Invoices - Ability to recognise future revenue
The ability to recognise future revenue from the invoice.
Purpose: To find out the future revenue, because for some businesses the invoice that they’ve issued to their customer is the revenue for the future month.
Hi all, appreciate the interest and rationale in wanting to be able to recognise revenue of a sale at a date different to that of the invoice or payment date.
While this maybe a function we look to explore in the long-term we want to be upfront that this is not something we'll be developing in the near term. In the meantime it may be best to look into connected apps that can solve for revenue recognition. We'll be sure to let you know if there's any change around this, here.
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Jomari Steyn commented
Would it be possible to always have a journal automatically updated, to account for ALL Draft Invoices as:
dt. Deferred Income
cr. Sales (the specific sales account as indicated in the draft invoice)I imagine this being an automated journal that updates as soon as a new invoice is saved to drafts, and also removed from the journal when it is approved.
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Danietta Janse van Noordwyk commented
SaaS businesses Have to have this as a feature of their accounting package. All US companies had to adopt ASC 606 from 2019.
the basic principle of ASC 606 / IFRS 15 is to “recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.” It needs to be recognised on a daily basis.
To keep these calculations in excel and to have multi currency becomes extremely convoluted and the risk for formula errors are very high, which could lead to material errors in the revenue recognition.
Not having this capability will ultimately force us to look at alternative solutions for our business
As a SaaS business yourself and in the current economic environment I am quite surprised this has not received the required attention.
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AA DJs Ltd. commented
We are an events DJ company that often have clients booking us a year in advance. In order to comply with bookkeeping and accounting best practices and actual reporting requirements, this is a feature that is critical. Worst yet, the profit and loss report and the sales transaction reports calculate total sales based on the invoice issued date, and not on the due date. We thought we could workaround this by setting the due date to the client's event date, but then we have discovered that the invoices are still showing under the current year's data which totally goes against the revenue recognition principal.
Please, please, please, please, please implement this feature ASAP.
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Rufus Grantham commented
We are a DaaS business and like others bill some customers monthly by Direct Debit which is fine, but for those that won't sign a mandate, they pay quarterly or annually in advance, however from a metric perspective it is important we accrue revenue in equal monthly installments. Currently have to book the invoice to a customer prepayment account on the balance sheet and then manually journal from there to revenue each month. The ability to set up the revenue recognition schedule at the point of issuing the invoice itself so avoiding the manual journals would make a huge difference
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Aparna Mehta commented
Accruals should be able to be assigned to an invoice or customer. And have more features available for manual J/E. Also, there is no training or information on your website for Accruals. Please add training for accruals.
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Pamela Narain commented
Deferred Revenue Recognition
When a multi-period sale invoice is booked there should be a feature which enables the user to recognize the revenue over multiple periods. Perhaps two additional columns can be added to the invoicing input screen where the user can enter the start and end date of the term to facilitate the calculations. If changes are made to the original invoice then the user should have the option to automatically or bulk adjust the prior prorations.
This feature would be useful to multiple businesses that sell multi-term services and are required by accounting rules to recognize the revenue proportionally over the life of the contract.
This feature can also be used on the Billing side to recognize prepaid expenses over multiple periods.
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Cristian Bejan commented
We are a SaaS business and we invoice all our clients in advance for one year therefore we have to do the deferred revenue and revenue recognition process every month. At the moment this process takes me two days to do using excel every month.
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Diana Robbins commented
It is a critical feature, a third party doesn't really do it well. We will also need to make a change at some point if this cannot be solved within Xero.
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Rod Crook commented
We must have this feature - as others have commented. Luckily we also track all invoice activity in Salesforce and reconcile this to Xero every week. In Salesforce we have been able to build an FRS reporting dashboard to solve the revenue recognition, accrued and deferred revenues. It seems clear that to scale we will have to migrate from Xero as the product owners are not awake to this critical business issue.
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Phil Norton commented
Difficult to account for annual SaaS subscriptions using Xero right now.
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sufia von bismarck commented
I work for a subscriptions based business and the manual work involved in trying to deal with prepayments, paused and changed payments makes Xero unfeasible as the business scales up.
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Luke Curtis commented
I would extend this to the same functionality but for deferred revenues that have to be spread over a period - critical for subscription-based businesses.
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Luke Curtis commented
This should be a dead cert for Xero to add as it is a manual process that literally every accounting team have to process manually once a month.
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Joel Mansford commented
Next month this idea I believe will be 10years. This has now become so critical for us we're looking to move off of Xero.
Not even being able to record dates on invoice/transaction lines means we can't even attempt to do this manually outside of Xero.
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Aprilyn Sotto commented
Prepayment function should also be available on Xero where at the time of creating purchase invoice, a prepayment tickbox can be selected and user will be prompted to enter the prepayment period. Xero shall automatically reverse the expense on the period where the client paid in advance and amortize the expense over the period selected. This will avoid omission of necesary prepayment entries at monthend.
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Kim Duffy commented
This should be very simple - SAGE offer it as standard. Really frustrating having to do journals every month :-(
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Marika Muizniece commented
Adding prepayment functionality (similar to depreciation or Scheduled journals) into Invoices and Bills would save so much time at the month end - when enterinf bill or invoice, it would be great if you could define expense dates from / to and xero would split the costs automatically over this period. Balancing entry would then go to Prepayments or Advance / Deferred income accounts. In ideal situation, there should also be report that shows prepayments / deferred income schedule with items line by line and total costs / income to be recorded each month.
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Raz Miah commented
Prepayments lead schedule - similar to Fixed assets Register, could be used for deferred income, accruals schedule too.
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Tracy Round commented
If Xero could help to automate the prepayments process this would stop errors and omissions and save a lot of time
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Chorus Executive Finance commented
Absolutely agree. If you could achieve this, it would be a game changer! To be able to spread revenue invoiced over future months would be the number one Xero improvement for me. I think this is one change that would impact directly on your market share.