How do I use the Deferred Revenue feature?
Deferred Revenue gives you a way to record an invoice, including payment, prior to shipping product to your customer. Unlike a deposit on their account, a deferred revenue process ties the client's pre-payment to a specific sale/invoice.
1. Setup & Accounting
To begin using Deferred Revenue, you must establish a liability account for the purpose. The liability account will have the Setup Type of L - Deferred Revenue. This is a required account for AcctVantage, so even if you're new to Deferred Revenue, you will already have this account in your chart of accounts. To view, go to the Chart of Accounts list screen and use the Filter By to select "Special Accounts."
You must turn on the Deferred Revenue function by checking a preference on the Administration > System Setup, Sales tab (image above). Check the box to "allow deferred revenue sales."
When a Deferred Revenue invoice is posted, rather than posting a credit to your Sales Income account, those dollars are posted to the Deferred Revenue Liability account mentioned above. This account will maintain a detailed sub-ledger of postings so that your liability for specific invoices is tracked. The debit side of the Deferred Revenue invoice posting is your payment account (Cash, Credit Card Receivables, AR, etc.)
When you've filled the backorder and shipped the product for which you've collected a Deferred Revenue invoice, AcctVantage takes care of debiting (-) the liability and crediting the Sales/Revenue account for the product. Filling a Deferred Revenue sale is done via the Back Orders process.
2. Turn on the Invoice Qty column for Order Entry
You must display the Invoice Qty column on the Sales Order entry screen. Activate this column via the Administration > System Configuration screen, line items tab. Make the column visible and enterable.
3. Processing a Deferred Revenue Invoice
To process a Deferred Revenue Invoice, enter the Sales Order just like any other with the exception of the Invoice Qty column. By default, AcctVantage will match the Invoice Qty to the Ship Qty, effectively invoicing for only those items that you are able to ship. By updating the Invoice Qty, you are able to process an Invoice and collect the payment (or book the AR) for product which you have not yet shipped.
Whenever the Invoice Qty does not match the Ship Qty, AcctVantage will post a liability for the quantity not shipped to the Deferred Revenue liability account established above. Note that this means you could invoice an entire order while you ship partial and back order the remainder.
In the screen shot example below, we are going to invoice and collect payment (note: this could be charged to A/R as well) for all 100 units (Invoice column) the customer is requesting. We will be shipping 5 units today and back ordering the remainder.
In this example, we will have $2,100 of revenue/sales posted to the income account (Ship Extend column) and $2,100 posted to the Deferred Revenue liability account.
4. Filling a Deferred Revenue Sale
Filling a Deferred Revenue sale follows the same steps as filling a normal back order. The distinction is that a normal back order will require a payment on the back order shipment/invoice while a deferred revenue backorder will show as paid.