Chargebee RevRec 

Introduction 

RevRec provides a comprehensive suite of revenue recognition features that are compliant with Accounting Standards Codification (ASC) 606 and International Financial Reporting Standard (IFRS) 15. Using RevRec you can configure and apply appropriate revenue recognition methods for all products and services.

For example,

• If you are offering a term-based Software as a Service(SaaS) product to your customers, a ratable recognition method that splits the total contract value into each period of the term for revenue recognition is more suitable.
• If you are selling a usage-based product, a proportional performance method can recognize revenue based on actual usage.

RevRec helps you streamline the accounting and bookkeeping process for revenue recognition in a highly automated and controlled manner. Your invoice and sales order data can be directly synced from relevant source systems, and processed for revenue recognition with validations done at each step of the process.

Overview of Revenue Recognition 

The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) collaborated to create a global standard that defines how companies recognize revenue from contracts with customers in ASC 606/IFRS 15.

The following is the five-step process of revenue recognition as defined in ASC 606:

1. Identify the contract: Identify the criteria that must be met when establishing a contract with the customer.
2. Identify the performance obligations: Identify the items to be recognized in the contract.
3. Determine the transaction price: Elaborate on what must be considered when establishing the transaction price, the amount that the business expects to receive for transferring the goods or services to the customer if sold separately. A sales contract may have fixed consideration, variable consideration, or both.
4. Allocate the transaction price: Determine and allocate how the transaction price is allocated across the contract's separate performance obligations.
5. Recognize revenue: Revenue gets recognized as the business satisfies each performance obligation (delivers the goods or services).

Revenue is not the same as cash received from customers. You can read more about this in our ultimate guide.

In the ASC 606 revenue recognition process, your billing and CRM systems provide the functionality to manage Steps 1, 2, and 3, including identifying the signed contract, contract obligation details, and final price. Chargebee RevRec supports your business with features related to Step 4 (Allocating transaction prices), and Step 5(Recognizing revenue).

Key Features of RevRec 

Here is a list of some key features of RevRec that add value to your business:

• RevRec is fully compliant with ASC 606 revenue recognition capabilities that cover your sales activities right from contract changes (renewal, modification, cancellation), to selling through partners or reselling as an agent with commission arrangements and conducting multi-currency transactions.
• It is a versatile application that comes with built-in checks and validations based on industry best practices to ensure auditability, compliance, and controls.
• It serves as a revenue subledger with detailed records at customer and contact level, with customizable General Ledger (GL) mapping, direct journal entries posting, flexible close process, and accounting period support (such as the 5/4/4 calendar).
• RevRec is easy to use with an out-of-box integration with a wide range of third-party systems, such as Salesforce, Hubspot, Stripe, Quickbooks, Xero, Intacct, and NetSuite.
• RevRec comes with a modern, intuitive web UI and Microstrategy-based reporting package that provides insight into your revenue, from reviewing the revenue allocation in a multi-item contract to spotting the major revenue drivers impacting your business.
• It is capable of supporting more complicated revenue recognition scenarios such as variable consideration, collectibility assessment, and material rights.

Using Chargebee RevRec 

Based on your specific requirements, there are different ways in which you can use Chargebee RevRec for your business, as follows:

• Chargebee + RevRec
• RevRec Direct

Chargebee + RevRec 

While using Chargebee to manage your subscriptions and recurring invoices, if you are looking for a comprehensive set of revenue recognition features, that gives you complete control and flexibility over the process, the Chargebee RevRec is for you.

You can set up and use various features, like Standalone Sales Pricing for transaction price allocation for multi-product sales orders, applying your specific accounting policy on a range of topics such as collectibility assessment, variable considerations, commission recognition, and credit note recognition. In addition to processing your Chargebee data, you can also connect additional data sources (for example, Salesforce for contract information) for revenue recognition. The Chargebee RevRec support team will work along with you through the implementation and configuration steps.

RevRec Direct 

If you are not a Chargebee user, but you are looking for a comprehensive set of revenue recognition features and control functions, you can sign-up and use RevRec directly. It offers direct integration with a range of third-party systems including Salesforce, Stripe, Hubspot, Xero, Quickbook, Intacct, and Netsuite. The Chargebee RevRec support team will work along with you through the implementation.