In Revenue recognition, Synder can process open invoices in multiple ways. If you want to recognize open invoices and write the recognized revenue off as a bad debt if the invoice gets voided or uncollectible, Synder allows you to do it. However, some businesses want to keep it simple and just ignore any unpaid invoices unless they get paid.
Synder supports both modes. Read this article to learn more about how Synder automates both approaches.
Overview:
Pause recognition for open invoices
Recognition flow explained
Overall idea:
Synder pauses recognition of any open invoices and does not recognize anything in your books unless the invoice has the Paid/Voided/Uncollectible statuses. It’s only once the invoice gets one of these statuses that Synder recognizes it, updating the previous periods with Revenue Recognition entries.
Example:
Your Stripe subscription has 2 invoices. The first one is a monthly invoice for the Bronze plan, fully paid right away in February. The other one is a yearly invoice for the Large plan that is initiated in March, and remains open till May, when it gets finally paid off.
Recognition flow:
February:
The monthly invoice is fully recognized in February, as the subscription starts on February 1, so the recognition process goes on like that: $199.99/28*28=$199.99
March and further months:
You will get no Journal Entries available for synchronization unless the invoice is paid off, so your PandL will be empty throughout March and April. It is only in May that the Entries will be generated, and you will have them synced as of March 31 and April 30.
Note: Synder will display a message showing that none of the RevRec Entries (Journal Entries to recognize your revenue) for the open invoice are generated.
The schedule will still display the expected revenue for your open invoice:
As soon as the invoice is paid off in May, Synder will generate and sync the Journal Entries for March (as of March 31) and April (as of April 30)Â and will keep generating further Journal Entries regularly (at the end of each month).Â
Note: You can filter out open invoices and their revenue in the overview report so that you can match the numbers to your PandL (as your PandL only includes the revenue for the synced months. It means that the “pending” months with open invoices are not reflected in your books).
The Profit and Loss will look like this (this is an ongoing yearly subscription, so it has been recognized only up to November):
The Balance Sheet will look like this (this is an ongoing yearly subscription, so it has been recognized only up to November):
Setup explained
To set up the app if you want to pause open invoices recognition, follow the steps below:
1. Make sure this method is set for your revenue recognition.
Note: if you enable Revenue recognition via a support team call, this method will be set for your account by the Synder Team as they take care of all the setup process for your Revenue recognition.
Note 2: As Revenue recognition highly depends on historical data, you will not be able to change the method later. If you still want to do that, you will have to start the setup and the syncing process from scratch.
2. If you don’t want open invoices to get into your books, make sure you have the setting to “Sync open invoices” OFF in your Synder settings. Then no open invoices will be synced unless they are paid off.
If you want to track AR, enable this setting to sync over open invoices. If the invoice is voided in Stripe, Synder will automatically roll it back. Uncollectible invoices will remain in your books.
You can learn more about how Synder treats invoice statuses for this method in this guide.
Note: You do not need the Bad Debt category for this method.
Recognize open invoices
Recognition flow explained
Overall idea:
Synder recognizes every open invoice in the same way as if it is paid. So if the customer’s card doesn’t have enough funds and Stripe keeps retrying charges within a week (the invoice remains open all this time), the revenue will be recognized after the week is over, and the invoice will remain unpaid. In this situation, 2 scenarios are possible:
- The payment eventually succeeds. Synder will sync the payment automatically to the books and close the invoice. In this case, you get uninterrupted recognition of money in the books.
- Retrying to charge the money didn’t work out, and the Stripe account owner/the Stripe user voided the invoice or marked it as “uncollectible” (such cases are treated as equal from the Revenue recognition standpoint). Then, Synder will sync a Credit Memo in QuickBooks Online to close the invoice (and delete it from your Accounts Receivable) and will write off any recognized revenue to the Bad Debt account in your PandL.
Example:
Your Stripe subscription has 2 invoices, the first one is a monthly invoice for the Bronze plan that is fully paid. The other one is a yearly invoice for the Large plan initiated in April, and remains open till June. In June, it is marked as “uncollectible” (a “voided” invoice will have the same implications for your books).
Note: We recommend marking invoices in Stripe as “voided” rather than “uncollectible” because “Voided” is the final status of the invoice and will not cause any discrepancies in the future.
Recognition schedule in Synder RevRec:
March recognition:
$199.99 monthly subscription is recognized over March and April. As it covers 30 days of March, the amount to be recognized is $199.99/31 (as March has 31 days total)*30=$193.54
April recognition:
We have $6.45 remaining from the monthly invoice ($199.99-$193.54).
The $1200 yearly invoice is recognized with the daily ratable method, which means $1200/366 days (as 2024 is a leap year) *29 days (as the yearly subscription covered 29 days of April) = $95.08
May recognition:
$1200/366*31 = $101.64
June recognition:
$1200/366*30 = $98.36
July recognition:
In July, the open $1200 yearly invoice becomes “Uncollectible”, so all the revenue recognized for this invoice should be written off to Bad Debt: April+May+June = $95.08 + $101.64+$98.36 = $295.08Â
This is how the schedule will look:
You will also be able to see that Synder has created a Credit Memo to close the invoice and delete it from your Accounts Receivable:
Profit and Loss report will show the Bronze and Large plan incomes and Bad Debt:
The Balance Sheet (Deferred Revenue) report will go to zero:
Setup explained
To set up the recognition of Open invoices, follow the steps below:
1. Make sure this method is set for your Revenue recognition.Â
Note: if you enable revenue recognition via a support team call, this method will be set for your account by the Synder Team as they take care of all the setup process for your revenue recognition.
Note 2: As Revenue recognition highly depends on historical data, you will not be able to change the method later. If you still want to do that, you will have to start the setup and sync from scratch.
2. Have the setting to “Sync open invoices” ON in your Synder settings.
3. Make sure you have selected the right Bad Debt account in the Synder settings category.
Once you have the setup ready, you can check how Synder processes an invoice for you:
1. Find an open/voided/uncollectible invoice in Stripe.
2. Open the invoice and copy the ID of the subscription it relates to.
3. Paste the subscription ID to Synder’s RevRec and find the subscription you need.
Reach out to the Synder team via online support chat, phone, or email with any questions you have – we’re always happy to help you!