Synder RevRec: Revenue Recognition use cases explained

In this guide, you will find basic use cases for SAAS revenue recognition. If you have more specific use cases you want to learn about, reach out to our support team. 
All the examples given below will demonstrate using the daily proration method, though there are more recognition methods available with Synder. Just like there are different ways of setup available for different use cases. However, below you will see the most standard ones.

Overview:

1. Monthly subscription
2. Yearly subscription
3. Yearly subscription refunded in the middle of the contract
4. Yearly subscription canceled midterm
5. Yearly subscription canceled midterm and the remaining part is refunded
6. Subscription upgrade
7. Subscription with tax
8. Additional use cases

Monthly subscription

Use case details:
A monthly invoice was issued on May 5, 2023 for $39.99 for a “Medium” plan subscription.

Transactions:
Invoice – May 5, 2023 for $39.99.

Revenue schedule:
This method of revenue recognition implies that the first day of the billing period is included and the last is excluded. So as the subscription started on May 5 , it means that it covers 27 days of May and 4 days of June.

Period	Days in period	Billed amount	Period revenue	Cumulative Revenue Recognized	Deferred Revenue Balance
May	27	39.99	34.83	34.83	5.16
June	4		5.16	39.99	0.00

Yearly subscription

Use case details:
A yearly invoice was issued on May 5, 2023 for $399.99 for a “Medium” plan subscription and $1200 for a “Large” plan subscription.

Transactions:
Invoice – May 5, 2023 for $1599.99

Revenue schedule:
There are two items in the subscription, so Synder will allocate the revenue for the period for the two items accordingly . If the total revenue for May is $118.03, the itemized level of the books will look like this:
$399.99/36627 = $29.51 (366 days due to 2024 leap year) $1200/36627 = $88.52

Period	Days in period	Billed amount	Period revenue	Recognized revenue balance	Deferred revenue balance
May	27	1599.99	118.03	118.03	1481.96
June	30		131.15	249.18	1350.81
July	31		135.52	384.70	1215.29
August	31		135.52	520.22	1079.77
September	30		131.15	651.36	948.63
October	31		135.52	786.88	813.11
November	30		131.15	918.03	681.96
December	31		135.52	1053.55	546.44
January	31		135.52	1189.06	410.93
February	29		126.78	1315.84	284.15
March	31		135.52	1451.36	148.63
April	30		131.15	1582.50	17.49
May	4		17.49	1599.99	0.00

Yearly subscription refunded in the middle of the contract

Use case details:
A yearly invoice was issued on September 28, 2023 for $1200 for a “Large” plan subscription. It was fully refunded 3 months into the subscription on Nov 12, 2023.

Transactions:
Invoice – Sep 28, 2023 for $1200
Refund – Nov 12, 2023 for $1200

Revenue schedule:
As a full refund was issued in November, the recognized revenue should be offset. So in November, the revenue is offsetting the September and October revenue (9.84+101.64 = -111.48)

Recognition period	Days in period	Billed amount	Period revenue	Cumulative Revenue Recognized	Deferred Revenue Balance
September	3	1,200.00	9.84	9.84	1190.16
October	31		101.64	111.48	1088.52
November	30	-1,200.00	-111.48	0.00	0.00
December	31		0.00	0.00	0.00
January	31		0.00	0.00	0.00
February	29		0.00	0.00	0.00
March	31		0.00	0.00	0.00
April	30		0.00	0.00	0.00
May	31		0.00	0.00	0.00
June	30		0.00	0.00	0.00
July	31		0.00	0.00	000.
August	31		0.00	0.00	0.00
September	27		0.00	0.00	0.00

Yearly subscription canceled midterm

Use case details:
A yearly invoice was issued on September 28, 2023 for $1200 for a “Large” plan subscription.

Transactions:
Invoice – Sep 28, 2023 for $1200

Revenue schedule:
The subscription was canceled in May 2024. As there is no refund issued for the remaining part of the subscription, all the remaining months are recognized upon cancellation. So the revenue in May equals $491.8.

Recognition period	Days in period	Billed amount	Period revenue	Cumulative Revenue Recognized	Deferred Revenue Balance
September	3	1,200.00	9.84	9.84	1190.16
October	31		101.64	111.48	1088.52
November	30		98.36	209.84	990.16
December	31		101.64	311.48	888.52
January	31		101.64	413.11	786.89
February	29		95.08	508.20	691.80
March	31		101.64	609.84	590.16
April	30		98.36	708.20	491.80
May	31		491.80	1200.00	0.00
June	30		0.00	0.00	0.00
July	31		0.00	0.00	000.
August	31		0.00	0.00	0.00
September	27		0.00	0.00	0.00

Yearly subscription canceled midterm and the remaining part is refunded

Use case details:
A yearly invoice was issued on September 28, 2023 for $1200 for a “Large” plan subscription. The subscription was canceled in May and the remaining part was refunded.

Transactions:
Invoice – Sep 28, 2023 for $1200
Refund – May 11, 2023 for $491.80

Revenue schedule:
The subscription was canceled in May 2024, and there is a refund issued for the remaining part, so there is nothing left or recognition in May.

Recognition period	Days in period	Billed amount	Period revenue	Cumulative Revenue Recognized	Deferred Revenue Balance
September	3	1,200.00	9.84	9.84	1190.16
October	31		101.64	111.48	1088.52
November	30		98.36	209.84	990.16
December	31		101.64	311.48	888.52
January	31		101.64	413.11	786.89
February	29		95.08	508.20	691.80
March	31		101.64	609.84	590.16
April	30		98.36	708.20	491.80
May	31	-491.80	0.00	708.20	0.00
June	30		0.00	708.20	0.00
July	31		0.00	708.20	0.00
August	31		0.00	708.20	0.00
September	27		0.00	708.20	0.00

Subscription upgrade

Upgrades and downgrades work similarly, so here, we will explore an example of a subscription upgrade.

Use case details:
A monthly invoice was issued on September 25, 2023 for $39.99 for a “Medium” plan subscription. The subscription was upgraded in October for a yearly “Scale” plan for $740. The remaining part of the monthly subscription of $27.06 was prorated, so the total of the second invoice is $712.94

Transactions:
Invoice 1 – Sep 25, 2023 for $39.99
Invoice 2 – October 5, 2023 for $712.94

Revenue schedule:

The revenue for October is composed of two pieces: the remaining part of the first invoice and a portion of the second one.

The first monthly invoice:
We should see how much revenue should be recognized for October taking the already recognized amount and the prorated amount out of the total invoice amount: $39.99-$8-$27.06=$4.93.

The second yearly invoice:
We should take the full amount of the new plan and recognize it according to the new billing period of the contract taking into consideration that 27 days of October were covered by the new subscription: $740/366*27=$54.59.

So the total revenue for October is $4.93+$54.59 = $59.52.

Recognition period	Days in period	Billed amount	Period revenue	Cumulative Revenue Recognized	Deferred Revenue Balance
September	6	39.99	8.00	8.00	31.99
October	31	712.94	59.52	67.52	685.41
November	30		60.66	128.18	624.75
December	31		62.68	190.85	562.08
January	31		62.68	253.53	499.40
February	29		58.63	312.16	440.77
March	31		62.68	374.84	378.09
April	30		60.66	435.50	317.43
May	31		62.68	498.18	254.75
June	30		60.66	558.83	194.10
July	31		62.68	621.51	131.42
August	31		62.68	684.19	68.74
September	30		60.66	744.84	8.09
October	4		8.09	752.93	0.00

Subscription with tax

Use case details:
A monthly invoice was issued on May 5, 2023 for $39.99 for a “Medium” plan subscription, with the 5% tax of $1.99 applied on top of the subscription.

Transactions:
Invoice – May 5, 2023 for $41.98

Revenue schedule:
The taxes will not affect the revenue recognition process and are not recognized. It means that although the total of the invoice is $41.98, you will see the line items total of $39.99 in the revenue schedule.

Period	Days in period	Billed amount	Period revenue	Cumulative Revenue Recognized	Deferred Revenue Balance
May	27	39.99	34.83	34.83	5.16
June	4		5.16	39.99	0.00

Additional use cases

You may learn more on how other use cases are processed in these guides:

• Discounts processing methods
• Chargebacks processing
• Open invoices processing and setup
• Multicurrency revenue recognition

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!