Upgrade Memberships set up with Deferred Revenue Revenue Recognition: recommended workflowLast updated on 05/12/2023

This article will provide the recommended workflow for users to upgrade or downgrade a previously sold Deferred Revenue membership type.

Cancel existing membership and sell a new membership
Edit customer’s membership type and collect additional money owed

Things to know

To verify if membership is set up with Deferred Revenue Revenue Recognition, navigate to Settings > Membership Type Settings > Edit on the membership type > Recurrences > Revenue Recognition. Deferred revenue membership types should have the Deferred Revenue option selected.
When you follow the Edit customer’s membership type and collect additional money owed workflow and the upgraded membership is set up to have Deferred Revenue calculated automatically, the invoice templates of the recurring service may recalculate as a result of the edit to Initial Deferred Revenue.

Workflows

Cancel existing membership and sell a new membership

If no action is taken within the membership, that is all recurring service events are still in a Not Attempted status. This workflow will keep a record of both sales for proper accounting purposes.

In ServiceTitan, go to the navigation bar and click Search.
From the dropdown field, select the customer whose membership you want to cancel.
Select the membership you want to cancel.
The Membership screen opens.
Click the Edit pencil.
The Edit Membership screen opens.
In the Status dropdown, select Cancelled.
When you’re done, click Save. If the pop-up screen asking whether you want to Do Nothing or Refund Customer opens, select Do Nothing.
Go back to the customer page.
Click Sell Membership.
The Create Membership Sale Invoice screen opens.
From the Membership Sale Task dropdown, select the sale task for the new, upgraded membership type.
Sell the new membership.
On the sale invoice, create an adjustment invoice. Note: You may need to batch and post the parent invoice first.
On the adjustment invoice, add a negative, non-workflow task, mapped to a liability GL account, priced at the same price as the original membership’s sale price. For example, if you originally sold the first membership for $100, add the negative task to the adjustment invoice for $-100. Note: Do not use a membership sales task for this step, it is recommended to use a billing template task. This will ensure the customer is not charged double and the Deferred Revenue remains correct. This invoice can be used to send to the customer to collect the remaining money owed for upgrading the membership.
Batch, post, and export both invoices as you do it normally.
Backdate the new membership if necessary.

The above workflow will allow for a record to be kept of the previously sold membership that is on the customer page, and all new upgraded offerings will be recorded on the newly active membership.

Edit customer’s membership type and collect additional money owed

Follow this workflow if action has been taken within the membership (such as a recurring service event being marked as complete). This workflow will instruct users to make all edits in a single membership.

Repeat the steps from 1 through 4. For more information, follow the Cancel existing membership and sell a new membership workflow. The Edit Membership screen opens.
From the Type dropdown, select the type for the upgrade membership.
From the menu that appears, select the membership type for the upgraded membership.
When you’re done, click Save.

The membership is upgraded.

To collect the remaining money owed from selling the upgraded membership:

Go to the activation invoice for the membership.
Create an adjustment invoice on the membership activation invoice.
On the adjustment invoice, add a miscellaneous, non-workflow task, mapped to a liability GL account, to charge the customer for the remaining balance. Note: Do not use the task that activated the original membership, that would create a duplicate membership. It is recommended to use a membership billing task. The task should be priced at the price of the upgraded membership minus the price of the original membership. For example, Original membership sold at $100. Upgraded membership priced at $150. Task price = $150 - $100 = $50. This adjustment invoice can be provided to the customer in order to collect the remaining money owed for the upgrade.
Go back to the customer’s membership page and click Edit pencil.
On the edit membership page, edit the Initial Deferred Revenue field to include the amount of the additional money collected from the adjustment invoice.
When you’re done, click Save.

If the Membership Type is a Fixed Duration Membership, follow the below steps: Note: Memberships with an ongoing type are not required to follow these steps.

On the Customer Membership page, click the Recurring Service page for any recurring services with remaining event(s).
On the Edit Recurring Service page, go to the Invoice Template field.
Click Edit.
Edit the invoice template so that the positive and negative tasks are priced to make up for the missed revenue on the already completed event(s).

The previously completed events were completed at a time when the expected Deferred Revenue was less than it is now. You will need to adjust the pricing of tasks on future events to collect this revenue.

To do that:

Take the amount you inputted in the initial deferred revenue field and divide it evenly by the remaining recurring services with events. For example, if you added $50 to the initial deferred revenue and have two remaining services with 1 event remaining, then add $25 to each recurring service’s invoice template.
positive and negative tasks on the invoice template and click Save.

The above workflow will prevent users from seeing the membership set up prior to upgrading, but any actions taken previously will still be recorded on the new membership.

If the Membership Type is an Ongoing Duration Membership, you must turn on the configuration called ‘Recurring service invoice template for following years is editable’. This configuration will create a first-year and 2+ year invoice template on each recurring service.

Ongoing membership deferred revenue is calculated using the sales task plus all billing for 12 months and then divided by how many visits.
In the scenario where a customer is upgrading, you are selling the membership for a price AND adding initial deferred revenue from the previous membership balance which enhances the first year of billing vs anything after.

Example: Membership is $10 a month and has 2 visits per year.

Normally this is $120 for the year divided by 2 visits. Each visit is worth $60
In the upgrade case, we are also adding initial deferred revenue from the previous membership. In this case, it's an additional $50. So each visit for the first year should be $85 instead of $60.
The next year does not have initial deferred revenue factoring in and should only recognize $60 per visit. Which is why you need the two invoice templates. ServiceTitan should calculate this automatically.

Note: If the upgraded membership includes new Recurring Services, the new Recurring Services must be manually added from the edit membership page. For more information on how to add recurring services to an existing membership, see Manage recurring services.