Revenue Rules in Ordway govern how Revenue Schedules are created and revenue is recognized for each of the Products sold in Subscriptions. Learn more about Revenue Recognition Rule types.
A Revenue Recognition Rule is required if a Product has Deferred Revenue Management enabled in Setup New Products.
Preconditions:
Finance must be enabled in Menu > Setup > Finance.
Create Revenue Recognition Rule
Steps:
1. Navigate to Menu > Finance > Revenue Rules.
2. Click + Add.
3. Populate the Revenue Rule:
- Enter a Name for reference
- Select the Recognition Method (once selected, additional fields may display)
- Select the Recognition Schedule
- Select the Posting Day
- Select Recognition Term: Contract Term applies the method based on the Subscription Term while a Fixed Period recognizes the value over a determined period of time regardless of individual Subscription Term length.
4. Save when finished.
|
Field Name |
Type |
Picklist Options |
Best Practices |
|
Name |
Text Field |
|
Use an easily recognizable name. |
|
Recognition Method |
Picklist |
Recognize on Invoicing Straight-line, Prorated Straight-line, Front loaded Exact Days, Prorated Straight-line, Even periods Custom |
Most Ordway users select Straight-line-prorated instead which prorates the partial periods and then evenly spreads the remaining over full periods. |
|
Recognition Schedule Period |
Picklist |
Monthly, Quarterly, Semi-Annually, Annually |
Monthly is the most commonly used option. |
|
Posting Day |
Picklist |
Any day of the month |
The day the Journal Entry will post Revenue. |
|
Recognition Term |
Options |
Contract Term of Fixed Period |
Fixed Period is a User defined period of time used as the denominator for amortization calculations regardless of the Subscription’s contracted term length. |
Example:
| Field Name | Picklist Option | Best Practices |
|
Name |
RR-0001: Recognize revenue prorated over contract term |
|
|
Recognition Method |
Straight-line, Prorated |
Most Ordway users select Straight-line-prorated instead which prorates the partial periods and then evenly spreads the remaining over full periods. |
|
Recognition Schedule Period |
Monthly |
|
|
Posting Day |
Last day of the month |
|
|
Recognition Term |
Contract Term |
|
Example: (recognition method changed to = straight-line pro-rated):
12 month Subscription term with a $12,000 Annual Charge from 1/15 - 1/14.
Output of this Subscription with RR-0001 as defined above would be 1 Revenue Schedule (RS) with 13 Revenue Schedule Lines (RSL).
The first and last RSL would be prorated based on exact days in the period, while the RSL in between would = 1 month / 12 months * Charge Amount = $1000 that would be recognized on the last day of each month.
January (first period) = $548.38
Each period in between = $1000
January (last period) = $451.62
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