Revenue Recognition
Please contact our commercial team if you are interested in using this functionality.
Revenue recognition is an accounting approach used to ascertain how revenue should be recorded during the period when a service is utilized. In addition to the data export, we also offer reports in which we pre-calculate revenue recognition metrics.
Billing tells you what a customer owes; recognition tells you what you have earned. The two rarely coincide: an annual subscription invoiced up front is cash and a receivable on day one, but revenue only as the service is delivered. Solvimon calculates that split for you, per invoice line and per month, and passes the service periods to your ERP so the journals follow.
How recognition works
Solvimon’s revenue recognition reports comply with ASC 606 and IFRS 15. Both standards recognise revenue when the performance obligation is satisfied rather than when the invoice is raised, and Solvimon applies that rule per invoice line:
- Recurring revenue invoiced in advance is deferred and released. The obligation is satisfied continuously across the service period, so the amount is held as deferred revenue and released straight-line per day over that period.
- Usage revenue is recognised in the period it is delivered. Usage is metered and billed after consumption, so the obligation is already satisfied at invoicing. There is nothing to defer.
- Commitments and discounts are allocated across the period they relate to. The transaction price is spread over the same service period as the item it belongs to, so a discounted annual commitment recognises its discounted value evenly rather than front-loading the discount.
Every calculation runs off the service period stored on the invoice line, which is printed on the invoice, exposed in the report downloads, and synced to your ERP. Because a finalised invoice in Solvimon is immutable and corrections run through linked credit notes, each recognised amount traces back to a specific line on a specific invoice. This provides further confidence during audits.
Terms used on this page
The schedule covers invoiced revenue: lines on final and draft invoices. Revenue for billing periods that have not been invoiced yet, such as year two of a multi-year subscription, is not part of the schedule.
Reports
At this moment we offer the following reports on Revenue recognition:
- Recognised Revenue: The revenue that can be recognized according to recognition guidelines (ASC 606 and IFRS 15).
- Deferred Revenue: The deferred or pending revenue that will recognise at a later moment in time, depending on when the underlying service obligation is fulfilled (captured through the service periods).
The two reports are the same schedule seen from two sides: what has been earned, and what is still owed to the customer in service. Read together they reconcile, so the closing deferred balance of one month plus the revenue released in the next equals the opening balance you started with.
In addition to the offered reports, we also include information on the applicable revenue recognition periods in the downloadable invoice line report, refer to report downloads.
Recognised and deferred revenue
The recognised revenue report provides the base amount to be recognized for each month. Additionally, it incorporates the anticipated recognized revenue for coming months, which is already present in either Final or Draft invoices.
The deferred revenue report provides the base amount that is pending for the remainder of the service period. The two are complementary: what leaves the deferred balance in a month is what the recognised report reports for that month.
Example of a straight line per day revenue recognition schedule
In this example we assume that a customer has an annual subscription that has a flat fee of €365 that is invoiced on Jan 1, 2023 for the period of Jan 1, 2023 to Dec 31, 2023.
Both amounts are calculated on the base amount (invoice amount minus tax) and aggregated by month. The recognised amount will be €31 for Jan 2023 and €28 for Feb 2023, and the deferred balance will be €365 - €31 = €334 at the end of Jan 2023 and €334 - €28 = €306 at the end of Feb 2023.
The full year, as the balance moves out of the deferred bucket and into the recognised bucket:
Reading the visual: the light blue bar is the deferred balance, everything invoiced but not yet earned, and the dark blue bar is revenue recognised to date. Each month a slice of one month’s service crosses from left to right, and the two always sum to the €365 on the invoice. That crossing amount is the release your ledger posts. By the end of the service period the deferred bar is empty and the full €365 has been recognised.
On the last day of the service period the deferred balance is zero and the full €365 has been recognised. That closing balance is what your deferred revenue account in the ledger should show each month, which makes the report the reconciliation document for the account.
Each month therefore carries one day of revenue for every day of service in it, which is why February is smaller than January rather than every month being one twelfth. This holds where the service is delivered at a constant rate across the period, which is the assumption behind straight-line recognition. Where delivery is not constant, for example a milestone-based implementation fee or usage that varies month to month, the service periods on the invoice lines are what determine the pattern instead. Commitments and discounts are also applied and spread over the entire period.
Revenue recognition with your ERP
Solvimon calculates the schedule for every customer, and every finalised invoice line carries the service period it belongs to. What differs per ERP is whether that ERP turns those periods into deferral and release journals by itself, or whether the journals are posted from Solvimon’s recognition report.
There are three patterns:
- The ERP recognises automatically. Solvimon posts the invoice with a service period on each line, and the ERP builds the schedule and posts the monthly release. This is how Exact Online, NetSuite, QuickBooks Advanced, Campfire, and Rillet work.
- The ERP has no period-based deferral. Solvimon posts the invoice, and the deferral and monthly release journals are entered manually from Solvimon’s recognition report. This is how Xero works.
- No ERP recognition. Solvimon’s recognised and deferred revenue reports are the schedule of record, and journals are posted wherever you keep your ledger.
In all three cases the reports above stay available, so you always have a schedule to reconcile against.
Capability overview
The setup in the right-hand column is done once, in the ERP, by you or your accountant. Solvimon does not post the release journal itself; it supplies the invoice, the service period on every line, and the calculated schedule. Solvimon can support the setup and the integration with your ERP, including the mapping of accounts and service periods. Talk to your Sales Executive to enable that support.
Posting the release manually
For Xero, DATEV, or any ledger without period-based deferral:
- Pull the recognised revenue report for the month you are closing.
- Post a journal per revenue account that debits deferred revenue and credits revenue for the recognised amount.
- Use the deferred revenue report as the closing balance check on the deferral account.
Because both reports are pre-calculated per month, the journal is a transcription of the report rather than a re-derivation of the schedule. Usage lines need no entry: they were recognised when the invoice posted.
Querying the schedule
Beyond the report downloads, recognition data is available in the analytics datasets exposed through the API and the Solvimon MCP server, so you can ask for recognised and deferred revenue per month and per customer without exporting a file.