Revenue should be recognized as control of goods and services pass to the customer, which could be different from when the customer is invoiced or when payment is received. The process of recording revenue in a compliant way is called revenue recognition.
A simple revenue recognition scenario might look like this:
- A customer purchases a magazine for 10 USD in January.
- After the month ends, 10 USD in revenue is recognized for January.
Software as a service (SaaS) businesses that provide services over a period of time can recognize revenue while the service is being rendered. For example:
- A customer purchases an annual subscription for 120 USD in January.
- Because the customer has access to the platform throughout the year, 10 USD is distributed each month.
- 10 USD in revenue is recognized for each month throughout the year.
Revenue recognition can be more complex if you have a high volume of customers, different product lines, or if recognition and payment collection happen at different times. It can also be time consuming and error prone if you have to manage it manually. However, Stripe’s revenue recognition tooling helps businesses of all sizes record revenue correctly without building manual processes or integrating third-party applications.
Stripe’s tooling primarily consists of interactive dashboards and detailed reports that you can download as CSV files. In the Stripe Dashboard, you can view:
- Recognized revenue
- Deferred revenue
- Monthly summaries
- Recognition schedule, also known as a waterfall report
The CSV reports that you can download have both summarized data and detailed information. This includes:
- Income statement and balance sheet reports at the summary, price, and invoice levels
- Debit and credit views at the summary, price, and invoice levels
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