Revenue Management begins with the approval of a revenue source such as a sales order, cash sale, return authorization, credit memo, cash refund, invoice, project, custom event, a subscription when SuiteBilling is present, or a journal entry. From the approved transaction, a revenue arrangement can be automatically created.
Revenue arrangement is a transaction that represents a revenue contract. It contains the details on how revenue is going to be recognized. Revenue elements are attached as lines on a revenue arrangement. A revenue element represents a line on the source transaction. Each revenue element has a forecast revenue plan and one or more actual revenue plans that control the posting of revenue. Revenue recognition plans indicate the posting period that revenue should be recognized, and the amount to be recognized in each period.
With multielement sales, the sales prices of the elements may not be the same as their fair value. That’s when ARM uses revenue allocation. This process distributes revenue from a sale across its elements in proportion to their fair value amounts. An actual revenue recognition plan is only created when a triggering event occurs. This could happen when the revenue arrangement is created, upon billing, fulfillment, or when a project milestone occurs, and for certain events.
The revenue recognition plans provide the information required to recognize revenue. The actual revenue plans then become the basis for creating revenue recognition journal entries and revenue reclassification journal entries during monthend processing. And NetSuite offers numerous reports that help accurately analyze forecast an actual revenue.