Many of our customers need to forecast their projected revenue, and also account for their confirmed income, over different time periods and not just as a single value based on the Opportunity’s Closing Date.
Your company may sell single, multi-year contracts and need to recognize each year’s revenue individually in forecast projections. Or perhaps your business includes the sale of equipment or machinery along with a quarterly service agreement and you need to account for the machine immediately the deal closes but the service agreement revenue should be recognized on a quarterly basis from the date the machine is delivered. These are some examples where you can use our Revenue Recognition.
Revenue recognition is available for our Business & Enterprise tier customers and can be enabled by your Pipeliner Admins in the Automation hub. Once running, you can enable Revenue Recognition individually for all of your opportunities in Pipeliner.
Activating Revenue recognition
First, an Administrator needs to activate Revenue Recognition in the Automation Hub. Click on “Add for Free” ⤵
Next, select a "Revenue Period" that fits your business. Choose from "Monthly", "Quarterly" or "Yearly" scheduled revenue ⤵
For the example of a single, multi-year contract, you’d go for “Yearly” whereas, for the service agreement example, you’d choose “Quarterly” scheduled revenue.
Next, choose whether you want to use Revenue Recognition based on the overall "Opportunity Value" or applied to each individual "Product Line" Item ⤵
NOTE: Please be aware that if you decide to change these options in the future, all Opportunities or Products that have Revenue Recognition set will be recalculated to use the new settings ⤵
Setting Revenue Recognition for an Opportunity based on Opportunity Value
Once enabled, you’ll then be able to set Revenue Recognition for each Opportunity individually. If your company is using Revenue Recognition at the Opportunity Value level, you’ll see an icon to the right of the value field.
NOTE: Your Administrators might have applied a different label to the Opportunity Value field ⤵
Click on the "Revenue Recognition" icon to access the specific settings for this Opportunity ⤵
Revenue Schedule Start — you can begin recognizing the revenue from either the "Closing Date" of the Opportunity or from a specific date that you select. You might use this if, for example, you should start recognizing revenue from the date a project begins (which might be well after the Closing Date).
Revenue Schedule End — the date by which all revenue will have been recognized. This is calculated automatically based on the "Schedule Start Date" and the number of periods.
Scheduling Period — your options here depend on the configuration chosen by the Administrator in the Automation Hub — if they selected "Yearly", your only option will be Year.
Number of periods — this is the number of periods — years, quarters or months, over which the revenue should be recognized.
Click on "Save" to apply your settings. You will always be able to see if Revenue Recognition has been applied to an Opportunity based on the Opportunity Value as the schedule will display under the Value field ⤵
Click on the "Revenue Recognition" icon to change your choices or click on "Remove" to remove the settings completely ⤵
Open the Revenue Recognition section in the right-hand panel to see a summary of the revenue recognition schedule for that Opportunity ⤵
The widget shows you
- Revenue duration — the total period over which revenue will be recognized
- Revenue (total) — the total amount included in the revenue recognition schedule
- Revenue (achieved) — the revenue accounted for in the current period
- Current Period — the current period that is operating
- Opportunity Value — the total value of revenue recognized in the current period
Setting Revenue Recognition for an Opportunity based on Product Amount
First, your Administrator will need to select the right options for your business in the "Revenue Recognition" options in the Automation Hub ⤵
Once enabled, you’ll then be able to set Revenue Recognition for each Product Line Item individually.
If your company is using Revenue Recognition at the Product Amount level, you’ll set your Revenue Recognition options by clicking on the down arrow on the right-hand side of the Product grid ⤵
Click on “Set Revenue Recognition” to choose your options for this individual Product Line Item ⤵
Revenue Schedule Start — you can begin recognizing the revenue from this Product either from the "Closing Date" of the Opportunity or from a specific date that you select.
Revenue Schedule End — the date by which all revenue will have been recognized. This is calculated automatically based on the Schedule Start Date and the number of periods.
Scheduling Period — your options here depend on the configuration chosen by the Administrator in the Automation Hub — if they chose "Monthly Revenue Recognition", you’ll be able to select from Month, Quarter or Year for the Revenue Schedule for this particular Line Item.
Number of periods — this is the number of periods — Years, Quarters or Months, over which the revenue should be recognized.
Click on "Save" to apply your settings. You will always be able to see if Revenue Recognition has been applied to an individual Product Line Item as the Revenue Recognition symbol will display just to the left of the down arrow ⤵
Click on the down arrow and then choose "Edit Revenue Recognition icon" to change your choices or click on "Remove" to remove the settings completely ⤵
NOTE: Don’t forget to use the Revenue Recognition widget in the right-hand panel!
Revenue recognition in practice
In the example below using Yearly recognition, the $12,000 (value of the Opportunity) will be all be recognized over a single year starting on August 23rd (the Closing Date of the Opportunity) ⤵
Using the same Opportunity below, the period has been extended to 3 years so now $4000 will be recognized each year for 3 periods of a year each, beginning on the "Closing Date" of 23rd August 2020 and ending on August 22nd 2023 ⤵
Here we’re using "Monthly Revenue Recognition" for an individual Product Line Item — a Warranty agreement which costs a total of $12000 with $1000 recognized each month for 12 months ⤵
This is the same Warranty but this time the revenue will begin to be recognized from January 1st over 2 Quarters. The revenue breakdown is still shown as $2000 per month over 6 months as the Administrator set up our company’s Revenue Recognition as Monthly (rather than Quarterly or Yearly) ⤵
Again this is the same Warranty with the same "Start Date" but this time the Administrator set up our company’s Revenue Recognition as Quarterly (rather than Monthly or Yearly) so now the revenue is scheduled across 2 Quarters at $6000 per quarter ⤵
Reporting on Revenue Recognition
There are 4 new fields that you can access in the Opportunity List View or in Reports ⤵
- Recognized revenue (total) — this is the total of the scheduled revenue for the opportunity.
- Recognized revenue (achieved) — this is the total revenue already recognized to date.
- Recognized revenue duration — this is the whole time period over which the revenue will be recognized.
- Recognized revenue in target period — this is how much revenue will be recognized during the period I have selected in my Target.
Using Recognized Revenue in the Target
Click on the gears icon to open up the Power Panel and then select the Target tab.
NOTE: If you’re not familiar with using Target Settings, please review this article.
You can now choose recognized Revenue (achieved) and Recognized Revenue (total) as the value on which the Target is calculated ⤵
NOTE: Remember that the Target values are filtered by the selected date range so when using “Recognized Revenue (achieved)" and a "Target Period of This Year", the Target shows the total of revenue recognized only in the current year ⤵