Deferred Revenue

Deferred Revenue Best Practices

There are generally two types of revenue that associations may choose to defer - Membership Dues and Event Income. The process for each is different, explained below.

Deferred Membership Dues Income
When creating Revenue Items, you will need to flag the Deferred Revenue checkbox for each Membership Dues Revenue Item you wish to defer over the period that the Dues investment covers:

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For example, an invoice for a typical one year membership cycle would mean that the invoice is broken out into 1/12 amounts to be recognized each month throughout that year. When invoices are generated within MC Trade, each invoice is given a Service Period based on the billing cycle – most often annually. The Service Period Start Date is based on the Anchor Month and Day from the profile’s recurring Billing Record, and the Service Period End Date is calculated from that Start Date based on the length of the billing cycle. So, in a typical annual billing situation, an example could be:

A Membership Dues invoice is created for $1200 for a Member, which will cover their membership from 1/1/2015 through 12/31/2015.

With the Membership Dues Revenue Item flagged as Deferred Revenue, a user will then be able to use the Deferred Revenue Recognition reports to know how much of each invoice should be recognized each month. If integrating with an accounting package such as QuickBooks, the user would also set up the Debit and Credit accounts within the Revenue Item setup area. As an example, for Membership Dues, they may choose to debit MC Trade Receivables and credit Deferred Dues Income. With this example, when posting the invoice transactions after creation, the journal entries would flow over to the accounting package with a debit to MC Trade Receivables, and a credit to Deferred Dues Income.

Using the Deferred Recognition Reports each month, the user would easily be able to see exactly how much should be moved within their accounting package from Deferred Dues Income to Earned Dues Income.

Deferred Event Income
Some associations prefer to defer event income until an event takes place, at which point they recognize the money as earned income. For this situation, the user would have their event Revenue Items set to debit something  similar to MC Trade Receivables, and credit a Deferred Event Income account. (IE. Deferred Golf, Deferred Annual Banquet, etc.) As invoices are created within MC Trade and then posted from the Post Transactions screen, the journal entries will flow over to the accounting package with a debit to MC Trade Receivables, and a credit to the Deferred Event account.

At the time of the event, or when the user wishes to recognize that money as earned, they would utilize a report from MC Trade such as the Single Event Revenue Report to easily identify the amount of money to be moved within their accounting package from Deferred Event Income to Earned Event Income.

Because the Deferred Revenue flag in the Revenue Item setup area is specifically used for the reports where the total of the invoice is broken out into 1/12 amounts to be recognized, it is not beneficial or suggested to use for event related Revenue Items. Rather, this flag is suggested for only Dues related items.

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