Before You Start

This guide assumes a high volume of subscription contracts and administrator access to your accounting system (e.g., QuickBooks Online, NetSuite).

Overview

60 min
Setup Time
Advanced
Difficulty
Monthly
Maintenance

What You’ll Learn

  • Understanding ASC 606/IFRS 15 requirements for subscriptions
  • Selecting the right revenue recognition automation tool
  • Integrating your tool with your GL (e.g., QuickBooks, NetSuite)
  • Setting up contract modifications and deferral schedules
  • Automating reporting for audit readiness and compliance

1. Preparation Steps

Ensure your accounting system is prepared for deferred revenue entries:

Required Accounts

  • Deferred Revenue (Liability)
  • Recognized Subscription Revenue (Income)
  • Contract Assets/Liabilities (Asset/Liability, for specific scenarios)

Optional (but recommended)

  • Unbilled Receivables (Asset)
  • Customer Deposits (Liability)
  • Subscription Discounts (Income Reduction)

2. Choosing Your Solution

You have two main options, each with serious pros and cons.

Method A: Manual Spreadsheet Management

This involves tracking all contracts and recognition manually.

Pros:
  • No upfront software cost.
  • Full control over calculations.
  • Suitable for very low contract volumes.
Cons:
  • Highly prone to errors.
  • Extremely time-consuming to maintain.
  • Difficult to audit and scale.

Method B: Dedicated RevRec Automation Software (e.g., Chargebee, Maxio)

These are paid apps designed for ASC 606/IFRS 15 compliance.

Expert Tip: For businesses with significant subscription volume, dedicated revenue recognition software is essential. It ensures compliance, accuracy, and auditability at scale. Trying to manage ASC 606 manually with high volumes is a recipe for errors and audit headaches.

3. Step-by-Step: Implementing Automation

Here is the high-level workflow for a clean setup.

Here is a sample code block to show how an API call for a revenue schedule might look.

{
  "contract_id": "SUB-001-2025",
  "customer_id": "CUST-XYZ",
  "start_date": "2025-01-01",
  "end_date": "2025-12-31",
  "total_contract_value": 1200.00,
  "recognition_schedule": [
    { "period": "Jan-2025", "amount": 100.00 },
    { "period": "Feb-2025", "amount": 100.00 },
    { "period": "Mar-2025", "amount": 100.00 },
    { "period": "Apr-2025", "amount": 100.00 },
    { "period": "May-2025", "amount": 100.00 },
    { "period": "Jun-2025", "amount": 100.00 },
    { "period": "Jul-2025", "amount": 100.00 },
    { "period": "Aug-2025", "amount": 100.00 },
    { "period": "Sep-2025", "amount": 100.00 },
    { "period": "Oct-2025", "amount": 100.00 },
    { "period": "Nov-2025", "amount": 100.00 },
    { "period": "Dec-2025", "amount": 100.00 }
  ]
}

4. Setting Up Your Automation Tool

  1. 1

    Integrate with Billing & GL

    Connect your chosen revenue recognition tool to your subscription billing system (e.g., Stripe, Recurly) and your General Ledger (QuickBooks, NetSuite).

  2. 2

    Define Revenue Policies

    Configure rules for performance obligations, contract terms, and deferral periods based on your specific ASC 606/IFRS 15 interpretation.

  3. 3

    Map Accounts

    Link your revenue recognition categories (e.g., subscription income, professional services) to the correct GL accounts for automated journal entries.

Common Error: Inconsistent Contract Terms

Ensure your contract terms (start date, end date, payment terms) are consistently entered in your billing system. Inconsistencies will lead to incorrect deferral schedules and compliance issues.

5. Testing and Validation

Test Import Checklist

  • Process a sample of recent subscription contracts
  • Verify revenue schedules match your defined policies
  • Confirm journal entries are correctly generated in the GL
  • Reconcile deferred revenue GL balance to the subsidiary ledger

Need Help?

Get Support

Navigating complex revenue recognition standards can be challenging. Our team can help ensure your setup is compliant and efficient.

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