Scope
How is the increased subscription value within the billing period is calculated in RevRec?
What happens if the subscription value increases within a term in RevRec?
How is the prorated invoice after the subscription upgrade calculated in RevRec?
Example: Chargebee - Annual SaaS - Midterm Expansion in RevRec
Summary
A Midterm Expansion is a term in RevRec when the total subscription value such as plan, addon, or charge (price/unit) decreases within the billing period, and once the billing period is completed by autorenewing for the next term sync the data manually by navigating from Sync > Invoices > Chargebee > Run Job in RevRec. Then, you can check the data under Revenue Plan from Customer > Sales Order > Arrangements > Revenue Plan. You can also check the Deferred Revenue RollForward from under the Customer details page.
Solution
Once we create a subscription, charge, and upgrade the subscription, upon a successful sync in RevRec, we will see the contracts for the customer with both the original order (with the overage and expansion on it) and the subsequent renewal contract.
Testing in Chargebee:
For instance, we have a customer (ACME) subscribing to SaaS Annual subscription at $120, Recurring Addon at $20 & Overage Charge at $20 for the Year (Dec 2019 - Dec 2020)
Initially, we created a SaaS Annual subscription at $120 with 100 units, Recurring Addon at $20 with 100 units for an amount of $14,000.
By using the Time machine in Chargebee, we have set the subscription creation date on Nov 06, 2019, and the subscription activation date as Dec 15, 2019 (Future state).
So the invoice is created for the billing period Dec 15, 2019 to Dec 15, 2020.
Since the end-user has exhausted the units provided in the month of February 2020 and used 25 additional units, we are adding an overage usage charge for 25 units i.e, $500 on March 08, 2020.
Adding Overage Charge Unit
Overage Charge Period
Invoice for the charge
A few months later, on May 6, 2020, the customer requested to upgrade his subscription from 100 units to 150 units, hence we have updated the subscription (as referred to the screenshot below)
Invoice for the subscription change (with proration)
Once the subscription period is completed for the year (Dec 2019, Dec 2020), we are going to check how RevRec is going to reflect Chargebee - Annual SaaS with Overage - Midterm Expansion.
Testing in RevRec:
You can manually trigger an unscheduled sync from Chargebee from Connect Source dialog. Go to Sync -> CONNECT (three cables icon) on the right-hand corner > Invoices > Chargebee > Run Job. Click on the [Run Job] icon button on the Chargebee tile.
Once synced, we can see the Chargebee invoices value to the updated contract below in RevRec.
Navigate to Customer > ACME > Sales Order, Chargebee invoices 4, 5 & 6 are merged as one contract on Order# 11-20191215 and invoice 7 is linked to Order# 11-20201215.
Under Sales Order Item, you can find all the Chargebee items listed in RevRec.
Once you click on the expand button (arrow at the right corner) of these items, you can see the Item Number, Product Name, Quantity, Unit Price, List Price (Default price), Product Family, Product Type, and Service/Delivery period details.
Click on Arrangements under Sales Order
and then click on Revenue Plan to get the data and graph of the Total Revenue of each item or combined.
You can toggle between Graph, Total Revenue, and items to check the data specific to it.
In the below screenshot, we have filtered SaaS Annual plan and Recurring addon by Total Revenue. As you can see in Mar-2020 there is an increase in total revenue due to the overage usage charge fee and in May 2020 the plan and addon price and total revenue increased due to the subscription upgrade. The first and last period has different revenue as per the Ratable configuration.
You can also refer to the Deferred Revenue Rollforward by navigating from Customer > Deferred Revenue Rollforward
You can find detailed information such as Beginning Deferred Revenue, Billing, Revenue, Ending Deferred Revenue & Adjustments.
Note, that you can test Midterm Expansion using Time Machine in Chargebee test site & RevRec test enviornment.Related Articles
How to add Custom fields to a RevRec report?