Recurring contracts don’t always line up neatly with accounting periods. Maybe your customers prefer one annual invoice instead of twelve smaller ones. Maybe your billing team wants to get recurring invoices out at the beginning of the quarter rather than processing them throughout the year. The billing schedule that makes sense for the customer and your business may not be the same schedule you need for recognizing the revenue.
PZ keeps those two events separate when they need to be. You can bill according to the contract schedule while controlling when the related revenue is recognized in the General Ledger.
Billing and Revenue Recognition Don’t Have to Happen Together
Consider an annual inspection contract that is billed at the beginning of the year but includes work that will be performed later. The customer can receive the invoice according to the agreed billing schedule while the revenue remains deferred until the appropriate recognition event occurs. For recurring inspection pre-billing, for example, revenue can remain deferred until the related inspection is completed. That gives companies more flexibility in how they structure contract billing without forcing the financial statements to follow the exact same timing.
There may also be times when accounting needs to recognize revenue that was billed earlier. In PZ Contract Billing, the Sales Recognition option lets accounting recognize eligible revenue without creating another invoice for the customer. The Effective Date determines the open GL period where that recognition posts.
Keep Track of What Has Been Billed and What Has Been Earned
Once billing and revenue recognition happen at different times, accounting needs to be able to answer some pretty basic questions. How much have we billed? How much have we actually earned? What’s still sitting in deferred revenue?
PZ contract reporting brings that information together, including:
- Total Contract Revenue
- Amount already billed
- Billing still pending
- Revenue already recognized
- Revenue still pending recognition
- Deferred revenue balance
The reporting also compares the revenue expected from the contract activity with the contract’s total revenue. If the numbers don’t line up, the contract can be identified as out of balance so someone can review the setup before the discrepancy becomes harder to trace.
PZ also includes safeguards designed to prevent revenue from being recognized beyond the contract’s Total Contract Revenue and to catch certain quantity mismatches tied to recurring inspection activity.
Give Accounting More Control Over Timing
An accounting team may be managing customers with several different billing arrangements at the same time. One customer is billed annually. Another is billed quarterly. Meanwhile, the work covered by those contracts may happen on an entirely different schedule.
Accounting still needs a clear picture of where each contract stands without manually piecing together what was billed, what was performed, and what should be recognized.
PZ keeps those pieces connected. Billing schedules define when the customer is invoiced. Revenue recognition handles when eligible revenue reaches the GL. Contract activity and reporting provide the information needed to see how those two sides compare.
One Contract, One Connected Financial Picture
This is where PZ’s connected accounting architecture matters. The contract, billing schedule, service activity, deferred revenue, and General Ledger are all part of the same system. Accounting doesn’t have to recreate the relationship between what was billed and what was earned in another application.
That gives companies flexibility in how they bill recurring contracts while still maintaining a clear financial picture of what has been recognized, what remains deferred, and what is still ahead.
Want to see how PZ can help you manage contract billing and revenue recognition in one connected system? Contact our team to schedule a demo.