--- updatedAt: 2026-04-09T13:42:46.000Z agentTools: projectIndex: https://docs.pelcro.com/v2.4/llms.txt --- # Subscription Revenue Detailed guide to subscription revenue - how subscription invoices affect Account Receivable, Deferred Revenue, and Taxes. ## 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 *** ## Columns Affected This row affects three accounting columns. Together, they must balance to ensure accurate bookkeeping. *** ## 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** *** ## 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) *** ## 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 *** ## Common Questions ### 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. ### 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. ### 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. ### 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. ### 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. ### 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. ### How do gift subscriptions affect the numbers? * **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 ### 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). ### 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. ### 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. *** ## Summary **Quick Reference:** | Column | Shows | Sign | Calculation Base | | ------------------ | -------------- | -------- | ----------------------------- | | Account Receivable | Total invoiced | Positive | invoice.total (including tax) | | Deferred Revenue | Service owed | Negative | invoice.total - tax | | Taxes | Tax collected | Negative | invoice.tax | **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 # Sibling pages * [eCommerce Revenue](https://docs.pelcro.com/v2.4/docs/accounting-revenue-streams-ecommerce-revenue.md) # What’s Next * [eCommerce revenue](https://docs.pelcro.com/v2.4/docs/accounting-revenue-streams-ecommerce-revenue.md)