Subscription Revenue

What is Subscriptions Revenue?

Subscriptions Revenue represents subscription invoices that meet specific criteria during the reporting month. This is when you bill your customers for their subscriptions.

Invoices Included in This Row

An invoice appears in "Subscriptions revenue" when ALL of the following are true:

1. Account Match: Invoice belongs to your account
2. Currency Match: Invoice is in the selected currency (e.g., USD, EUR)
3. Non-Negative Total: Invoice total is $0 or greater (negative invoices are excluded)
4. Not Deleted: Invoice has not been deleted
5. Created in Selected Month:
   • For regular invoices: created date is within the month
   • For advance invoices: created_at date is within the month
6. Has Required Data: Invoice must have:
   • A customer (user)
   • At least one invoice line item
   • A subscription linked to that line item
   • A plan linked to that line item
   • A product linked to that plan

Real-World Examples

Example 1 - Regular Monthly Subscription:

• Customer has a $100/month subscription
• Invoice created on October 15, 2024
• Invoice total: $110 (including tax)
• Result: Appears in October report as Subscriptions Revenue

Example 2 - Annual Subscription:

• Customer has a $1,200/year subscription
• Invoice created on October 1, 2024
• Invoice total: $1,320 (including tax)
• Result: Full $1,320 appears in October report

Example 3 - Gift Subscription:

• Donor purchases a $500 annual gift subscription on October 10
• Donor's invoice: $550 (including tax)
• Result: Donor's invoice appears in October report
• Note: Recipient's $0 invoice is handled specially (see Account Receivable section)

Example 4 - What Doesn't Appear:

• Invoice created September 30 → appears in September, not October
• Invoice deleted on October 20 → doesn't appear
• Invoice in EUR when viewing USD report → doesn't appear
• One-time product purchase (no subscription) → appears in "eCommerce revenue" instead

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Columns Affected

This row affects three accounting columns. Together, they must balance to ensure accurate bookkeeping.

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📊 Account Receivable

What Does This Number Mean?

Account Receivable for Subscriptions revenue is the total amount customers owe you (or have paid) for the subscription invoices created this month. It's the full invoice amount including all taxes.

Think of it as: "How much did we invoice customers for subscriptions this month?"

The Exact Calculation

The system adds up invoice totals using this logic:

For each invoice that meets the criteria above:
  If invoice total = $0 AND customer is a gift recipient:
    Add $0 (skip this invoice)
  Otherwise:
    Add the invoice total (including tax)

Important: Gift Recipient Special Handling

When someone receives a gift subscription, their invoice is typically $0 (because the donor paid). The system specifically excludes these $0 gift recipient invoices from the Account Receivable total to avoid counting non-revenue transactions.

• Gift Donor invoice ($500): Included ✓
• Gift Recipient invoice ($0): Excluded ✗

What This Number Tells You

1. Total Amount Billed: This is your gross billing for subscriptions this month
2. Includes All Taxes: The full amount customers see on their invoices
3. Not About Payment: Whether customers paid or not doesn't matter - this is about billing

Factors That Affect This Number

Makes the number LARGER:

• More subscriptions billing this month
• Higher subscription prices
• More seats/licenses per subscription
• Higher tax rates
• Annual subscriptions (12x larger than monthly)

Makes the number SMALLER:

• Fewer subscriptions billing
• Lower prices or discounts
• $0 gift recipient invoices (automatically excluded)
• No activity in the selected month

Common Scenarios

Scenario 1: 100 Monthly Subscriptions

• 100 customers × $50/month = $5,000
• Tax (10%) = $500
• Account Receivable: $5,500

Scenario 2: Mix of Monthly and Annual

• 80 monthly at $50 × 1.1 (with tax) = $4,400
• 20 annual at $500 × 1.1 (with tax) = $11,000
• Account Receivable: $15,400

Scenario 3: With Gift Subscriptions

• 95 regular at $50 × 1.1 = $5,225
• 5 gift donors at $500 × 1.1 = $2,750
• 5 gift recipients at $0 = $0 (excluded)
• Account Receivable: $7,975

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📊 Deferred Revenue

What Does This Number Mean?

Deferred Revenue represents the tax-excluded portion of invoiced revenue that you haven't earned yet because you haven't delivered the full subscription service. It's a liability - you owe your customers service for the money they've paid.

Think of it as: "How much service do we still need to deliver to customers from this month's invoices?"

The Exact Calculation

The system calculates deferred revenue using this logic:

For each invoice that meets the criteria:
  If invoice total = $0 AND customer is a gift recipient:
    Add $0 (skip)
  Else if customer is a gift recipient AND has a 100% discount coupon:
    Add: -(invoice subtotal - taxes)
  Else if invoice total = $0:
    Add $0 (skip)
  Otherwise:
    Add: -(invoice total - taxes)

Result is shown as a negative number (liability)

Why Is This Number Negative?

The negative value indicates it's a liability account. You've collected money (or invoiced for it) but haven't yet earned it by delivering the service. In accounting:

• Assets are positive
• Liabilities are negative

Important: Tax Is Excluded

Deferred revenue always excludes taxes because:

• Tax isn't your revenue - it belongs to the government
• Tax is tracked separately in the "Taxes" column
• Only the net revenue amount is deferred and later recognized

Gift Recipient Special Logic

When a gift recipient has a 100% discount coupon (common scenario):

• Invoice total = $0 (because of discount)
• But the subscription still has real value
• System uses the subtotal (original value before discount) instead of $0
• This ensures the revenue gets properly recognized over time

Example:

• Gift subscription worth $500/year
• Recipient invoice shows: $500 subtotal, -$500 discount = $0 total
• Deferred Revenue uses: -$500 (not $0)

What This Number Tells You

1. Service Obligation: How much service you owe customers
2. Future Revenue: This will become recognized revenue as you deliver service
3. Balance Sheet Impact: Increases your liabilities

Factors That Affect This Number

Makes the number MORE NEGATIVE (larger liability):

• More subscriptions invoiced
• Higher subscription prices
• Longer subscription terms (annual vs monthly)
• Advance billing

Makes the number LESS NEGATIVE (smaller liability):

• Fewer subscriptions invoiced
• Lower prices
• Shorter subscription terms
• $0 invoices (automatically excluded)

Common Scenarios

Scenario 1: 100 Monthly Subscriptions at $50

• Invoice totals: 100 × $55 = $5,500 (including $500 tax)
• Tax excluded: 100 × $50 = $5,000
• Deferred Revenue: -$5,000
• Over the next month, this -$5,000 will move to Recognized Revenue

Scenario 2: 20 Annual Subscriptions at $1,200

• Invoice totals: 20 × $1,320 = $26,400 (including $2,400 tax)
• Tax excluded: 20 × $1,200 = $24,000
• Deferred Revenue: -$24,000
• Over the next 12 months, -$2,000/month will move to Recognized Revenue

Scenario 3: Gift Subscription

• Donor invoice: $550 total ($500 + $50 tax)
• Donor deferred: -$500
• Recipient invoice: $0 total (with 100% discount, but $500 subtotal)
• Recipient deferred: -$500 (uses subtotal, not $0)
• Total Deferred Revenue from both: -$1,000

What Happens Next

Deferred revenue doesn't stay deferred forever. Each month, as you deliver the service:

1. The system calculates how much service was delivered
2. That portion moves from "Deferred Revenue" to "Recognized Revenue"
3. This happens in the "Recognized Revenue - Time" or "Recognized Revenue - Shipments" rows
4. Your deferred revenue balance gradually decreases
5. Your recognized revenue (income statement) increases

Monthly Flow Example:

• October: Invoice $1,320 → Deferred Revenue -$1,200
• November: 1 month delivered → Recognized Revenue +$100, Deferred Revenue decreases by $100
• December: 1 more month → Recognized Revenue +$100, Deferred Revenue decreases by $100
• (Continues for 12 months until fully recognized)

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📊 Taxes

What Does This Number Mean?

Taxes represents the total tax amount collected on subscription invoices. This is money you collect from customers on behalf of tax authorities (sales tax, VAT, GST, etc.). It's a liability - you owe this money to the government.

Think of it as: "How much tax did we collect this month that needs to be remitted to tax authorities?"

The Exact Calculation

For each invoice that meets the criteria:
  If invoice has tax > $0:
    Add: -(invoice tax amount)
  Else:
    Add $0 (skip)

Result is shown as a negative number (liability)

Why Is This Number Negative?

The negative value indicates it's a liability account. You've collected this money from customers, but it doesn't belong to you - you owe it to tax authorities. Until you remit payment to the government, it remains as a liability on your balance sheet.

What This Number Tells You

1. Tax Collected: Total tax collected from customers this month
2. Tax Liability: Amount owed to tax authorities
3. Not Your Revenue: This is pass-through money, not your income

Tax Breakdown By Rate

The system tracks taxes by individual tax rate. If you charge multiple taxes (state, county, city), each is tracked separately:

Example:

• California State Sales Tax (7.25%): -$362.50
• San Francisco County Tax (0.5%): -$25.00
• SF Transportation District (0.5%): -$25.00
• Total Taxes: -$412.50

This breakdown helps you:

• File accurate tax returns
• Allocate taxes to the correct authorities
• Reconcile payments

Factors That Affect This Number

Makes the number MORE NEGATIVE (larger liability):

• More taxable subscriptions
• Higher tax rates
• Higher subscription prices (tax is a percentage)
• Customers in high-tax jurisdictions

Makes the number LESS NEGATIVE (smaller liability):

• More tax-exempt customers
• Lower tax rates
• Lower subscription prices
• Customers in zero-tax jurisdictions

Common Scenarios

Scenario 1: Simple Single Tax Rate

• 100 subscriptions at $50 each = $5,000
• Tax rate: 10%
• Taxes: -$500

Scenario 2: Multiple Tax Jurisdictions

• 50 customers in California (9.5% tax): $2,500 × 9.5% = -$237.50
• 30 customers in Texas (8.25% tax): $1,500 × 8.25% = -$123.75
• 20 customers in Oregon (0% tax): $1,000 × 0% = $0
• Total Taxes: -$361.25

Scenario 3: Mixed with Gift Subscription

• 95 regular subscriptions: $4,750 × 10% = -$475
• 5 gift donor invoices: $2,500 × 10% = -$250
• 5 gift recipient invoices: $0 × 10% = $0
• Total Taxes: -$725

Tax-Inclusive vs Tax-Exclusive Pricing

Your subscription pricing can be set up in two ways:

Tax-Exclusive (Most Common):

• Subscription price: $100
• Tax (10%): $10
• Customer pays: $110
• Taxes column shows: -$10

Tax-Inclusive:

• Display price: $100 (includes tax)
• Tax portion (10%): $9.09
• Customer pays: $100
• Taxes column shows: -$9.09

In both cases, the tax amount collected appears in this column.

What Happens to These Taxes

1. Collection: You collect taxes when customers pay invoices
2. Recording: Taxes appear in this column as a liability
3. Accumulation: The liability grows as you collect more taxes
4. Remittance: Periodically (monthly/quarterly), you:
   • File tax returns
   • Pay the collected taxes to authorities
   • Record the payment in your accounting system
5. Clearing: When you remit the taxes, the liability is reduced

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Balance Check

How the Three Columns Work Together

For every subscription invoice, these three amounts must balance:

Account Receivable = Deferred Revenue + Taxes

This ensures:

• You've accounted for the full invoice amount
• Tax and revenue are properly separated
• Nothing is double-counted or missed

Example with $1,200 Annual Subscription

What Each Number Tells You

1. Account Receivable ($1,320):

   • "We invoiced the customer $1,320"
   • This increases your receivables

2. Deferred Revenue (-$1,200):

   • "We owe $1,200 worth of service"
   • This is a liability until service is delivered

3. Taxes (-$120):

   • "We collected $120 for the government"
   • This is a liability until remitted

Over Time

Month 1 (October - Invoice Created):

Month 2 (November - Service Delivered):

The deferred revenue gradually transfers to recognized revenue as you deliver the subscription service month by month.

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Common Questions

Q: Why is my Account Receivable different from Deferred Revenue?

A: Account Receivable includes taxes, while Deferred Revenue excludes them. The difference between the two should equal the Taxes column. This is by design - tax isn't your revenue.

Q: Why don't I see an invoice from last month?

A: Only invoices created in the selected month appear in that month's report. Each invoice appears once in the month it was created.

Q: What if a customer pays late?

A: Payment timing doesn't affect the Subscriptions Revenue row. The amounts appear based on when the invoice was created, not when it was paid. Customer payments appear in the "Payments Received" row instead.

Q: Why is Deferred Revenue negative?

A: It's an accounting liability. You've collected money but haven't earned it yet by delivering the full service. Liabilities are shown as negative numbers in this report format.

Q: What happens to invoices with negative totals?

A: Negative invoices (where total < $0) are automatically excluded from the Subscriptions Revenue row. These might appear in other rows like "Credit Notes" depending on their type.

Q: I see $0 for all three columns. Is something wrong?

A: Not necessarily. If you had no subscription invoices created during the selected month (or none that met the criteria), all three columns will show $0 or blank. This is normal during slow months or for new accounts.

Q: How do gift subscriptions affect the numbers?

A:

• Gift Donor: Their invoice appears at full amount in all three columns
• Gift Recipient: Their $0 invoice is excluded from Account Receivable, but the deferred revenue uses the subscription's actual value (subtotal) to ensure proper revenue recognition

Q: Why are gift recipients handled specially?

A: Recipients receive the subscription for free (donor paid), so their invoice is $0. We exclude the $0 from Account Receivable to avoid counting non-revenue transactions. However, we still defer the subscription's actual value so it can be properly recognized over time (matching the donor's payment).

Q: What about refunds and cancellations?

A: Those appear in different rows:

• Refunds: "Refunds Made" row
• Credit notes: "Credit Notes" row
• Uncollectible invoices: "Uncollectible Invoices" row
• Voided invoices: "Voided Invoices" row

The Subscriptions Revenue row only shows new invoices created this month.

Q: Can I see which specific invoices are included?

A: Yes! If you have the appropriate permissions, there's a download icon next to "Subscriptions revenue" that lets you export a detailed list of all invoices included in these calculations.

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Summary

Quick Reference:

Key Criteria for Inclusion:

• Invoice for your account and selected currency
• Non-negative total (≥ $0)
• Not deleted
• Created in selected month
• Linked to subscription, plan, product, and customer

Balance Rule: Account Receivable = Deferred Revenue + Taxes (when all three are added)