When selling subscriptions, memberships, or prepaid investments, companies often receive large sums of money upfront from their customers and cannot recognize that revenue immediately. This can cause accounting and cashflow issues if the money was immediately available as revenue all at once. Therefore, Microsoft Dynamics 365 for Finance offers Revenue and expense deferrals as part of their new Subscription billing offerings. Revenue deferral allows the revenue to enter a deferred account and be recognized on a schedule to be defined by the accounting team. Let's discuss how to set this up.
The first step is to set up Deferral defaults. This section can be found in Subscription billing > Revenue and expense deferrals > Setup > Deferral defaults.
This form looks similar to the Posting screen in the Inventory management module. Here, you can set the following default deferral accounts for Sales orders:
- Deferred revenue
- Deferred discount
- Deferred consumption
- Deferred charge
- Charge template
|Set the default deferral account for Recurring contract billing|
And the following default deferral accounts for Free text invoices:
|Set the default deferral and recognition accounts as well as the recognition templates!|
You may have noticed that Templates were listed as a Deferral default. Let's dive into the Templates and what they do!
|Revenue and expense deferral parameters|
- Variable amounts - a specific allocation amount is entered for each line
- Equal amounts - The amount is allocated equally per line
- Percentage - The amount is allocated based on a set percentage per line
- Percentage of completion - A cumulative completion, by date in ascending order, is entered for each line
- Variable quantity - A specific quantity is entered per line
Items Deferred by Default
Revenue Deferral Process
|The line is deferred, now click the Deferrals button on the line to learn more!|