Revenue Management is an application built into GTV that produces journal entries for the day-to-day billing activity occurring in the platform. Let the posting rules in Revenue Management handle accounting scenarios unique to subscription billing that might not exist in your ERP or would be time consuming to create manually, like recognizing revenue daily over a service period. The application is designed to be flexible and ultimately create journal entries (transactions) that can be easily integrated with your existing accounting data by utilizing data extracts provided by GTV, the GTV Connector Service, or using Premier Data Access.
Revenue Management consists of one or more AR ledgers. An AR ledger is designed to act as a sub-ledger for the accounts receivable (AR) activity in GTV. Each AR ledger is customized using a client-defined chart of accounts, a posting rule set, and an accounting calendar. The posting rules are created from templates designed to capture all aspects of billing activity, ensuring all pertinent data is recorded as transactions, and your preferred revenue recognition policies are followed. The accounting calendar of an AR ledger has accounting periods that can be open or closed to control the posting dates of transactions and can be customized to match your accounting periods. The transactions created can be sent to you as individual or aggregated entries. GTV acts as the system of record for the aggregated transactions.
Revenue management is a flexible application allowing you to create multiple AR ledgers, charts of accounts, and posting rule sets. Each AR ledger created can use a different combination of charts of accounts and posting rule sets to create transactions. Each AR ledger analyzes the same billing data. The transactions produced depend on the chart of accounts and posting rule set assigned to the AR ledger. This allows for AR ledgers that are useful for:
- Comparing Accounting Methods—Assign different chart of accounts and posting rule sets to the AR ledgers similar to the image below.
- Segmented Accounting—Postings rules are customized to produce transactions for a specific product line or division.
- Multi-Entity Accounting—Separate AR ledgers are created, and each assigned a billing account category, which will limit the scope of the posting rules to charge info records with the specific billing account category.
The image below shows how you can compare cash and accrual basis accounting or compare different fiscal calendars by using multiple AR ledgers.
Use Case Example
In this use case, you want to compare financial statements using two methods of revenue recognition for one-time products.
- Recognize one-time product revenue when invoiced—When a one-time product is ordered, all the revenue for that product will be recognized either in the accounting period that the invoice is issued or that the order is approved.
- Recognize one-time product revenue over customer lifetime—When a one-time product is ordered, the revenue for that product may be recognized monthly or daily over the number of months indicated by the customer lifetime field of the AR ledger. The revenue recognition starts with either the date the invoice is posted or the order approval date. For example, the one-time product for $1,200 is ordered and the customer lifetime of the AR ledger is set to 12 months. When that product is invoiced, $1,200 will be deferred and the revenue will be recognized daily based on the number of days the service was active in a given month, or monthly, with an even amount recognized each month.
You will want to set up two AR ledgers that will be configured similarly but with some key differences in the posting rules and AR ledger configuration. Due to the flexibility of Revenue Management, GL accounts, GL categories, and posting rules can be assigned to more than one AR ledger. Many of the GL accounts, GL categories, and posting rules created for the first ledger can be used with the second ledger so you will not need to duplicate most of the setup process. Additionally, by primarily using the same GL accounts, GL categories, and posting rules, you are assured the financial statements are identical except for the revenue recognition of one-time products, allowing for easy comparison.
AR Ledger for recognizing one-time product revenue when invoiced—Complete the following steps to create an AR ledger that will produce transactions for all billing activity, including transactions where the revenue for one-time products is recognized when the invoice is posted.
- Create the GL accounts needed for your chart of accounts.
- Create the GL categories for your chart of accounts, optionally.
- Create a chart of accounts and assign the GL accounts and GL categories. Create parent-child relationships, if needed.
- Create posting rules. The rules are created to account for all possible billing activity, like payments, discounts, and taxes. Include posting rules for one-time products using the posting rule template to recognize revenue for one-time products when it is invoiced.
- Create a posting rule set and assign the posting rules.
- Create an AR ledger and assign the chart of accounts and posting rule set to it. Create the accounting calendar and then set the AR ledger to Active status. It is now ready to create transactions.
AR Ledger for recognizing one-time product revenue over customer lifetime—Complete the following steps to create an AR ledger that will produce transactions for all billing activity, including transactions where the revenue for one-time products is recognized over a period of time as designated by the AR ledger. GL accounts, GL categories and posting rules created for the first AR ledger can be assigned again when creating the second AR ledger.
- Create any additional GL accounts needed for posting rules that defer revenue recognition. For example, a GL account for Deferred Revenue for Onetime Products.
- Create any additional GL categories for your chart of accounts, optionally.
- Create the second chart of accounts and assign the GL accounts and GL categories. Create parent-child relationships, if needed.
Note: In this scenario you would assign all the GL accounts and categories you assigned to the first AR ledger plus any additional GL accounts and categories you need for the different method of revenue recognition.
- Create additional posting rules for one-time products using the template for recognizing revenue over the customer lifetime.
- Create the second posting rule set and assign the posting rules. You will assign the same rules you created for the first posting rule set, but exclude the rules for recognizing revenue for one-time products when invoiced and include the rules for recognizing revenue over the customer lifetime.
- Create the AR ledger and assign the second chart of accounts and the second posting rule set to it. Enter the number of months in the Customer Lifetime field if the rules have been configured to use that value. Create the accounting calendar, then set the AR ledger to Active status. It is now ready to create transactions.
Once both AR ledgers are active and creating transactions, you will be able to easily compare how revenue for one-time products is recognized over time because the only difference between the two AR ledgers is how one-time product revenue is recognized. All other transactions will be the same across both AR ledgers because you used the same GL accounts, GL categories, and posting rules for that activity.
Viewing Setup Page
Open the Revenue Management application by selecting Revenue Management from the Gotransverse action menu , then select Setup from the left pane. The Setup section is where you start the process of creating an AR Ledger by, first, creating GL accounts, GL categories, chart of accounts, posting rules and posting rule sets. Once created, this is where you view, edit, or delete setup items.
|1||Setup Action Menu||Drop-down menu for creating setup items to create an AR Ledger. From this menu you can create:|
|2||GL Accounts Detail Tab||Select to create, edit, and delete GL accounts.|
|3||GL Categories Detail Tab||Select to create, edit, and delete GL categories.|
|4||Chart of Accounts Detail Tab||Select to create, edit, and delete charts of accounts.|
|5||Posting Rules Detail Tab||Select to create, edit, and delete posting rules.|
|6||Posting Rule Sets Detail Tab||Select to create, edit, and delete posting rule sets.|
|7||AR Ledger||Select to create, edit, and delete an AR ledger. Select an AR ledger to view the details and find transactions.|
|8||Charge Info Records||Select to display a list of charge info records created the last time the Collector ran.|
The Revenue Recognition Principle requires that revenue is recognized in the accounting period that it is earned. When to recognize revenue varies greatly and depends on the product and service being sold. Accurate revenue recognition is a priority, and GTV has rules for common or popular revenue recognition types, and custom posting rules can be created for your unique scenarios.
- Recurring Service Revenue–Revenue for recurring services is recognized based on the service period. A service period represents a recurring time period, like a month or a year, for which a service is billed. Revenue can be recognized over the service period daily or monthly. The standard posting rules for recurring revenue work together in posting rule suites and accommodate all billing scenarios in the GTV billing platform. Revenue recognition will occur regardless of when services are invoiced. The following debit and credit accounts for a positive charge, one that increases AR.
- On Service Period—This rule defers the full amount of the service at the beginning of the service period.
- Debit—Unbilled Accounts Receivable
- Credit—Deferred Revenue
- On Revenue Recognition—This rule recognizes revenue over the service period daily or monthly, reducing deferred revenue over the service period.
- Debit—Deferred Revenue
- Credit—Recognized Revenue
- On Invoice—This rule posts the AR created by the invoice and credits Unbilled AR.
- Debit—Accounts Receivable
- Credit—Unbilled Account Receivable
- On Deactivation—This rule makes adjustments for deactivated services, based on the service end date, the amount of revenue recognized, the prorate on cancel setting for the service, and other factors.
- Zeros out deferred revenue
- Trues up revenue recognition
- Leaves a balance in unbilled AR for any service credits that might be issued on the next invoice.
- On Service Period—This rule defers the full amount of the service at the beginning of the service period.
- One-time Product Revenue—Revenue for products sold once can be recognized when invoiced or over a period of time.
- Usage Revenue—Usage-based revenue is typically recognized when invoiced but can be accrued daily during the service period.
- Revenue Schedules—To accommodate ASC 606 regulations, revenue management can use revenue schedules that will recognize revenue accordingly.
Revenue Management happens at the end of the GTV process flow. As seen in the image below, billing activity is processed and recorded. These records are collected and normalized to create charge info records, which are formatted specifically to be used by posting rules. GTV support works closely with you to create posting rule sets that will analyze the billing information and create transactions according to your specific needs.
Once created, the transactions from an AR ledger can be transmitted to you in a few ways. The quantity of journal entries is determined by the aggregation level. The method of transmission is determined by you.
- Aggregation Level
Aggregating transactions will reduce the number of journal entries received by your system. GTV will act as the system of record to support the aggregated transactions.
- No Aggregation—Every transaction is reported.
- High-Level Aggregation—GL account balance changes are reported monthly.
- Multi-Level Aggregation—You determine what level of detail is needed for each journal entry by specific attributes including, but not limited to:
- GL Account
- GL Account Type or Designation
- Billing Account Category
- Time period
- Transmittal Method
Every client is different, and multiple methods are available for receiving the transactions from GTV.
GTV Connector—Revenue Management and your ERP are connected utilizing the GTV connector service. This service uses API calls or flat files to communicate this data.
Data Extracts—The aggregated data is exported to your preferred file format so that you can upload the file to your system and import the data.
Premier Data Access—If you are using Premier Data Access, then all transactions, with no aggregation, are available in your Snowflake database. All details of the transactions are available for analysis. You can create your own reports to pull the data you need for your ERP. If your current financial data is stored in Snowflake, you can combine the data and utilize it for financial statements and analysis.
Transactions are created utilizing an AR ledger. Each AR ledger uses a chart of accounts, a posting rule set, and an accounting calendar to create transactions. The chart of accounts is a collection of GL accounts that have been structured. The posting rule set is a collection of posting rules designed to work together to create the transactions you want to see.
Each AR ledger needs a chart of accounts, posting rule set, and an accounting calendar before it can generate transactions. Below are the steps needed to create an active AR ledger capable of generating transactions.
- Create Revenue Management Setup Items
- Create AR Ledger.
- Create an AR ledger draft.
- Assign a chart of accounts.
- Assign a posting rule set.
- Create an accounting calendar.
- Make the AR ledger active.
- Generate Transactions.
To automate the generation of transactions in an AR ledger, the two processes listed below are typically scheduled to run in the background on a daily basis. The processes can also be manually triggered by you from the AR ledger to produce transactions on demand.
- Charge Info Collector Run—This process collects the GTV activity and creates charge information records. These records will be used to create transactions during the AR Ledger Run.
- AR Ledger Run—This process produces the transactions in the AR ledger by telling the posting rules to analyze the charge information records and create transactions from that data.