Revenue Recognition with Microsoft Dynamics AX
Revenue recognition is a crucial cornerstone of business accrual accounting principles. If a customer pays for a product or service in advance, companies need a system that accurately records the amount paid and the amount deferred, as well as the timeframe in which the payment is deferred in accordance with the Generally Accepted Accounting Principles (GAAP).
Ignify’s Revenue Recognition Solution with Microsoft Dynamics AX provides businesses with a GAAP Compliant solution that provides revenue deferral and revenue recognition capability and tracks accurately all aspects of the transaction including the initial order, invoice, payment and points of revenue recognition.
Flexible Setup for Revenue Deferrals and Recognition
With the Revenue Recognition Solution, businesses are able to defer revenue on several types of items and services. Businesses are able to easily define the period that the recognition may occur over as well as the deferred amounts - for example, some items may need the entire amount deferred, while others may only need a portion of the revenue amount to be deferred (such as a percentage).
In addition to specifying percentages of deferrals, businesses can also set up the Ledger posting accounts, the calendar type that the deferral will run on, period frequency, length of time - e.g. 1 years, 2 years, 3 years or based on another construct like the duration of a support plan, etc.
The Revenue Recognition Solution allows companies to specify the percentage of a deferral amount, the duration that the deferral will be conducted, and the posting account.
Deferrals can also be activated or deactivated at any time or the rules can be changed and the recognition will automatically leverage the new rules.
After a deferral group is created, businesses can easily define the items or services that are associated with that specific deferral.
By creating a sales agreement and adding a sales agreement line item, the deferral group and list price will be populated from the deferral group defined on the item. List amount and renewal amount are calculated based on the list price, quantity of the items or services, and the deferral group.
A sales order can then be created from the sales agreement with a click of a button, with the deferral group populated from the sales agreement line. The planned start and planned end dates are calculated by the calendar type defined in the deferral group. Users can edit the deferral group, planned start date, and/or planned end date on the sales order if changes are needed.
Companies can simply click “Release Order” to create a sales order from the sales agreement.
Posting the invoice of the sales order then defers revenue, creating the deferral journal and recognition entries. Once the entire line is invoiced, the system will mark the sales line item as a deferred item.
When a sales order invoice is posted, the system defers revenue, as shown by the checked deferred item checkbox in the sales line.
The Revenue Recognition Solution provides in-depth visibility to deferred items and their journals, offering different ways that companies can retrieve and view the data.
Through the system’s invoice screen, companies have the ability to view the deferral journal as a whole or drill down to the deferral journal lines.
A company can view the individual lines that make up a deferral journal.
Recognition entries can also be accessed from the invoice screen as well, while sales agreement renewals can be viewed from the sales and marketing area.
The ability to view deferral and revenue recognition data through different reports provides companies transparency and crucial control over business processes.
If you would like more information, or if you have any questions about Ignify’s Revenue Recognition Solution for Microsoft Dynamics AX, please email us at firstname.lastname@example.org.