How does revenue recognition work in Zoho Billing?

Revenue recognition in Zoho Billing spreads the revenue from an invoice across the period you deliver the service, instead of booking it all on the invoice date. Unrecognised amounts sit in a deferred revenue account and move to income on a schedule. It is offered on higher plans, so check that your edition includes it before you rely on it.

When you bill a customer yearly in advance, you have not earned the full amount on day one. Accounting standards such as ASC 606 and IFRS 15 expect you to recognise revenue as you deliver. Zoho Billing handles this by holding the invoiced amount in deferred revenue and releasing a portion to income each period, usually monthly, across the service term of the subscription or item.

You set it up by turning on revenue recognition in settings and choosing rules for how revenue is spread, for example evenly across the billing period. You then apply rules to plans, addons or items. Billing creates the schedule and the journal entries. Reports show recognised and deferred revenue by period, which helps with monthly closes and investor reporting.

Check a few things early. Decide how upgrades, downgrades, refunds and mid-term cancellations should affect the schedule, and test each case with a sample customer. Make sure the deferred revenue account maps correctly if Billing syncs to Zoho Books. Feature names and options change over time, so read the current Zoho help page for your edition. If your contracts mix one-off setup fees with recurring fees, plan rules for each line separately.

Written by Flowpeak, a Zoho implementation partner. Zoho pricing and features change, so confirm current details on the official Zoho site. Free checklists | Ask us a question