Revenue Recognition is the process of aligning revenue with the delivery of goods and services.
As a Sales Representative, after you make a sale, you must report the revenue that results from your sales. You must consider the structure of the sale, contract terms, and the billing and fulfillment status for each deal to accurately report revenue to your investors, executives, and board members. It is vital to get this right because revenue is the most important measure of how well your company is performing.
Revenue is not the same as cash, and the two are distinctly different. Revenue is the fair market value of products or services delivered. This may differ from the invoice and payment amount for an individual service. This is especially true when sales and marketing teams offer free add-ons.
To better understand the challenges, let's look at a few transactions to see how this works in practice.
- When you buy a product for $100 at a retail store, the store recognizes $100 as revenue immediately since you received the product at the time you paid.
- When you sign up for an annual subscription to a video streaming service, the vendor will spread the revenue over 12 months since the service is delivered over the course of a year.
- When you buy a car and receive a free annual subscription for a radio service, the revenue is split between the car and the radio service. Revenue for the car is recognized immediately since you received the car at the time of purchase. Revenue for the radio is spread over 12 months as the service is delivered over time.
Complex contracts and flexible purchasing options can make managing revenue very challenging. Conga Revenue Recognition inherits and uses information and data from other applications in the Conga Quote-to-Cash suite. Revenue Recognition syncs seamlessly with Conga CPQ, Conga Contract Management, Conga Billing, and Conga Renewals Management. With this synchronization, you can increase your access to all the information you require, real-time, while reducing time and effort across all the teams involved.
This is why Conga is uniquely suited to handle the Revenue Recognition process. Only Conga with its end-to-end view of the entire Quote-to-Cash process has all of the information required without the need for messy integrations.
The following table lists the tasks that administrators and users can perform using Revenue Recognition.
It is important to understand how terms are used when working with Revenue Recognition.
The revenue earned for the current period. Actual Revenue is posted to General Ledger and reported on financial statements.
Agreement Revenue Adjustments
Represent the changes to the amount of revenue recognized during a period.
Agreement Revenue Summary
Represents the summary of all recognized and forecast revenue and deferred revenue balances for a single period for all agreement fees within an agreement.
Revenue for services that have not yet been performed or goods that have not yet been delivered.
|Legal Entity||Individual business units within an organization., responsible for conducting business transactions with customers across geographies.|
The primary method used to verify the accuracy of an account's balance.
Predicts a company's future financial state. Forecasted Revenue allows executives to plan future activities and provide guidance to investors and stakeholders on future performance.
|Revenue Recognition||The process used to align revenue with the delivery of goods and services.|
|Revenue Recognition Policy||Defines how to recognize revenue for an Agreement Fee.|
|Revenue Recognition Rule||Determines how revenue will be recognized. Revenue Recognition Rules are the foundation rules of the policy that a company follows.|
|RevRec Period||The time period to recognize revenue for a particular legal entity.|