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What Is ‘Revenue Recognition’ And How Does It Differ From Billing?

04.07.22

‘Revenue’ is distinct from ‘billing’ (or sales) in that it is based on the value of the service delivered to the customer and when it is delivered, and not what was charged for it and when. For many day-to-day services they amount to the same thing, but for satellite air-time providers they can be very different due to the billing being in advance of service provision (perhaps by many years) and the use of free of charge periods or variable capacity within a contract.

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Satellite capacity is the core service provided by air-time providers and resellers and it requires monthly revenue recognition based on the actual satellite capacity provided within each product within each contract. Typically, satellite channels’ revenue is calculated ‘proportionate to capacity’, i.e. the revenue is based on the total contract value apportioned across the capacity provided in each service month. This can be pooled across multiple network products within a contract, if required. Revenues must therefore be recognised within the posting period in which the service is performed and not necessarily in the period in which the service was billed.  

Customer-facing invoicing and revenue are intrinsically linked as they are both based on the same contract information. Although revenue recognition apportionment is calculated using separate algorithms than those required for invoicing, the total customer billing value over the life of the contract must always be the same as the total contract revenue recognition value. 

Different revenue recognition rules may be required depending on the product and contract type as non-air-time services (for example, equipment sales) need to be handled differently, as do services whose value is only known after the service has been provided, for example post-paid consumption. 

How Can SATbill Help?

SATbill contains a Revenue Recognition module which was specifically built for satellite air-time providers. It is tightly integrated with both the contract module and with the billing module. It is able to handle the revenue for many different types of services and it can use a variety of ‘rules’ to recognise revenue in the correct way, such as:

  • Proportionate to capacity
  • Equal monthly revenue
  • Point in time
  • Revenue equals revenue
  • Or ‘ignore for revenue’

In addition, a revenue analyst can always take control of a contract’s revenue plan if it needs to be handled in an unusual way, and manual plans can be uploaded to SATbill for it to use, rather than the automatically calculated plans.

Once a revenue plan has been approved it may have its revenue posted to your financial control system, such as SAP-ECC, for onward internal and external reporting. Opening balances, deferred revenue and management of contract amendments are also fully supported.

The revenue reports are presented in easy-to-use on-screen editable spreadsheet areas; however, all the data comes directly from the contracts and their forecast and actual billing held within SATbill, thus ensuring there is one source for all your billing and revenue data.

 

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Image source: Pixabay