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.

AdministratorAdministrator/User
  • Define Revenue Recognition Rules
  • Define Revenue Recognition Policies
  • Create Legal Entities
  • Enable and Disable Email Notifications
  • Define RevRec Periods for each Legal Entity
  • Configure Revenue Recognition System Properties 
  • Recognize Revenue according to ASC 605 and ASC 606 standards for standalone, bundle and usage-based products
  • Generate actual and forecast revenue 
  • Rollback actual and forecast revenue 
  • Schedule or execute immediate revenue run
  • Recognize revenue for asset-based orders
  • Recognize revenue for agreement fee adjustments 
  • Recognize deferred revenue
  • Recognize milestone-based revenue
  • Recognize revenue for % based RevRec Rule
  • Generate, view and delete agreement revenue snapshots and summaries
  • Perform revenue reconciliation
  • Manage accounting periods
  • Create and process agreements in bulk

Key Terminology

It is important to understand how terms are used when working with Revenue Recognition.

TermDefinition

Actual Revenue

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.

Deferred Revenue

Revenue for services that have not yet been performed or goods that have not yet been delivered.

Legal EntityIndividual business units within an organization., responsible for conducting business transactions with customers across geographies.

Reconciliation

The primary method used to verify the accuracy of an account's balance.

Revenue Forecasts

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 RecognitionThe process used to align revenue with the delivery of goods and services.
Revenue Recognition PolicyDefines how to recognize revenue for an Agreement Fee.
Revenue Recognition RuleDetermines how revenue will be recognized. Revenue Recognition Rules are the foundation rules of the policy that a company follows.
RevRec PeriodThe time period to recognize revenue for a particular legal entity.