Dynamics 365 – Revenue Recognition – Let the PARTY Continue!

We will build on the post where we introduced Revenue recognition, and learn some more awesomeness.

For example, care must be exercised when a Sale with deferred revenue must be adjusted.  We will build on the post where we introduced Revenue recognition in Dynamics 365, and learn some more awesomeness.  Revenue recognition schedules can be set to default by item to the sales order.  And there are options for determining Revenue price.

Revenue Recognition

Now that revenue recognition is setup and deferring revenue for the company, and revenue is being recognized with the posting of the revenue recognition journal, don’t forget the importance of revenue recognition and the need to consider it when making corrections to or canceling sales recorded with a revenue schedule.

But there is no need to be afraid.  It is simple if a couple things are applied.

In the case of needing to credit a customer for an invoiced item or service, it is best to add a sales line to the original sales order as a credit.  Make sure the Setup line details for the credit line include the same contract terms as the sales order line being credited.

Enter the credit sales line using the same Revenue schedule as the original sales order line:

Sales order lines dynamics 365

Enter the same Contract start date and end date as the original line.

contract terms revenue schedule d365

The number of Occurences should match the original line.

When the credit is invoiced, the Revenue schedule will contain debits and credits that cancel each other by date and amount.

revenue recognition schedule dynamics 365

If the Contract start date and end date on the credit line do not match the original invoiced line, the credits will not offset when revenue recognition is posted.  Additionally, the deferred revenue credits will be dated and calculated beginning with the invoiced date forward, which could be a problem.

Revenue Recognition defaults

Setting the default settings for the revenue recognition can be maintained by item, making the process of deferring revenue consistent.

Navigate to the Released product record (Product information management > Products > Released products).

Select the Released product and double click it.

Open the last tab on the Released product form.  From here, set the Revenue schedule that will be defaulted to the sales order line.

dynamics 365 revenue recognition defaults

The default value can be updated in the sales form, as needed.

Revenue price

Also on the Released product form, is the opportunity to manage the Revenue price so revenue is recognized using the discount allocation method, the median price method, or the item price from the sales order line.

First, D365FO will check to see if Revenue allocation is active.  If not, the Median price option is checked.  If neither are set, the Unit price on the sales order line will be used as the Revenue price.

revenue allocation in dynamics 365

When using the Median price (set to Yes), the Exclude from carve out (Y/N) and the two tolerances will become editable fields.

To set the median price, or Fair market value (FMV), navigate to Revenue recognition > Setup > Inventory and product setup > Revenue prices.

Median prices, or FMV’s, can be set by amount or percent of list:

median prices fmv d365

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