Configure revenue recognition rules to define revenue treatments specific to your business.
Stripe revenue recognition allows you to configure custom rules to handle revenue treatments specific to your business needs. For example, you can configure a rule to:
- Categorize an invoice line item as a tax or fee
- Book a transaction amount or invoice line item as a passthrough fee
- Exclude transactions from specific customers or test invoices
- Amortize revenue over a specified time period relative to payment or invoice finalization date
- Recognize revenue after a specific time period to model a future fulfillment schedule
- Allocate multiple revenue treatments to a single transaction amount
Stripe revenue recognition provides a set of default rules to model the methodology for handling common Stripe resources.
- For invoice line items with service periods, the line item amount is amortized evenly over its service period. If a period is not set on an invoice line item, the amount is recognized entirely upon invoice finalization.
- Other payments not made through an invoice are recognized immediately upon payment since there is no service period or fulfillment information.
Custom rules will override Stripe’s default revenue treatment behaviors where applicable and can be added or modified on the Stripe Dashboard.
Rules can be applied to:
- Invoice line items
- Other payments (i.e. payments that are not associated with invoices)
Learn more about creating a rule and defining revenue treatments and explore sample rules on tax treatment, passthrough fees, exclusion, and custom time periods.
Rule ordering and hierarchy
Each transaction can only have one rule applied to it when revenue reports are processed. In situations where a single transaction fits the “Apply-to” criteria for multiple rules, rule hierarchy matters to determine which rule will be applied to the transaction. The higher a rule is ranked on the list, the higher the priority with which it will be applied.
You can rearrange the order of the rules by clicking on the “Change rule order” button as shown below:
After clicking the “Change rule order” button, you can reorder the rules to adjust their priorities.
Best practices for effectively maintaining your rules
As your business grows, it is important to ensure your rules are regularly maintained to ensure the accuracy of your revenue reports. The following are some best practices to keep rules correct for your revenue recognition reports.
Know when to create a rule
When applied correctly, Stripe’s default rules and revenue treatment methodology for handling subscription events will accurately recognize and defer revenue out-of-the-box for businesses who require more control over their unique use.
Regularly monitor rules to ensure they are up-to-date
Billing models, customer types and edge cases can regularly change, and rules should evolve accordingly. To ensure that revenue treatments remain predictable, it is recommended that rules are periodically checked to ensure they are up-to-date in terms of hierarchy and effective period.
Check if your accounting period is open or closed when new rules are applied
If a new rules’s effective period overlaps with a closed accounting period, corrections are generated if rules are retrospectively applied to transactions from past closed accounting periods since books are closed. If you wish to avoid this, reopen your books by opening your accounting period prior to adding the rule.