Revenue Recognition in QuickBooks Online

This post is part of a 5 part series titled SaaS Guide to Invoicing in QuickBooks Online.

Deferred revenue in a nutshell

Deferred revenue is an important topic for a SaaS subscription company. While it’s not the most exciting, it’s important because you’ll want to make sure you are reporting your company’s revenue correctly.

The concept of deferred revenue (or revenue recognition) can be simplified by saying that when you bring on a new customer, revenue must be recognized as your earn it. For example, you you sell a $12,000 subscription for 12 months of access to your SaaS product, you can’t recognize all $12,000 as revenue when the contract is signed. It must be recognized as you earn it, or 1/12th each month.

Deferred revenue is revenue you are deferring until a later date. Then you can recognize that revenue over time as you earn it, decreasing deferred revenue and increasing actual revenue.

Deferred revenue in QuickBooks

QuickBooks does not manage deferred revenue natively. People will typically create elaborate spreadsheets to track deferred revenue and make manual adjustments to the GL each month.

ProRata to the rescue

ProRata is a QuickBooks Online app that integrates directly with your accounting software to automate and manage deferred revenue. ProRata also has additional reporting capabilities for Revenue, Deferred Revenue, MRR, ARR and SaaS reports and metrics.

For more information use the form to the right!

Recurring Invoices in QuickBooks Online

This post is part of a 5 part series titled SaaS Guide to Invoicing in QuickBooks Online.

Creating recurring invoices

Recurring invoices in QuickBooks Online are a great way to manage renewals. By setting up a recurring invoice you won’t have to remember when to create a renewal invoice. It’s also a great way to bill your customers on a recurring basis for monthly or quarterly billing terms.

Open any saved invoice, then at the bottom of the invoice in the dark gray area click Make recurring.

 

Recurring invoice options

Creating in advance

You can choose to create the invoice a certain number of days in advance. For instance, choose 30 days in along with NET30 terms to ensure the invoice is paid on time.

Automatically send emails

You can also have QuickBooks email the recurring invoice when it’s created.

Interval

The interval determines on what schedule the invoices should be created. Common options are monthly and yearly. This is great, no only for renewals but in the case where you may be billing monthly or quarterly. You can also when to start and how to end.

Viewing your recurring invoices

Go to Gear > Lists > Recurring transactions. You can also filter by Invoice templates.

This screen is useful in determining the next date the invoice will be created. It’s a good check to make sure you’ve set up your Interval correctly and aren’t invoicing too soon or too late.

Using Classes and Locations in QuickBooks Online

This post is part of a 5 part series titled SaaS Guide to Invoicing in QuickBooks Online.

Classes and locations are options within QuickBooks Online that allow you to tag transactions such as invoices with additional data.

To enable classes and/or locations go to  Gear > Company settings > Categories

Classes

Classes can either be assigned to an entire invoice or to each individual row in the invoice.

Classes can be used to track just about anything. You could use classes to track the type of revenue: New Business, Renewal, Expansion, Contraction, etc. You could also use it to track a cohort you would like to report on such as Region, Country, Company Size, Company Vertical, etc.

To manage classes go to Gear > Lists > All Lists > Classes.

 

Locations

Locations are very similar to classes, with a few differences:

  • You can only assign one Location to an invoice
  • You can change the terminology for Locations
    • Business
    • Department
    • Division
    • Location
    • Property
    • Store
    • Territory

Reporting

QuickBooks also allows you to run certain reports by both Location and Class. To view the available reports, go to Reports > All Reports > Search.

ProRata

ProRata handles classes on transaction in two ways:

  • Classes and locations are tagged in ProRata, allowing you to run revenue reports and filter by location or classes
  • Deferred revenue journal entries created by ProRata will inherit classes and locations that were on the original invoice when imported into ProRata