Understanding revenue recognition in Replicon

You can use Replicon's Revenue Workbench to recognize revenue on an ongoing basis.

Replicon offers two default revenue recognition contracts, Percent of Completion and Equal Distribution. But, if your company uses another method, we can easily and affordably set you up with a custom revenue contract.

Once your contracts are enabled and project administrators have assigned them to projects, revenue managers can then carry out revenue runs to formally account for all recognizable revenue that has been earned for a project.

The Revenue Workbench is available in our Professional Services Automation product.

What is revenue recognition?

Revenue recognition is a common accounting procedure that officially accounts for revenue earned.

This procedure is necessary since, for example, you might be paid for a three-year project upon completion. To ensure a true picture of the state of that project, you need to credit part of that revenue to each of the three years.

Revenue recognition allows you to:

  • Comply with industry regulations, such as IFRS 15 and ASC 606
  • Give accurate reports on your financial status to investors and shareholders
  • Carry out informed revenue forecasting

Typical revenue recognition workflow

  1. Administrator sets up applicable revenue clauses and contracts at the system level. Some are available by default.
  2. Project Manager assigns a revenue contract to a project; they can edit which contract clauses are included in the contract for each project.
  3. Project team members record hours against the project.
  4. The system applies revenue contract rules to hours worked, generating recognizable revenue.
See Understanding revenue contracts and clauses for information on how recognizable revenue is calculated for each default contract clause.
  1. On some regular schedule, Revenue Manager creates revenue runs, selecting the amount of available revenue to officially recognize. They can choose to recognize only a portion of the available recognizable amount, if desired.
  2. Revenue Manager marks the revenue run as complete and can download a CSV of the revenue run for import into an ERP system.

FAQs

What are IFRS 15 and ASC 606?

These are international revenue recognition standards that are just taking effect – both define the same rules.

With these new standards, regulators aim to eliminate industry-specific reporting methods to make it easier for analysts and others to compare the performance of different professional services companies.

If professional services companies fail to comply with these standards, they face penalties.

Will using the Revenue Workbench make our organization compliant with IFRS 15 and ASC 606?

Our out of the box Percentage of Completion contract can be used to comply with these regulations.

Is there a report where I can view revenue and recognizable revenue for a project?

Yes. See the Revenue report template or the Revenue Recognition Summary.