Concept: Revenue Recognition

You can create revenue recognition schedules for customer contracts based on the contract terms. Revenue recognition schedules identify and drive accounting for the creation and appropriate amortization of unrecognized revenue. Revenue recognition operates separately from billing processing.

Milestones

You can create milestones to track the completion of tasks and specify when Workday can process billing and revenue recognition schedules and installments. You can assign multiple milestones to schedules and installments. Workday doesn't process schedules or installments with pending milestones.

You can use these tasks to configure standard milestones:

Maintain Date Milestone Types

Create Date Milestone

Standard milestones become customer milestones once you add them to a customer. You can view customer milestone details using the

Find Milestones

report. Customer milestones are unique for each customer and company combination.

Workday supports these milestone types:

Billing Schedule First Invoice: Use to initiate revenue recognition once billing has occurred.

Date Milestones: Use standard date milestones as the basis for creating customer date milestones.

Project Tasks: Mark project tasks as milestones in the project. Use project milestones to control when you bill project transactions and recognize revenue. You can define project milestones for a project phase or for the overall project to determine when transactions are available for billing. You can use project tasks marked as milestones as contract milestones. You can't delete project tasks that are in use on a contract. You can enter estimated and actual completion dates. Once the project task is complete and you enter an end date, billing can occur. Workday uses the end date as the milestone completion date.

Schedule Types

You can use the

Maintain Schedule Types

task to configure schedule types for use on billing and revenue recognition schedules. When you enable a schedule type for use on:

Billing schedules, you also have the option to enable Prepaid
or Consolidated Billing Schedule
.

Revenue recognition schedules, you also have the option to enable Usage-Based Subscription
or Multi-Period
.

Workday displays the usage count for each schedule type, and you can set a schedule type as Inactive
at any time. When you set a schedule type as Inactive
, Workday removes the option from the

Schedule Type

prompt on billing and revenue recognition schedules.

Billing Schedules and Installments

You can:

Link contract lines that span multiple contracts for the same company and customer to the same billing schedule.

Define schedule types so you can classify your schedules. This process simplifies searches, approvals, and reporting.

Create installment or transaction billing schedules to manage certain types of contract lines, or consolidated billing schedules to manage installment, transaction, and prepaid contract lines in 1 schedule.

Workday creates installments based on the scheduled start and end dates, which can differ from the contract line start and end dates. You can also configure the invoice date to assign, which can differ from the installment start date.

Workday supports these billing methods for each billing schedule, and you can change methods throughout the life of the schedule:

Defined Installment
: Define the first and last installment amount for each contract line. Workday spreads the remaining amount evenly among the other installments. You can't use this billing method on consolidated billing schedules.

Spread Even
: Define a set number of installments with equal amounts.

Custom
: You control all aspects of the installments.

A billing schedule includes 1 or more installments. Each billing installment:

Creates a customer invoice.

Becomes an invoice line.

Derives attributes from the associated contract line.

Once you generate installments, you can:

Manually update individual installments.

Regenerate billing installments automatically after changes to contract amounts. This function only applies to Spread Even
billing methods or Spread Even
and Number of Days
revenue recognition methods.

Update your schedules automatically when you make changes to your contract lines.

Edit all installments at once when you have a custom schedule.

Workday assigns an Out of Balance
status when:

You don't schedule your contract line installments exactly.

A custom schedule overbills.

You can create customer invoices from billing installments after you approve the billing schedule.

Independent Revenue Processing

To accrue and recognize revenue for project transactions without billing, select the

Independent Revenue Processing

check box on the

Create Revenue Recognition Schedule for Customer Contract

task.

Multi-Period Revenue Schedules

Workday enables you to create revenue recognition schedules that span multiple periods. You can specify the duration and the amount or percentage of revenue to allocate for each period.

Revenue Recognition for Order Fulfillment

You can track orders fulfilled against a customer contract line. You can then generate billing based on both partially and completely filled orders, and recognize revenue. You can recognize revenue for orders by:

Creating a sales item that requires order fulfillment.

Creating a customer contract with a sales item on the contract line that requires order fulfillment.

Recording order fulfillment transactions.

Creating revenue recognition installments for billable transactions.

Posting revenue recognition accounting for the revenue recognition installments.

Invoices and Revenue Recognition Schedules for Transaction-Based Contract Lines

For multiple element arrangements, you can allocate and recognize revenue based on the Standalone Selling Price (SSP) of each item sold.

Recognizable revenue derives from ongoing billing. To add every invoice for a contract line to the revenue recognition schedule, you can assign a schedule to the transaction-based contract line in your contract configuration. Revenue recognition for each invoice starts at the invoice date and distributes until the schedule end date. Workday recalculates the amount if:

The invoice date falls in an installment that's already in process or completed.

The schedule method for revenue recognition is Daily
or Spread Even
.

You can enter different worktags on the invoice and contract lines, but the revenue recognition transaction worktags automatically populate from the contract line.

When an invoice contains lines that reference a contract line, Workday displays an invoice summary on the

Contract Lines

tab on the customer invoice.