Handle revenue recognition

Revenue recognition is a generally accepted accounting principle (GAAP) that defines how and when revenue should be recognized. Businesses that use a cash-based accounting method, such as sellers of physical goods, can recognize revenue when they receive payment for their goods or services. Conversely, SaaS businesses and software providers generally follow accrual-based accounting standards, and they recognize revenue when it is realized and earned, not when cash is received.

Revenue that is not yet earned is classified as deferred revenue, which is a liability.

The accuracy of your revenue recognition also matters more for:

• Public companies
• Products with a material amount of revenue
• Pre-IPO companies, possibly looking to raise money

Metronome supports revenue recognition through our in-house functionality that you can also export to your preferred tool.

Metronome functionality

The revenue recognition process begins with your product definitions. When designing products, consider whether the product is billed in advance (such as a subscription or seat-based model), or whether the product is billed in arrears (such as a usage-based charge). Charges that are billed in advance are deferred revenue at the time of invoicing and recognized in a future period. Charges billed in arrears can likely be recognized upon invoicing.

Metronome provides all the necessary data for you to recognize revenue accurately. After revenue recognition treatment has been determined for your products, you can poll the /customers/{customer_id}/invoices endpoint to fetch bills sent during the accounting period.

Accurate calculations of deferred and recognized revenue may also require credit grant and credit grant deduction data. Metronome calculates a cost basis for credit grants that you can use for your calculations. At the end of an accounting period, use the /credits/listGrants and /credits/listEntries endpoints to retrieve this information.

Revenue recognition tools

Having properly set up your products within Metronome, and with the data exportable in several ways, you can use your tool of choice to complete your revenue recognition. This may be:

• Spreadsheets
• Data warehouse
• Custom scripts

Note that Metronome provides invoice, credit grant, and credit grant deduction data through automated data exports to an external data warehouse of your choice.