BLOG

Recognizing revenue for membership based companies


gravity-software-cloud-accounting-recognizing-revenue-for-membership-based-companies-revenue-recognition

When it comes to revenue recognition, that concept of reporting revenue in the period it is earned seems simple. But for most companies it becomes a tedious and sometimes frustrating process. For membership based companies; e.g. associations, complications arise as fees or dues are often paid up front or in advance. But what happens when a constituent pays  their annual dues in advance? Are you recording the revenue in the period it is earned?

Proper revenue recognition is so important that the Financial Accounting Standards Board (FASB), the industry’s regulatory body, passed a new standard for deferred revenue. So when your constituent prepaid for an upcoming conference, the new standard states that you need to record the revenue when the goods or services (an event in this case) are actually performed.

Gravity Software 10 key ideas for improving your accounting practice

The reporting process should be simple if every constituent signed up and paid on the same day without any adjustments or cancellations. But in the real world the potential for inaccurate revenue recognition multiplies considerably. As constituents join, end, revise, and/or cancel their memberships at different times throughout the calendar year, what do you do? And it doesn’t end there. Perhaps the cost of membership increased or decreased. What happens if a group membership was granted special payment terms, a special rate or flexible cancellation clause? Trying to sort through these issues while properly reporting and complying with the new FASB standards can be overwhelming! These complications can definitely get out of hand, but they don’t have to because there’s a solution.

[Related: Fast, smart and automatic: Boost productivity on revenue recognition with the right tools]

Accurate and reliable statements

Gravity Software® (Gravity) takes the pain away with its Revenue Recognition (Rev Rec) module.  This module enables membership based companies to accurately and correctly recognize revenue and expenses in the period they are earned. Yes, even with all the different variables that are factored in (start/end dates, rate adjustments, discounts, cancellations, the list goes on and on), Gravity has you covered. Its recognition templates does the sorting for you. Think of the templates as a set of tools designed to sort through and simplify a potentially complex process. What’s left for you to do? Just post the monthly entries.

If you’re looking for new and viable accounting software, consider Gravity. Gravity’s cloud-based accounting solution is written on the Microsoft Power Platform (aka Dynamics 365 CRM). Gravity’s Revenue Recognition module provides more accurate and reliable financial statements that truly represent revenue and associated costs that have been actually earned. Learn more about Gravity and schedule your online demo today.

Gravity Software

Better. Smarter. Accounting.

 

schedule a demo with Gravity Software