Revenue Recognition Rules determine how revenue will be recognized. Revenue Recognition Rules are the foundation rules of the policy that a company follows. Revenue Recognition Rules are assigned to each Agreement Fee.
The following table describes the basic rules that Conga supports.
|Revenue Recognition Rule
|Recognize the entire fee amount immediately. For example, when you buy groceries from a store, revenue is recognized immediately.
Recognize the fee amount over a period of time and calculate the deferred balance accordingly. For example, when you subscribe to a video streaming and pay for one year upfront, then revenue will be recognized every month and the deferred balance will decline as revenue is recognized.
This model is useful when there is no end date to the subscribed product or service. The customer pays as per usage.
Ratable - Day
Fee amount is calculated based on the number of days in term. Allocated revenue is a multiplication of the base monthly revenue and the number of days in a month. The deferred balance is calculated accordingly.
Recognize the fee amount over a period of time but does not track deferred revenue. For example, you subscribe to any online magazine with a monthly payment, revenue will be recognized over a period of twelve months.
This model is useful for monthly subscription models where a customer is free to cancel at any time.
|Track the progress of a revenue fee towards completion. You need to enter the completion percentage of a revenue fee for each month in the term. Based on your inputs, the system will create appropriate revenue schedules to recognize the revenue.
To add a Revenue Recognition Rule to your Agreement Fee, kindly refer Agreement Fees.
You can opt to consider or ignore Leap year while calculating revenue from Custom Settings. Go to Setup > Build > Develop > Custom Setting and click Manage for Revenue System Properties. Click Edit for System Properties and select Ignore Leap Year For Revenue Recognition to ignore the leap year for revenue recognition.