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.


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 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 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


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 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

Using Bundles in QuickBooks Online

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

QuickBooks Online lets you create groups of products and services called bundles. Bundles are made up of one or more products and services.

Bundling products is a great way to define a commonly billed set of products and services. It’s also a great tool for developing a repeatable billing process.

To create a bundle go to Gear > Products and services > New > Bundle.

Using bundles for frequently billed products

Let’s say you typically bill for the following products/services for most of your clients:

  • SaaS subscription
  • Maintenance Fee
  • Implementation Fee
  • Custom Report Hours

Creating a bundle that consists of the 4 items above you save you time when creating each invoice. You would only need to add the bundle item to the invoice and each of the 4 items would be automatically added to the invoice.

Using bundles to hide pricing details

Let’s take the 4 items above and say the total cost you will end up billing your client is $50,000. With bundling you can choose whether the details of the bundle show up on the invoice. You can choose whether only the bundle item shows up on the invoice with the total cost, or each of the 4 products also show up.

When creating a bundle either check or un-check Display bundle components when printing or sending transactions

Basic Invoicing in QuickBooks Online

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

Developing an internal process

One of the most important tasks is to develop an internal process for billing your clients. Even if you are a small company now, having a repeatable process that you can use to train others will pay off in the future.

  • Provide as much detail on the invoice as possible: terms of the subscription, implementation details, renewal details
  • Provide details for each product/service you sell. If you are selling software subscription, note the start/end dates for the subscription.
  • Come up with a process for billing renewals (we’ll discuss recurring transactions in another post)

Enabling service date

QuickBooks Online allows you to enable an extra field on invoices called Service Date. This extra field can be used to specify additional information such as the start date of the subscription or the date you plan to be providing that service to your customer.

To enable Service Date go to Gear > Company Settings > Sales > Sales form content

Emailing your invoices

Emailing your invoices to customers will allow you to get paid much quicker. You can also use QuickBooks Payments to easily accept credit cards and ACH payments.

When you email your invoices to your clients, you will be able to see when they have opened and viewed the invoice. This only works if they click the link provided in the email, so you may want to turn off the PDF attachment option to make sure they have to click that link. Gear > Company Settings > Sales > Online delivery > Attach sales form as pdf

In our next posts in this series we’ll go over some other options for invoicing such as product bundles, classes, locations and how to utilize QuickBooks Online and ProRata to manage your revenue recognition.

SaaS Guide to Invoicing in QuickBooks Online

In this 5 part series we will be going over some best practices and how-to’s for how SaaS companies can utilize QuickBooks Online‘s built-in features to manage your subscription billing process.

  1. Basic Invoicing in QuickBooks Online – We’ll go over the basics as well as how to enable certain features in QBO that are useful when selling SaaS products and services.
  2. Using Bundles in QuickBooks Online – Learn how to create an use bundles for multiple-element contracts
  3. Using Classes and Locations in QuickBooks Online – Learn how to use QBO’s classes and locations to tag your invoices with additional data for reporting
  4. Recurring Invoices in QuickBooks Online – You’ll learn how to use QBO’s recurring invoicing features to create future invoices for renewals
  5. Revenue Recognition in QuickBooks Online – Learn how ProRata can streamline your revenue recognition and revenue reporting

We will release a new blog post each day next week.

NEW BLOG SERIES: How to Conquer the Age of FinTech: Finding Your Niche, Mastering Solutions, Marketing Your Skills, and Taking on the IoT and the Cloud Subscription Frontier


The ProRata team and I would like to welcome you to our newest blog series, “How to Conquer the Age of FinTech: Finding Your Niche, Mastering Solutions, Marketing Your Skills, and Taking on the IoT and the Cloud Subscription Frontier.”

No matter the type of financial professional: CFO, corporate controller, a bookkeeper, fractional/freelance/full-time, etc; you will benefit from a brief course through this blog on how to #ConquerFinTech .

In 8 weeks, you will be ready with this battle-tested advice:

Topics Being Covered:

  • Defining Value Added Finance and FinOps – No More Vague Advice Like “Be a Resource:” Titled:: You are Not A Babysitter: The Age of Value-Added Finance Professionals
  • The Art of Identifying and Studying Your Niche (Yes, CFO/controllers/staff accountants have niches too!)
  • How do I Master my Niche and Prevent Myself from Losing the Trust of my Client(s) Making a Bad Recommendation?
  • Why Make Use of the App Ecosystems and Cloud Products: How to Leverage Them to #ConquerFinTech?
  • What Skills Do I Need and How Do I Get Great at Them to #ConquerFinTech ?
  • How to Market Your Value: Part 1
  • How to Market Your Value: Part 2
  • Introduction to the Frontier of IoT and Cloud Subscription: What Accountants Need to Know

Want this series in your inbox every 2 weeks? Let us know you want it! (subscribe button with I want to #ConquerFinTech)

Next week: You are NOT a Babysitter: The Age of Value-Added Finance Professionals
Use the hashtag #ConquerFinTech, mention us @ProRata on Twitter, or comment below.

How to Set Up Controls in Your Accounting Process

You may have seen the recent buzz word control.


With GAAP 2018 rules around the corner, even though they never state you must have controls in place, it has made it into the conversation (check out the previously blog post citing BDO).


Here’s why:

-Eliminates areas in the process where an error could have occurred

-Ensures compliance

-Ensures reliability and integrity of financial information

-Creates more time in the day to actually peel through your calculations for processes

that can not be automated and are an area where you provide the most value for your



Among other ways internal controls have been touted (sources below).


So how do you set controls up in your accounting process? Can a spreadsheet be used as an internal control?


Controls in the modern accounting process as it relates to software ultimately boil down to automation of redundant tasks or as one client called it: “donkey work.” As seen in the sources, there are additional controls we could hit but they aren’t really new to the space. Let’s hit home automation first.


Why a spreadsheet can’t be an internal control: spreadsheets are known for being fraught with business risk (refer to 88% of Spreadsheets blog as well as sources). You could attempt to put controls in places but as noted in Theiia, even those controls are not seen as truly automated controls, free of error. That can really only be provided by an automation tool.


What does a good automation tool look like?

Your automation tools should seamlessly integrate with your current accounting software (on-premise, hosted, or cloud) and more often than not, work as both frontend and backend tool. A strong automation tool will allow for you to create the permissions, set it, and forget it. The QuickBooks Online app store has this for just about everything: automate your time tracking for payroll of hourly employees with TSheets or automate your revenue recognition and reporting with ProRata.


How to Set-Up Internal Controls for Automation Processes:

With a great internal control i.e. a great business tool, the how-to is simple:

  1. An email or a call giving permission for their dev team to set it up in your current accounting software
  2. Hop on, set the permissions/rules you want the software to follow
  3. Go back to focusing on the parts of your day that truly matter.



Internal Control Sources:

Washington University (

AccountingWEB (

Small Business Chronicle (

Spreadsheet Sources:

Daylight Savings: Bet You Thought This Article Would be About a Q4 Promotion

     Daylight savings is this weekend and don’t worry, this article is not some cheap word play on the word ‘savings.’


     Do we save money and time for our clients?


     Of course, that is why you get ProRata.


     Is that what this article is about?


     No. We respect our readers.


     Time to understand this whole 2018 GAAP Compliance. Its scaring the daylights out of people. We’re getting calls.


     Let’s fall back on the literature and shed some light on why automating revenue recognition or at the very least getting a CPA to make sure you are absolutely compliant.


     The GAAP rules for 2018 have shifted and here are the area you need to look up if it is relevant to your business:

              -As of December 15, 2018, everyone is to be following FASB regulated guidelines (not

               just public companies)

              -SaaS companies will likely be required to make an estimate of “variable consideration”

             including any contingent usage fees or royalties (if you have contingent fees above and

             beyond the usual SaaS business, make sure to go to the FASB website)

               -Keep an eye out for distinct performance obligations as accounting units within a

               customer contract have changed for specific types of obligations (if you have obligations

                above and beyond the usual SaaS business, make sure to go to the FASB website)

               -Anything not covered by the standards previously that one would normally be at the

               company’s disgression must now be reported to standard

     The last three points specifically affects SaaS companies, otherwise it is business as usual. Overall a push for internal controls (automation acts as an internal control, especially of needlessly error-prone processes such as revenue recognition spreadsheets) has been a hallmark of rhetoric surrounding the new guidelines. Additionally, keeping good data that is uniform for investors and auditors is emphasized in compliment to encouraging businesses to have an internal control for obvious reasons such as keeping your business from going under and keeping you out of jail.


    Hope this helps! Please comment with questions below or @ProRata on Twitter. Enjoy falling back November 6th!


How-To Shift to Annual Based Subscriptions Without Driving Your Accounting Staff Up a Wall

The deferred revenue ‘problem:’ that issue that arises when you move away from monthly subscriptions, is now long gone thanks to automated revenue recognition solutions. With automated revenue recognition, the deferred revenue “problem” is similar to that annoying additional step to have sliced bread by actually cutting it up – 1928 we have sliced bread. In 2016, we have ProRata, an automated revenue recognition solution for QuickBooks Online users. ProRata is literally the best thing since sliced bread 😉


    With the deferred revenue “problem” solved, the question remains, in a time where “accounting firms are pushing for subscription revenue,” why not push for the annual subscription?


      It is key to note that in the same article citing the push for subscription revenue by accountants followed that statement by mentioning that this push leads them right into the cloud (where software exists to support such a model). They are doing more with less and saving time for clients. The article can be found below under “Quote Source.”


    MarketingExperiments by MEC Labs found that annual subscriptions even at a discounted rate of about 40% the monthly rate are sizably more profitable than their monthly counterpart. Tucker Dawson at Price Intelligently shares that a combo of both monthly and annual optimizes income through ensuring lower customer acquisition cost in a calendar year, boosts customer retention thus lower churn rate AND his findings were for businesses that have monthly customers as their bread and butter as far as pricing. It’s no secret to the business world that annual is gold but it is also important to remember when shifting to annual, offering both prices as mentioned by the sources above is an important option for those balking at the idea of commitment elsewise you might be spending too much on sales.


    Automating your revenue recognition will simplify for accountants what just makes sense for your business model.



Quote Source:  (