Scope
How to configure Expense Rules in RevRec?
How to create accounting rules for Expenses via bulk upload?
What fields are mandatory and optional in Expense rules?
Summary
RevRec’s Expense feature can recognize the business or contract cost associated with a subscription, based on a set of rules defined. The accounting rules are a set of guidelines provided by you to the system. These guidelines help the system in deciding the correct treatment for each type of expense. You can configure the accounting rules either through the application UI or through bulk upload functionality. Click Settings > Configure Advanced > Configure Accounting Rules > +New Expense Rule.
Note: Expense feature is not enabled by default, reach out to our RevRec Support to enable this on your site.Solution
Creating Expense Recognition Rules via UI
Follow the steps below to create an accounting rule (expense rule) on your RevRec site:
Click Settings > Configure.
Navigate to Advanced > Configure Accounting Rules, and click Configure > +New Expense Rule.
You can create two types of rules - Contract Cost Rule and Other Cost Rule.
To create a Contract Cost Rule, click +Contract Costs Rule. On the Create Contract Cost Rule window that appears, specify the following details:
| Fields | Required/Optional | Description |
|---|---|---|
| Expense Code | Required | A code is used in RevRec to identify a certain cost. |
| Product Code | Optional | A code is used in RevRec to identify the product. |
| Product | Optional | The product name to which you want to associate this rule. |
| Allocate Across all items in the Contract | Optional | If enabled, RevRec will allocate the cost to each line item of a contract.If disabled, RevRec allocates the entire cost to the associated product only. |
| Follow Revenue Recognition Rule | Optional | If enabled, Contract Cost will follow the revenue recognition method and terms defined for each order item in a contract.If disabled, the Contract Cost will follow what is configured in the following fields. |
| Recognition Method | Required | To amortize the expense over a certain term or recognize it as the expense incurred. You can select from the following options: Ratable, Point-in-time |
| Amortization Start Date | Optional | The date on which the expense amortization schedule will start. |
| Amortization Term | Required | Term in a month for which the expense will be provided. If a term is provided, an end date is not required. |
| Amortization End Date | Optional | The date on which the expense amortization schedule will end. |
Follow the Revenue Recognition Rule:
If this option is enabled, the Contract Cost will follow the revenue recognition rules (both method and term) defined for each product in a contract.
For Example, a customer has signed up for an annual subscription that includes Product A with an annual contract value of $12,000. The revenue for this subscription is recognized in a ratable manner over 12 months. There is a contract cost of $1,200 associated with product A. RevRec will automatically use the revenue Ratable recognition method and 12 Months term for expense recognition. A $100 expense is recognized per month over 12 months.
If this option is disabled, you can specify the Amortization Method (Ratable or Point in time), Amortization Start Date, Amortization End Date (Amortization Date or Expense Date), and Amortization Term.
Allocate across all items in the contract:
If this option is enabled, the Contract Cost will be allocated to all products in the contract. The allocation ratio will be based on the sale price of the products and the total contract value. Assume, we have two products A and B. Product A has a sale price of $12,000 and Product B has a sale price of $6,000. Product A has an associated contract cost of $1,200.
If Allocate across all items in the contract setting is enabled then RevRec allocates a contract cost of $1,200 between products A and B. The ratio for allocation is 66:33 based on their product sales price and the total contract value of the subscription. The allocated cost for product A will be $800 and product B will be $400.
To create the Other Cost Rule, click +New Other Cost Rule to add a new rule. On the Create Other Cost Rule window that appears, specify the following details:
| Fields | Required/Optional | Description |
|---|---|---|
| Expense Code | Required | This is the unique identifier for the expense. RevRec matches this code against the code provided for the expense to apply the accounting rule. |
| Recognition Method | Required | There are two expense recognition methods available in the system - Ratable or Point in Time |
| Amortization Term | Optional | The amortization term is the duration for which the user wants to amortize the expense. The term is defined in months in the system. |
Once you are done, click Save.
Your Expense rule is successfully created.
Creating Accounting Rules for Expenses via Bulk Upload
You can do a bulk upload of multiple contract cost rules for your products and services in RevRec instead of configuring them individually. To do a bulk upload of your cost rules, follow these steps:
Click Settings > Configure.
Navigate to Advanced > Configure Accounting Rules, and click Configure.
Create a spreadsheet with the fields mentioned in the above section
The SSP Type column defines the Contract Cost Rule or Other Cost Rule. Specify Direct for the contract cost rule and Indirect for the other cost ruleSave the updated file.
Once your file is ready to be uploaded, click Upload on the Accounting Rules page and upload the saved file and click Done.
After upload, the file is processed and analyzed for any errors. Once the processing is complete, you can view the status of the rules uploaded. The rules are broken down into four categories as follows:
| Category | Description |
|---|---|
| Invalid | RevRec displays invalid rules with a validation error. Click the ⓘ icon to see the validation error for each rule. |
| Duplicate | RevRec displays duplicate rules that exist in the uploaded file. |
| New | RevRec displays new rules that are added to the accounting rules. |
| Updated | RevRec displays rules that already exist and are updated. |
Fix the validation errors appearing for invalid rules and upload the entire file again.
Once all invalid rules are resolved, you can confirm the rules appearing in the list by clicking Confirm and Save.
After confirmation, the uploaded rules are added to the accounting rule engine.
Related Article and Documentation