Ordway invoices our customers based on the determined contract term requesting services be paid for up front. The contract value therefore reflects paid in full. However, revenue is not immediately recognized.
In order to record funds received as revenue, each of the following conditions must be met:
- Signed and active Subscription Contract
- Delivery confirmation of services or goods
- Received payment or reasonable assurance of forthcoming payment(s)
Revenue Recognition determines that revenue can only be recognized once the service has been provided, not when paid for in advance. Claiming income before services are rendered is a liability and should be avoided.
Example: A customer pays the full $24,000 twelve month contract value prior to the Contract Start Date. However, income cannot be claimed until the services have been rendered. The full contract value is not claimed as income until the entire contract ends.
The following table illustrates a paid in full contract and the monthly recognized revenue.
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