How to set up revenue recognition schedules
Billing is not the same as earning. A revenue schedule spreads what you billed across the periods you actually deliver - here is how to set one up.
Why you need revenue schedules
When a customer pays upfront for a year of service, you have the cash but you have not earned the revenue yet. Recognizing it all at once overstates the current period and leaves nothing for the months you still owe service. A revenue schedule holds the amount as deferred revenue and releases it as you deliver, which is what ASC 606 requires.
Setting up a schedule
- 1Identify the performance obligations in the contract - what you promised to deliver.
- 2Allocate the contract price across those obligations.
- 3Choose a recognition pattern - ratably over time, at a point in time, or by milestone.
- 4Set the schedule to release revenue on that pattern and hold the rest as deferred revenue.
- 5Recognize each period automatically and reconcile deferred revenue at close.
Common recognition patterns
| Deal type | Pattern |
|---|---|
| Annual SaaS subscription | Ratably over the term, monthly |
| One-time product sale | At the point of delivery |
| Implementation project | By milestone or percent complete |
| Usage-based service | As usage occurs |
How Fintra runs rev rec
- Revenue recognition builds schedules from the contract and releases revenue on the chosen pattern.
- Deferred revenue is tracked as a liability and drawn down automatically each period.
- Recognition posts as part of the close, with the deferred balance reconciled.
- Every recognition entry carries an audit trail back to the underlying contract.
Frequently asked questions
What is a revenue recognition schedule?
It is a plan that spreads billed revenue across the periods you actually deliver the service or product. The unearned portion sits as deferred revenue, a liability, and is released to revenue over time. It is how you comply with ASC 606, which recognizes revenue as obligations are satisfied, not when cash arrives.
What is deferred revenue?
Deferred revenue is money you have billed or collected but not yet earned. It is a liability, because you still owe the customer the product or service. As you deliver, the schedule moves amounts from deferred revenue into recognized revenue, drawing the liability down to zero over the contract term.
How does ASC 606 change revenue recognition?
ASC 606 ties recognition to satisfying performance obligations. You identify the obligations in a contract, allocate the price to them, and recognize revenue as each is delivered - over time or at a point in time. It standardizes how businesses spread revenue rather than recognizing on billing or cash.
Can revenue schedules be automated?
Yes. Once you set the obligations, price allocation, and recognition pattern, software can release revenue each period, maintain the deferred-revenue balance, and post the entries at close automatically. That removes the manual schedules teams often keep in spreadsheets, which drift and are hard to audit.
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