Set up deferred revenueLast updated on 09/07/2022
Use deferred revenue to recognize a portion of a membership fee as income when you provide a recurring service included with the membership. In a given month, recognized revenue offsets the cost of providing these services, which can help you manage cash flow and profitability.
Things to know
The Memberships Wizard helps automatically calculate deferred revenue for a membership type. You can also configure deferred revenue manually.
You can manually edit deferred revenue for an individual customer’s membership without affecting the membership type settings.
Use the Customer Memberships report template to track deferred revenue.
What is deferred revenue?
Deferred revenue is used in accrual accounting to manage advanced payment for upcoming services. After accepting payment, you only recognize it as income upon delivery of services, when the revenue is earned. Memberships use deferred revenue to account for recurring services included with a membership.
For example, for an annual membership fee of $200, customers receive quarterly air filter changes. With deferred revenue:
The upfront membership fee of $200 is deferred in a General Ledger (GL) liability account.
For each quarterly filter change, the invoice debits $50 from the liability account and recognizes $50 in the income account.
Set up memberships for deferred revenue
With deferred revenue, for sold memberships, recurring service event invoices are prefilled for your technicians and recurring revenue is automatically accounted for in your GL account.
Follow these steps to set up deferred revenue:
Step 1. Set up your General Ledger accounts
Set up a GL liability account for deferred membership revenue and a GL income account for recognized membership revenue in QuickBooks:
You can also map membership-related service items in your pricebook to Item GL Groups in Intacct:
Step 2. Create Pricebook service items for deferred revenue
These Pricebook service items appear on invoices for recurring service events. One item debits deferred revenue from the GL liability account, the other credits the revenue in the GL income account. Follow these steps"
Step 3. Configure invoice templates for deferred revenue
Invoice templates are used to generate invoices for recurring service events. Set up invoice templates with the deferred revenue billing items from your pricebook:
Step 4. Configure recurring service types for deferred revenue
Recurring services included with a membership are based on a recurring service type. Follow the steps to set up a recurring service type for deferred revenue:
Step 5. Set up deferred revenue for membership types
Set up a membership type to include a deferred revenue recurring service type. You can also configure the membership type to automatically calculate deferred revenue for each recurring service event:
Want to learn more?
Visit ServiceTitan Academy and enroll in Deferred Revenue Membership Programs
Important note: Some features may not be currently included in your account and additional configuration may be required. Please contact technical support for details.
Disclaimer: Information provided in this article is for informational purposes only and it should not be construed to be legal advice. Information provided in this article may also not constitute the most up-to-date legal or other information. You should not act or refrain from acting on the basis of any information in this article to meet any compliance requirements without seeking independent legal or other professional advice.