Recognized Revenue - eCommerce

What is Recognized Revenue - eCommerce?

Recognized Revenue - eCommerce represents revenue earned from one-time product orders when those orders are fulfilled and shipped to customers. When a customer places an order, the revenue is initially "deferred" (you haven't earned it yet because you haven't delivered the product). Once you fulfill and ship the order, that deferred revenue becomes "recognized" (earned) revenue.

This appears when: eCommerce order items are fulfilled and shipped during the selected month.

Affects:

• Deferred Revenue: Decreases (positive adjustment, reducing the liability)
• Recognized Revenue: Increases (negative value, representing income earned)

---

How eCommerce Recognition Works

The Basic Concept

Think of it like an online store order:

• Customer orders a t-shirt for $25 + $5 shipping = $30
• You owe them the t-shirt (Deferred Revenue: -$30)
• You fulfill the order and ship it → Revenue recognized: -$30 (income earned)
• You've now earned all $30

The Calculation Formula

Revenue Recognized = Fulfillment Amount × Quantity × (1 - Coupon %) + Shipping

Example - Product Order:

• Product: $50 × 2 items = $100
• Coupon: 10% off = -$10
• Shipping: $15
• Total fulfilled: $90 + $15 = $105 recognized when shipped

---

Real-World Examples

Example 1 - Simple Product Order:

• Customer orders 1 book for $25 + $5 shipping
• Order placed October 15, fulfilled October 20
• October Revenue Recognition: -$30 (when fulfilled)

Example 2 - Multiple Item Order:

• Customer orders:
  • 2 t-shirts @ $20 each = $40
  • 1 mug @ $10 = $10
  • Shipping: $8
• Total: $58
• All items fulfilled October 25
• October Revenue Recognition: -$58 (all items together)

Example 3 - Order with Discount:

• Product: $100
• 20% off coupon applied: -$20
• Shipping: $10
• Total: $90
• Fulfilled October 18
• October Revenue Recognition: -$90

Example 4 - Partial Fulfillment:

• Customer orders:
  • Item A: $50 (fulfilled October 10)
  • Item B: $30 (fulfilled November 5)
• October Recognition: -$50 (only Item A)
• November Recognition: -$30 (Item B when fulfilled)

---

Orders Included

An order appears in "Recognized Revenue - eCommerce" when ALL of the following are true:

1. Order-based: Invoice is linked to an order (not a subscription)
2. Fulfillment recorded: Order items have fulfillment records
3. Fulfilled this month: Fulfillment date (fulfilled_at) is within the selected month
4. Not deleted: Invoice not deleted
5. Correct account and currency: Matches selected account and currency

---

Columns Affected

---

Deferred Revenue

What Does This Number Mean?

Deferred Revenue in this row shows how much of the liability is being reduced as you fulfill and ship products to customers.

Think of it as: "Products shipped, obligation fulfilled"

The Exact Calculation

For each fulfilled order item this month:
  Calculate: Item amount × quantity
  Apply discount: × (1 - coupon percentage / 100)
  Add shipping: + shipping amount per order

Result is shown as a POSITIVE number (liability decreasing)

Example Breakdown:

Why Is This Number Positive?

When deferred revenue appears as positive in this row, it means the liability is decreasing. You're fulfilling your obligation to deliver products, so you owe less than before.

---

Recognized Revenue

What Does This Number Mean?

Recognized Revenue shows the income you've earned by fulfilling and shipping orders during this month.

Think of it as: "Income from orders shipped"

The Exact Calculation

Recognized Revenue = -1 × Deferred Revenue change

Result is shown as a NEGATIVE number (income earned)

The recognized revenue is always the negative mirror of the deferred revenue change. Whatever liability decreases becomes income earned.

Why Is This Number Negative?

In accounting reports, income is shown as negative numbers. The more negative this number, the more revenue you've earned. This follows standard accounting conventions.

---

How Fulfillment Is Tracked

Fulfillment Process

1. Order Placed: Customer completes checkout, invoice created

   • Deferred Revenue: -$100 (you owe products)

2. Order Processing: Warehouse picks and packs items

   • No accounting impact yet

3. Fulfillment Record Created: System records fulfillment

   • order_item_fulfillment table updated
   • fulfilled_at timestamp set

4. Revenue Recognition: When fulfilled, revenue is recognized

   • Deferred Revenue: +$100 (liability decreases)
   • Recognized Revenue: -$100 (income earned)

Fulfillment Date

Revenue is recognized based on the fulfilled_at timestamp, which typically represents:

• When the order was shipped
• When tracking number was generated
• When products left your warehouse
• When digital products were delivered

---

Differences from Subscription Revenue

---

Common Questions

When exactly is revenue recognized?

A: Revenue is recognized when the order items are fulfilled, which is marked by the fulfilled_at timestamp. This typically happens when products ship, not when they're delivered to the customer.

What if an order has multiple items fulfilled on different dates?

A: Each item is recognized separately when its fulfillment is recorded. If Item A ships October 10 and Item B ships October 20, their revenue is recognized on those respective dates.

Is shipping included in recognized revenue?

A: Yes! Shipping charges are added to the fulfillment amount and recognized together with the product revenue.

How are coupons/discounts handled?

A: Discounts are applied before recognition. A $100 product with 20% off recognizes $80 when fulfilled, not $100.

What happens if an order is refunded after fulfillment?

A: Refunds appear in a different row ("Refunds Made"). The recognized revenue from this row is not reversed - instead, the refund creates new accounting entries that adjust the values.

Do taxes get recognized?

A: No. Taxes are a separate liability and don't appear in revenue recognition rows. Only the product and shipping amounts (excluding tax) are recognized as revenue.

What if a customer never receives their order but we marked it as fulfilled?

A: The revenue is already recognized based on fulfillment. If you need to correct this, you would typically issue a refund or credit note, which appears in other rows.

Can digital products be recognized immediately?

A: Yes! For digital downloads, "fulfillment" can happen instantly when the customer downloads or accesses the product. The timing depends on when your system sets the fulfilled_at timestamp.

How is this different from "eCommerce Revenue" row?

• eCommerce Revenue: When invoice is created (customer orders)
• Recognized Revenue - eCommerce: When order is fulfilled (customer receives)

There can be days or weeks between these two events.

Can I see which orders were recognized?

A: Yes! If you have the appropriate permissions, there's a download icon next to this row that lets you export detailed transaction data including order IDs, fulfillment dates, and amounts.

---

Summary

Quick Reference:

What appears here: Revenue earned when eCommerce orders are fulfilled and shipped

Inclusion criteria:

• Order-based invoice (not subscription)
• Fulfillment recorded in system
• Fulfilled during the selected month
• Not deleted
• Correct account and currency

Columns:

• Deferred Revenue: Positive (liability decreasing)
• Recognized Revenue: Negative (income earned)

Recognition formula: (Fulfillment Amount × Quantity × (1 - Discount%)) + Shipping