Sales as well as the cost of the associated sales can be deferred using the Deferred Revenue process. The deferred revenue formula caters for the varying recognition rates over time relative to the invoice period. Initially this is used for on line product subscriptions where for example 50% of the revenue needs to be recognised in the invoice period, eleven months of nothing then the remaining 50% evenly over the next 12 months.

The recognition formula in the subscription module calculates the deferred revenue as soon as the subscription turns into “gratis”. This is needed as subscriptions are dealt with as part of specific contracts therefore each subscription order should not defer/recognize revenue from that point.

Contents

1 Invoice based
2 Subscription based
- - - 2.0.0.1 Process flow
3 Maintenance
4 Processing

Invoice based

Deferred Revenue Formula Maintenance (DSM420) is used to define and manage the deferred revenue recognition formulas.

A Deferred revenue formula definition file (DSDRA00P) stores the product/customer definitions and links them to the deferred revenue formulas specified in the Deferred Revenue recognition file (DSDRC00P).

Deferred Revenue GL Account Maintenance (DSM422) is used to define the General Ledger sales and cost of sales accounts and Company to be used with each Formula definition.

A deferred revenue recognition file (DSDRC00P) stores multiple formulas. Each formula contains up to eight rates for nominated time duration’s to be applied when calculating deferred revenue recognition.

Work with deferred revenue allows the user to defer, change, delete deferments, display deferment and display order details. This menu option displays the document date the document type, document number, status of the order, total amount, deferred value, balance value and posted value. This uses the deferred revenue balance file (DSDRV00P).

The processing of the deferment can be handled by the batch deferment generation. This program processes only manually deferred invoices in the original manner. Whereas the deferred revenue recognition uses the calculations using the formula based recognition.

The Deferred revenue report is then printed to list all the current period values to be posted.

The General Ledger Journals are then created. End of Day must be run to update the postings to the General Ledger.

Subscription based

Subscriptions are usually prepaid. Although payment has been received, it has not been earned until all the issues in the subscription have been sent to the customer. The revenue therefore has to be deferred and portions of this revenue are earned when an issue is despatched. When a Subscription List is created the Payment Type is nominated and the options are Pay as you Go or Payment in Advance. The PIA (payment in advance) method uses the Deferred Revenue processes if the item has been classified as a deferment Item.

All transactions processed through the Inventory and Billing modules post to the General Ledger using the normal General Ledger Interface. This means sales are recognised immediately. (Debit Debtors and Credit Sales).

Process flow

The following processing steps can be used to generate the Subscriptions Based deferred revenue.

The setup of deferment revenue starts off in the setup of the subscription list. From the subscription management module in the Distribution Module and within the menu ‘Subscription List’, the main field that affects deferment revenue is the field ‘Subscription Term type/length’ and the ‘Charge Method’.
The customer orders must be created against the subscription list.
The product list must be created and the product list type field indicates the Activity type and charge type to be used for PIA (Payment in Advance).
The rule on how the revenue should be recognized is setup in General Ledger under the option Deferment Revenue – Formula Maintenance (DSM420).
The next step would be to select the Subscription Order Release option, enter the Sub List and Product List.
Then select Release Run Management. The status of the run is ‘R’ and to complete this, select option 2 against the required run. This takes a few moments and the status changes to ‘C’.
Finalize the order through Distribution Processing for pending = P, Batch printing = K, Picking slips = D, Document printing = A, Invoice dispatch = I and Completed status = C.
The orders must be status ‘C’ before the deferred revenue can be generated.
Next select the deferred revenue generation (DSO426) from General Ledger module. This calculates the deferment revenue for the month.
Run the End of Day the GL menu, to post the journals.

Maintenance

Processing

Subs forecast renewal extracts