Stripe Adds Revenue Recognition Tool for Merchants That Record Sales Over Time – Digital Transactions

Online payment center Stripe Inc. on Tuesday introduced Stripe Revenue Recognition, an app to automate the mapping of money to a balance sheet.

The development of revenue accounting has been stimulated by the accounting needs of traders and businesses that are prepaid for goods and services to be delivered in the future or over an extended period. These include software as a service, SaaS, subscription and e-commerce companies, all of which need to consolidate transactions in one place, appropriately categorize transactions, and automatically generate auditable reports. .

For example, an e-commerce business would recognize revenue not when a customer clicks “buy” or when a product is shipped, but when a product is actually received by the customer. For a SaaS business, if a customer pays $ 120 for an annual subscription on January 1, that income would not be accrued on a single date, but at $ 10 per month for the following 12 months.

As a result, users get an accurate representation of their profits because the correct date of receipt of income is recorded in the balance sheet. But, more often than not, manually matching revenue with a balance sheet leads to errors and creates operational inefficiencies, Bandaged argues.

In addition to providing an accurate representation of profits, revenue recognition gives merchants and businesses the ability to understand their financial data in a standardized format in accordance with generally accepted accounting principles (GAAP).

“Recurring revenue businesses must consider contract changes such as upgrades, downgrades, prorates and cancellations, and it can be difficult to ensure accurate recognition of physical or digital assets that are paid for before they are paid. ‘a customer does not actually receive them. [In addition], fulfillment and order information must be reconciled to allow compliant revenue reporting, ”said Vladi Shunturov, product manager at Stripe, via email.

“Part of the challenge is that complexity adds to scale, just as you grow your business and focus on growing. Revenue recognition was designed to address these issues and provide a comprehensive view of our users’ financial health in one place, ”adds Shunturov.

Designing and building a revenue recognition solution alongside a company’s billing platform creates almost complete automation of accrual accounting, Stripe explains. “Revenue recognition was designed to solve these issues and provide a comprehensive view of the financial health of our users in one place,” adds Shunturov.

The application’s reporting tools can generate balance sheets, income statements, income cascade tables, as well as other types of financial reports. In addition, all transactions and payment changes occurring in Stripe are automatically reflected in the reports. Users can also import non-Stripe transactions. Users can adjust reports to accurately account for deferred revenue, exclude certain types of revenue, and pass expenses on. Companies can also comply with global standards such as ASC 606 and IFRS 15 with statements ready for audit, explains Stripe.

“Many of our users have shared the toll of countless hours of lost productivity in recognizing contracts, subscriptions, invoices and transactions across multiple systems,” says Shunturov. “Because Stripe handles most of our users’ revenue data, we felt this was an area where we can help. “

Stripe piloted revenue recognition within Stripe Billing, which helps businesses create and manage subscriptions more easily with flexible billing logic, and rolled out the feature as a separate app based on user requests. , adds Shunturov.

Earlier this year, Stripe introduced Band tax, an app that allows merchants to automatically calculate and collect sales tax, value added tax (VAT), and goods and services tax (GST) in the United States and more than 30 other countries.

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