Empress: Efficiently Managing Your Deferred Revenue

Guides & Tutorials
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Introduction

Introduction: What is Deferred Revenue?

Deferred Revenue, commonly known as Unearned Revenue, is the advanced payment a company receives for products or services that are scheduled for future delivery or performance. This is recorded as a liability on the company’s balance sheet under ‘Deferred Revenue’ because the revenue is not yet earned. It represents the products or services the company still owes to its customers. As the product or service gets delivered over time, it is recognized as revenue on the income statement.

In a business operation, managing deferred revenue is crucial, especially for companies that offer subscription-based services. Empress provides an excellent feature to help you manage this aspect of your business efficiently.

Configuring Deferred Revenue in Empress

Empress offers various settings that provide control over managing your deferred revenue. Here are the primary functions you need to know:

  1. Automatically Process Deferred Accounting Entry: This setting is enabled by default. However, if you prefer to process deferred accounting entries manually, you can disable this setting. When disabled, deferred accounting will need to be processed manually using the ‘Process Deferred Accounting’ option.

  2. Book Deferred Entries Based On: You can choose to book deferred revenue based on either ‘Days’ or ‘Months’. The default option is ‘Days’. If ‘Days’ is selected, the deferred revenue will be booked based on the number of days in each month. If ‘Months’ is selected, it will be booked based on the number of months.

  3. Book Deferred Entries Via Journal Entry: Typically, Ledger Entries are posted directly to book deferred revenue against an invoice. If you prefer to book this deferred amount posting via Journal Entry, you can enable this option.

  4. Submit Journal Entries: This option is only applicable if deferred accounting entries are posted via Journal Entry. By default, the Journal Entries for deferred posting are kept in ‘Draft’ state, and a user must verify these entries and submit them manually. If this option is enabled, Journal Entries will be automatically submitted without user intervention.

Using Deferred Revenue in Empress

Empress makes managing deferred revenue straightforward and efficient. Here’s how to configure Deferred Revenue accounting in Empress to automate the process.

Creating an Item

In the Item master created for the subscription plan, under the Deferred Revenue section, check the field ‘Enable Deferred Revenue’. You can also select a Deferred Revenue account for this particular item and set the number of months.

Creating a Sales Invoice

When creating a Sales Invoice for the Deferred Revenue Item, instead of posting in the Income Account, the Deferred Revenue account is credited by the sale amount. If you had set the account and period in the Item, then the account and service start and end dates will be fetched automatically.

Creating a Journal Entry

Based on the ‘From Date’ and ‘To Date’ set in the Sales Invoice Item table, Journal Entries are automatically created at the end of each month. The value is debited from the Deferred Revenue account and credited to the Income Account selected for an Item in the Sales Invoice.

In Conclusion

Managing Deferred Revenue is a critical aspect of business operations, especially for subscription-based businesses. Empress provides a user-friendly interface and practical tools to automate and simplify this process, freeing up valuable time and resources for other tasks.

For additional assistance or more in-depth guides, feel free to explore our support resources or reach out to our dedicated customer support team.