Revenue recognition in A/R

Thomas Walker

Hi,

Tom Walker here - Product Manager working on our new A/R capabilities.

I'm doing preliminary research on how we can better address the process of revenue recognition in FEnxt. Couple of questions for the hive

1. If you have deferred revenue you need to recognize. Is it time driven or event driven.
   1. Please provide specific examples of both.
2. Describe your current process for recognizing the revenue.

Thanks in advance for your help.

Tom

Jessica Smith

Thank you, Tom.

It has been helpful to me in the past that I can date the line items on a different day than the invoice. I have never used charges, and I understand the webview will have charges but not line items, and I hope it's possible to do that with charges as well.

Evans Langat

Thomas, I do not know about you specific situation but it is both time and event driven. There are many factors to consider, but the main one is when does your business has legal right to collect revenue

Example is you receive revenue in 2021 that you customer payed for an event or a class that you teach, in 2022. For this example the revenue is deferred to 2022, although you received the payment in the prior year. This will be a liability on your end until it is earned/you teach the class. The definition for earned depends on when your company has legal rights to collect revenue.

Beckie Osterman

1. If you have deferred revenue you need to recognize. Is it time driven or event driven.
   1. Please provide specific examples of both.

Our deferred revenue is time driven. However, that timing varies by the program they are being invoiced from. It also varies year over year based off of certain events happening throughout the year.

1. Describe your current process for recognizing the revenue.

We currently manually track this through excel. There is two spreadsheets for each of our countries. One that shows where families are at in our process. The other spreadsheet shows the amount of revenue to recognize by each region.

Anthony Block

Yes, I agree, both time and event. This was problematic in Student Billing 7. (I imagine similar situation in AR.) A transaction may be posted on 6/1 (assume 6/30 year end), and coded to a deferred revenue account. But if that transaction is not actually paid prior to 6/30, then it would need to be backed out of prepaid revenue and AR, since the actual pre-payment never occurred. Conversely, you could have a transaction dated 7/1, coded to a revenue account, but if you received payment say 6/28, you would have to manually adjust both AR and prepaid revenue for that, too. This continues to be a problem in Billing Management, by the way.

Thomas Walker

Yes the dates are tied to the specific charge, with the invoice date being independent

Thomas Walker

Do you track your program w/ a project or grant dimension?

Thomas Walker

Thanks Evans,

Could you give me some examples of event driven recognition you've encountered? Tom

Thomas Walker

Our intent is to show the specific charge dates on the invoice, which of course are likely different than the invoice date. Ex. you incur charges from June 20-24 and invoice on the 24th, so the charges on the invoice will have their specific date and the invoice date will be the 24th

Patrick Lunn

So lately, we've been getting a number of contributions/sponsorships that our auditors have been making us call “Refundable Advances.” Basically, we'll get $XXXXX for sponsorship of 6 specific events throughout the calendar year. There's always some discussion as to whether these are temporarily restricted contributions, or refundable advances/deferred revenue.

Anyway, once I get an invoice, contract or what have you, I'll go in to AR in DB view, and I'll split out the invoice to sponsorship income and/or refundable advances as I deem necessary. Frequently what will happen is we'll get a payment in the beginning of a calendar year for the full year, and since we're on a 6/30 fiscal year, it typically ends up being 50/50 current revenue and refundable advances. When the next fiscal year rolls around, I'll go in and make a manual J/E recognizing the revenue for the second half of the calendar year. So, it's event-driven in our case, mostly.

Tonya Higgins

@Thomas Walker

Hi Tom,

I am came across this post in trying to find an answer to a confounding issue we have with RE/FE integration related to AR.

While not positive this is the best workflow, we can't seem to figure out a better one.

When we need to invoice one of our supporters (for example, a foundation who needs an invoice each month to cover specific costs) we have to

use FE Database AR to create the invoice,
add a pledge to RE to create the corresponding amount due in RE, but mark it as already posted so there is not a duplicate entry in the GL in FE when posting gifts from RE to FE.

When the payment is received, in order to make sure the invoice can be closed, we have to
put the payment in FE, then remember to also add the payment in RE, linked to the corresponding pledge, but make sure to mark as “posted”.

A terrible workaround that bites us each year during the audit.

Any and all help - or hope for a better process in the near future - will be greatly appreciated.

Thanks!
Tonya

Thomas Walker

@Tonya Higgins
Hi Tonya, would like to dig into your requirements further, shoot me an email at thomas.walker@blackbaud.com if you would like to chat further

Tom

MckenZie Walker

@Thomas Walker

We have deferred revenue that is event-driven. Currently, we use Accounts Receivable and Journal Entry to enter the revenue to deferred revenue. We track these events in a separate spreadsheet and make a monthly entry to recognized the revenue.