Revenue Management: #2 How to compute revenue?
In our previous post, we discussed the revenue recognition standards under IFRS 15 and ASC 606 and the five-step model. Now, let's examine three distinct business scenarios to see how the standards and model work in practice. This will help you understand the timeline and values, as well as the challenges that lie behind them.
Scenario 1: One-time Product/Service Delivery
Imagine a custom furniture maker who takes an order in January and is paid $5000 up front for a handcrafted wall hanging that will be delivered in March. Applying the five-step logic from the previous post, the performance obligation here is fulfilled only when the wall hanging is delivered. That means the $5000 sits on the balance sheet as unearned/deferred revenue until March (promised delivery), and computation for a one-time product or service is simple. Record $5000 as recognized revenue in March in one short.
Imagine a custom furniture maker who takes an order in January and is paid $5000 up front for a handcrafted wall hanging that will be delivered in March. Applying the five-step logic from the previous post, the performance obligation here is fulfilled only when the wall hanging is delivered. That means the $5000 sits on the balance sheet as unearned/deferred revenue until March (promised delivery), and computation for a one-time product or service is simple. Record $5000 as recognized revenue in March in one short.
Service | Handcrafted Wall Hanging | |
Month | Deferred Revenue | Recognized Revenue |
January | $5000 | $0 |
February | $5000 | $0 |
March | $0 | $5000 |
Scenario 2: Subscription-based Services
Let's picture an online training application that charges $120 for a 12-month training, paid upfront in January. The seller's obligation is to provide sessions once a month. The computation here is straightforward. $120 / 12 = $10 per month. Recognition happens each month as the service is delivered throughout the subscribed period.
Service | Online Training Application | |
Months | Deferred Revenue | Recognized Revenue |
January | $110 | $10 |
February | $100 | $20 |
March | $90 | $30 |
April | $80 | $40 |
May | $70 | $50 |
June | $60 | $60 |
July | $50 | $70 |
August | $40 | $80 |
September | $30 | $90 |
October | $20 | $100 |
November | $10 | $110 |
December | $0 | $120 |
Scenario 3: Hybrid Model
Consider a marketing agency that sells a $5000 package made up of two components: a $2000 website redesign, which will be completed in two months, and $3000 of social media management spread across six months. Under the five-step approach, there are two obligations, and while recognizing the revenue, recognize each portion as its obligation is satisfied.
While computing, $2000 is recognized fully in the second month as and when the website goes live, and $3000 will be divided for the six months and recognized at $500 per month.
Service | Website Redesign | Social Media Management | ||
Months | Deferred Revenue | Recognized Revenue | Deferred Revenue | Recognized Revenue |
January | $2000 | $0 | $2500 | $500 |
February | $0 | $2000 | $2000 | $1000 |
March |
|
| $1500 | $1500 |
April |
|
| $1000 | $2000 |
May |
|
| $500 | $2500 |
June |
|
| $0 | $3000 |
The Real Challenge in Revenue Recognition
While these examples are easy to follow individually, businesses rarely operate with just one recognition rule or pattern. A software company might bill monthly for some services and yearly for others, and sell one-off onboarding sessions. A manufacturer might deliver large contracts in milestones while earning recurring revenue for maintenance contracts.
So, a single business may have a recognition period that is monthly, yearly, or sometimes quarterly. One can recognise revenue at the start of a specific service, and the other may decide to do it at the end of the period.
So, a single business may have a recognition period that is monthly, yearly, or sometimes quarterly. One can recognise revenue at the start of a specific service, and the other may decide to do it at the end of the period.
Different recognition periods, billing cycles, start and end dates, upgrades and downgrades, and other contract amendments can easily make revenue recognition a nightmare for business stakeholders.That's why businesses use revenue management tools like Zoho Billing to automate the calculation and gain accurate, detailed, and meaningful insights. These tools encapsulate the five-step model framework into repeatable calculations, so every contract is treated consistently and in compliance with global standards.
The next post'll show how a revenue management tool helps you configure recognition settings and turn these computations into audit-ready reports.
Topic Participants
Hari | Zoho Billing
Sticky Posts
Community Learning Series | Digest #5 — September 2020
Dear customers, We're happy to bring you the September edition of our #CommunityDigest! Keep track of your subscription KPIs right from your smartphone: Last month, we enhanced our Android mobile app to help our customers get daily updates on their business health. We got to know from a lot of customers that this has made their job much more easier because they no longer have to keep a reminder to manually check on the previous day's revenue or activations. If you have not downloaded it yet, here'sCommunity Learning Series | Digest #4 - August 2020
Dear customers, We hope you're staying safe and healthy. I'm happy to bring you the fourth edition of our #CommunityDigest with some brand-new updates from us. 1. Daily Business Updates (for Android users) The Zoho Subscriptions Android app has got a cool new update: You can now get a push notification to your smartphone that lets you know how many activations and cancellations have taken place, and what's the net revenue for the previous day. The best part is, you can tell the app when exactly youCommunity Learning Series | Digest #3 - July 2020
Dear customers, We hope you're staying safe and healthy. We're glad to bring you the July edition of our #CommunityDigest. New community members can view our previous newsletters here. This time, we have two major updates and three interesting topics for you: 1. Zoho Subscriptions Developer Community Since the inception of Zoho Subscriptions, our team believed that the recurring billing platform we provide should be able to offer an extensive API library that empowers businesses to automate mostIntroducing: Community Learning Series | Digest #1 - May 2020
Dear customers, We hope you are staying safe and healthy. Helping businesses manage their customer subscriptions more efficiently has always been, and always will be, our goal at Zoho Subscriptions. We strongly believe this is possible if we grow together as a community and share what we know with each other. To nurture this shared learning experience, here is our brand-new Community Learning Series! Welcome to the first edition of our digest! Each edition of our community digest includes guides
Recent Topics
Are downloadable product available in Zoho Commerce
Hi all. We're considering switching to Zoho Commerce for our shop, but we sell software and remote services. Is there a features for downloadable products? I can't find any information about this. Thank you very much AliceNeed Faster Help? Try Live Chat Support
Hello there, We understand that sometimes, whether you’re facing an issue, exploring a feature, or need quick clarification, sending an email and waiting for a response just doesn’t cut it. You need answers, and you need them now. That’s exactly why weCustom image for each contact using merge tag
Hi, I'm wondering if it's possible to set up an email campaign to display a different image for each contact using a custom field for the image url. I tried inserting custom html: <img src='$[UD:APP_IMAGE_URL||]$'/> but the editor seemed to reject this and did not actually add anything to the email template. Has anyone got any ideas? cheers, JeremyComment Reactions like a Thumbs Up
Can we please have the ability to emoji react on comments or at the very least, thumbs a comment up? Literally every other project management system out there can support this and it is very much needed to just acknowledge a comment instead of completelyZoho Mail Search Engine Sucks
Hello There! I really like all the features of Zoho Mail and I believe is way better than Gmail except for the Search Function. I believe Zoho Mail has a very poor search function, if you misspelled a word in the search box, Zoho Mail won't display anyAllow Subtasks and Task Lists to have their own Layout
I'd like to have the ability for subtasks and task lists to have their own layout. A subtask for us doesn't require all the fields that a parent task has. The subtask seems cluttered with all the extra fields. Within a project Task List had different purposes. I'd like the task layout to be different for some task lists.How to update Customers in Zoho Books through Zoho Flow?
Updating customers in Zoho Flow using a "update customer" action is deleting contact persons in Zoho Books.Conect chat of salesiq with zoho cliq
Is there any way to answer from zoho cliq the chat of salesiq initiated by customers?How to transfer credit between customers?
Hi All, We have a slightly odd situation. It happens that we have two separate customers that are related to each other personally. One customer has an amount of credit, and would like to use that credit to pay the *other* customers invoice. How wouldZoho Books Reports: Basic report with total items sold and Cost of goods sold
How can books show a report with Item Name || Qty Sold || Total Revenue || Total Cost of Goods Sold || Margin I need to factor in also invoices that have been credited where customers returned good. This seems like such a basic report, I'm sure I'm missingThe amount entered is more than the balance due for the selected bills."
Hi Team i am trying to record payments for vendors using API and getting this error in response as { "code": 28011, "message": "The amount entered is more than the balance due for the selected bills." } JSON is prepared according to Documentation andVBA handling named ranges
In VBA I'm able to work with a single cell named range. E.g. Set Jr = Range ("Year").Value. Also other options are working fine, like Range("Year").Address shows $L$3. However a named range refering to multiple cells is not working for me. Eg. tbl_TestKaizen #176 - Optimizing the Use of Record ID Variables in Zoho CRM Queries
Hello everyone! Welcome to another week of Kaizen! Since the release of Queries, we have covered Handling Query Variables in Zoho CRM, Serialization and Schema Management, and Leveraging the 'crmAPIResponse' object in Queries in previous posts. Today,Unbilled Items Report?
Hello! Is there any way to display a list of items that remain unbilled, without creating an invoice for each customer to see if the unbilled items box is displayed? ;-) BenConsolidation of Multi currency
Would like to discuss on the possibility of consolidating the ZOHO companiesLanded Cost Allocation / Custom Duty manual data entry
My client is an import business. They must manually enter the duty for each item with landed cost allocation in Bill. This is because customs duties cannot be allocated based on Quantity, Value, Weight, and Dimensions. Manual data entry is highly time-consumingTerritories Just Don't Work
I have been on chat and screenshare support for the past 3 days and am getting no resolution so hopefully, someone here can help me. I am the Super Admin of my organization. We publish books globally. I want to break down the books into territories soNegative Opening Balance
How can I add Negative Opening balance - meaning a credit balance to a Customer or a debit balance to a vendor? If I go thru Sales-->Customers, and if the opening balance is Rs. 1000 (credit balance), it does not allow me to enter a "minus" sign or mentionSingle-Line Invoicing from Sales Order Despite Multiple SKUs Shipped
We deal mostly with Government Tenders And Lets say we got a tender that needs 125 XYZ Laptops Then we found 95 Laptops with a different SKUs and 30 Laptops with different SKUs We talk with the IT department of the government company and they approve📣📣 Zoho Bookings Schedulathon 2025 is here!
Hey Zoho Bookings fam, We're excited to invite you to our first-ever hackathon: Yes, Zoho Bookings Schedulathon 2025 is live now. This is a virtual event and you can participate anywhere from the world. Businesses should be able to set up meetings fromI want to send out a new newsletter each month
Without rebuilding a whole journey is there a way to create a new newsletter that is sent to an existing journey monthly?Reinstalling Workdrive Truesync client
Hi, I attempted to update to the beta version of TrueSync, but it was unstable and kept crashing, so I need to revert to the stable version. How do I properly reinstall TrueSync on a Windows PC? I couldn't install the 3.15.x version directly over theEvaluating Creator; yesterday fine; today connection times out
Yesterday I spent hours creating a new app, and it worked fine. Today I cannot access creator.zoho.com. Is this common? I'm in the evaluation mode, but I'm thinking I'm going to keep looking. It worked from my home computer, and now I'm checking it from my work computer. My work computer always works just fine, so I shouldn't htink there would be special settings or anything. If there are, how to find out what they could be? Using Chrome on Windows XP The error I get is: The webpage at https://creator.zoho.comPivot Chart seems to show "old" data - how do I make it update?
I wonder how to make a Pivot Chart "update" its data contents. Here is the background: I need to report a subset of data that is so complicated that it is easier to make a calculation and put the result in a "reporting form", and then display the data from that form. So, I get data from the "original form" GRANTS, make some calculations and put the result in the "reporting form" PERIOD. Now I can watch the result in a list called LIST, which works fine. The list LIST shows that form PERIOD containsUpcoming Changes to LinkedIn Parsing in Resume Extractor
Starting 31 July 2025, the Zoho Recruit Resume Extractor will no longer support direct parsing of candidate data from LinkedIn profiles. Why Is This Change Needed? In accordance with LinkedIn’s platform policies, extracting profile data through browserIs there a way to map complex product variants from Magento into Zoho CRM without losing SKU-level details?
Hi everyone, I’m working on a Magento-based store that uses highly detailed product variants, and I’m struggling to map them into Zoho CRM without losing SKU-level details. The problem is that variants often collapse into single entries, which affectshow to create view in leads module to that will show all leads + converted leads?
is it possible to make custom view that combine all leads + converted leads? how to do thatDeal Stage component/widget/whatever it is... event
Deal Stages I am trying to access the event and value of this component. I can do it by changing the Stage field but users can also change a Deal Stage via this component and I need to be able to capture both values. Clicking on 'Verbal' for instance,Reply and react to comments
Hi everyone! We're excited to bring to you a couple of new features that'll make your sprint process simpler. A cloud application brings with it an array of social media features that can be efficiently used in your organizational setup. As an agile scrumAnnouncing Early Access to "Zoho CRM for Everyone" — A new and exciting update to Zoho CRM
Zoho CRM For Everyone is now officially available to all customers, and the Early Access Program has come to a close. We want to extend our sincere thanks to everyone who participated in the program. Your valuable feedback played a key role in shapingAvalara Sales Tax integration - AVATAX
Just wondering if anyone else is having troubles with this integration? Seems as though Avalara changed their billing process, unbeknownst to Zoho, and now ALL transactions are counted by Avalara, not just transactions in a taxable jurisdiction. This caused a huge price adjustment billed to us by Avalara within a month of us signing up. And Avalara is not cheap to begin with! Avalara has been great in waiving that increase, but there seems to be no fix. Zoho is aware of the problem, but slowInvalid value passed for description
Dear Sir, When I am entering the purchase bill , the following message showing "Invalid value passed for description" what should I do ? I am attaching screenshot. With Regards, Harish harish@cracku.in 7978841636Zoho Creator - 2024 Release Projection 1
Hello everyone! As we enter 2024, we'd like to extend our warmest wishes for success and prosperity. Your fantastic response to our Product Roadmap page last year has been incredibly motivating. Continuing on this path, we're excited to share a glimpseAutomation Assistance for Zoho Form Integration and Workflow
Hi, We are currently using a Zoho Form to send out our Global Credit Application and would like to automate the process further. Specifically, we’d like the ABN number submitted through the form to automatically populate the GST/VAT Number field in ZohoCOQL does not return queryable value if the result set is empty
See linked video for running code illustration of the problem: https://workdrive.zohoexternal.com/external/d49bb40033b43b288d56fdf843095b7c65b28391d3ec5d09c854f416d853003d Moderation update: We are appending the comment that was removed, to add contextZoho CRMでの商談の管理のしかたについて初歩的な質問です。
先月からZoho CRMを試験的に導入して運用しています。 商談の管理（運用？）の仕方について教えてください。 商談の数が増えてくると、ダッシュボードの「ステージ別進捗状況」にどんどん過去の商談が蓄積されてくると思うのですが、 現在動きのあるものを中心に確認したくなる気がします。 そのあたりについては、どのように運用が一般的なのでしょうか？ アドバイスいただけるととてもありがたいです。 よろしくお願いします。Composite Items & Purchase Orders
The Composite Item is great way to bundle different products and services into a single line and sell it as a single line item in Estimates, Sales Orders and Invoices. However, on the other side - i,e,. Purchasing - this item creates quite a bit of ausing custom function is it possible to update the created by field in Zoho Crm custom module
using custom function is it possible to update the created by field in Zoho Crm custom moduleSlow Sloww Slowwww Responses
Good day, Has anyone been experiencing slow responses from support? Since Thursday I migrated my Whats app to Sales Iq and I had to synch with Social to get the otp they were sending. Apparently What's app can't be automatically added so I reached outYou have exceeded the maximum number of attempts for this action. Please retry doing the same in 30 minutes.
When one of Zoho Books user tries to select a vendor, recording a new bill, these message appears: You have exceeded the maximum number of attempts for this action. Please retry doing the same in 30 minutes. Other user, at the same time, but differentNext Page