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Creating a revenue recognition entry

Updated

Sometimes you need to recognise revenue separately from a sales invoice. This happens when you've invoiced a client upfront but the work is happening over the following weeks or months. On that original invoice, the revenue would have been shown as deferred, sitting on your balance sheet rather than in your profit and loss.

A revenue recognition entry releases that deferred revenue as the work actually happens. This article explains how to create one, whether from a billing plan or manually from the invoices tab.

What is a revenue recognition entry

Deferred revenue means a sales invoice has been raised upfront, but the revenue is only released to your profit and loss as the work is delivered. A revenue recognition entry is the transaction that releases it.

In Synergist, these entries are prefixed RR. They behave like a sales invoice in terms of approval workflow, but they are not a document you send to a client. There is nothing to print and nothing to email. An RR simply moves revenue from deferred to recognised.

You can raise an RR against a single phase, a single job with multiple phases, or across multiple jobs.

Creating a revenue recognition entry from a billing plan

Revenue recognition entries are most commonly raised directly from a billing plan. A billing plan is a revenue forecast, listing out planned revenue by month for a job or phase. This is the recommended approach if you use billing plans to manage your revenue schedule.

  1. Go to the job or phase and open the Billing Plan tab.
  2. Choose the billing plan line that corresponds to the period you want to recognise revenue for.
  3. Select Actions > Invoice as per BP.

This does not create an invoice. It creates a draft revenue recognition entry.

Note: Check with your Synergist champion for your organisation's internal process. Some agencies raise RRs only from billing plans, others allow it from the invoices tab too.

Creating a revenue recognition entry manually

If you are not using billing plans, or you need to raise an RR outside of one, you can do this from the invoices tab on a job or phase.

  1. Go to the job or phase Invoices tab.
  2. Click New > New Rev Recognition.
  3. Enter the amount you want to recognise in the Recognise Now field. This reduces the deferred balance.
  4. Open Accounts Analysis and click Auto to pull through the correct nominal codes.
  5. Mark the entry as ready to approve.
  6. Approve, then select Make Real.

Choosing how to recognise revenue

When the RR entry opens, it lands on the Phase Allocations tab. You'll see the Deferred Total (the current deferred balance for the job or phase) and a field to enter how much you want to release this period.

You can enter this manually, or use one of the automatic options, depending on your agency's internal revenue recognition process:

  • Recognise all deferred revenue balances: releases the full invoice value into the profit and loss.
  • Defer all: sets the recognised amount to zero. Use this when raising the sales invoice itself and choosing to defer the revenue rather than recognise it straight away.
  • Recognise using tick-off charge values: calculates the amount to recognise based on the total value of ticked off costs per phase, so revenue tracks work done.
  • Reconcile using recognised totals: reconciles the entry against amounts already recognised.
  • Allocate revenue per BP: allocates the recognised amount to match the values planned in your billing plan. This option only appears if your agency uses phase level billing plans and the RR has been raised from one.

Whichever option you choose, the total recognised per phase must always equal the invoice total value.

Tip: If you use phase level billing plans, Allocate revenue per BP is usually the fastest option. It keeps your recognition lined up with what you originally forecast, without any manual entry.

Why allocated costs matter

Whenever you invoice a job, you need to know which costs that invoice actually covers. This isn't just admin. Your profit on a job is the amount you bill less the cost of the work behind it, so getting this right directly affects your reported margin.

The Allocated Costs tab is where this happens. It's often called tick-off, because you are ticking off the specific time, materials or purchase costs that this invoice or recognition entry covers.

For most jobs, it's enough to tick off every cost currently sitting on the job at the point the invoice is raised. You can make this automatic by turning on auto tick-off in company parameters, so you never have to think about it.

Manual tick-off is worth using when you're invoicing for something specific rather than everything on the job. For example:

  • Invoicing for one type of cost only, such as artwork.
  • Part-invoicing for costs incurred up to a certain date, leaving the rest on WIP for a later invoice.

Working with the allocated costs screen

The Allocated Costs tab shows every cost that has been ticked off against this invoice or entry.

  • Use the buttons at the top of the list to switch between time, materials and purchases.
  • Click a cost to change its tick-off status, then tick or untick as needed.
  • Check the totals at the bottom of the list, which show billed and written-off costs separately.
Note: Ticking a cost off as either billed or written off removes it from work in progress reports as at the invoice date. The difference is what happens to the invoice total. A written-off cost will not be included in the invoice total if your invoice build type is by actual costs.
 
Tip: If you have a backing sheet layout installed, you can print an invoice backing sheet directly from this screen, giving you a clear breakdown of exactly which costs sit behind the invoice.

Understanding the tabs on a revenue recognition entry

An RR uses the same creation interface as a regular sales invoice, but with fewer steps. Here's what each of the other tabs does.

  • Jobs/Phases invoiced: specifies which job or phases are being invoiced. You rarely need to change this, as Synergist selects it automatically. Use it manually only if you want to recognise revenue based on specific completed phases.
  • Financial: a summary of gross and net profit for the entry.
  • Phase allocations: revenue in Synergist sits at phase level, so this tab lets you allocate the invoice or recognition amount across each phase. 
  • Accounts analysis: select Auto here to let Synergist assign the correct nominal codes, based on your company settings. This ensures the deferred revenue nominal code is reduced and the sales nominal code is credited correctly. You can change the nominal manually from the drop-down if needed.

Approving and making real

A revenue recognition entry follows the same approval workflow as a sales invoice. It must be marked as approved before it can be reviewed and made real.

Selecting Make Real locks the financial details. A posting file is then generated, ready to post as a journal entry to whichever finance software you have integrated with Synergist.

Tips

  • Raise RRs from a billing plan wherever possible. It keeps your revenue forecast and your actual recognition in sync.
  • Use Allocate revenue per BP if you work with phase level billing plans, it saves manual allocation entirely.
  • Use recognise using tick-off charge values if you want revenue to track delivery rather than a fixed monthly schedule.
  • Check your allocated costs before approving. Getting tick-off right is what keeps your reported profit accurate.
  • Agree your recognition process with your Synergist champion first. The right approach depends on how your agency bills and reports revenue internally.

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