Using event-based revenue management, Receivables can automatically evaluate your invoices to determine whether to immediately recognize revenue, or temporarily defer revenue to an unearned revenue account. Revenue is subsequently recognized depending on certain events, such as customer acceptance or receipt of payment.
Receivables makes these automatic revenue recognition or deferral decisions based on your organization's established revenue policy, and the existence of any revenue contingencies on the invoice line. See: Defining Your Revenue Policy.
Revenue contingencies are terms and conditions in a sales contract or order that prevent revenue from being immediately recognized, based on strict revenue recognition requirements mandated by US GAAP and International Accounting Standards. Typical contingencies that can delay revenue recognition are fiscal funding clauses (for government contracts), cancellation clauses, customer acceptance clauses, customer creditworthiness, nonstandard payment terms, and nonstandard refund policies.
The extent of the revenue deferral, and subsequent timing of revenue recognition, depends on the revenue contingency. Each contingency has its own related contingency removal event:
For example, if the customer is not creditworthy, then you can recognize revenue on that customer's invoice only in the amount of any payments received.
Or, if the customer was offered a nonstandard refund policy on an order, then you can recognize revenue on that customer's invoice only after the refund policy has expired.
Receivables predefines a set of revenue contingencies that you can use with event-based revenue management. You cannot update or delete these predefined revenue contingencies, but you can create your own. Receivables also predefines contingency removal events, which you cannot delete or modify.
For a list of these predefined revenue contingencies, along with corresponding contingency removal events, see: Evaluating Invoices for Event-Based Revenue Management, Oracle Receivables User Guide.
For each contingency, you can define automatic defaulting rules to control which contingencies are assigned to which customer invoices. See: Assigning Contingencies.
Navigate to the Revenue Contingencies page using the Revenue Management Super User responsibility.
Duplicate and then modify an existing contingency. Or, define a new contingency.
Tip: For easier contingency auditing, avoid modifying your user-defined contingencies. Instead, assign an end date to the existing contingency, and create a new contingency.
In the General Information region, enter basic details about the contingency, such as name, effective dates, and description.
Note: A contingency's last effective date controls only whether it can be defaulted to new order or invoice lines. An expired contingency on an order or invoice line remains valid, provided that it was valid on the day when originally defaulted.
In the Related General Policy region, select the revenue policy that Receivables will review when considering whether this contingency is applicable:
Refund Policy
Receivables defaults this contingency if the invoice has a refund policy that violates your organization's standard policy.
Payment Term Policy
Receivables defaults this contingency if the invoice has a payment term that violates your organization's standard policy.
Credit Classification
Receivables defaults this contingency if the customer has a credit classification that matches one of the credit classifications defined in your organization's revenue policy.
None
Receivables does not consider any details in your organization's revenue policy.
Your define your revenue policies on the Revenue Policy page. See: Defining Your Revenue Policy.
Note: Receivables reviews the above details in conjunction with any defaulting rules that you define. See: Assigning Contingencies.
In the Contingency Removal Event region, select the event that will remove the contingency from the invoice:
Contingency Expiration
Customer Acceptance
Invoicing
Payment
Proof of Delivery
You can define multiple contingencies that have the same removal event.
Optionally enter removal event attributes and days that indicate the timeline for contingency removal. You can select these event attributes:
Fulfillment Date
Proof of Delivery Date
Ship Confirm Date
Transaction Date
Tip: If defining a pre-billing acceptance contingency whose removal event is Invoicing, do not select Transaction Date. This is because the order line will not be invoiced until after customer acceptance has been recorded in the feeder system.
For example, once 10 days have passed beyond an order's ship confirm date, you might want Receivables to automatically remove a customer acceptance contingency. (This is an example of implicit customer acceptance, as opposed to the Explicit Customer Acceptance contingency that Receivables predefines.)
You can set this up as follows:
Removal Event: Customer Acceptance
Event Attribute: Ship Confirm Date
Days Added to Event Attribute: 10
You can define defaulting rules for automatic contingency assignment.
Important: You must define defaulting rules to enable automatic contingency assignment. However, do not define defaulting rules to address revenue policy violations, because Receivables automatically assigns the appropriate revenue contingencies if any revenue policy is violated. See: Defining Your Revenue Policy.
For each rule that you define, you can specify one or more matching criteria. If the rule's stated criteria is matched, then Receivables assigns the contingency that you select.
For example, you might want to require Customer ABC to always manually accept an item before revenue on its transactions can be recognized. To enforce this scenario, create a new rule, select the revenue contingency that is the desired result (in this case, Explicit Acceptance), select Bill To Customer as the rule parameter, and enter the customer condition.
With this defaulting rule in place, Receivables will assign the Explicit Acceptance contingency to all Customer ABC's transaction lines, and revenue will be deferred until customer acceptance is manually recorded.
You can define multiple rules with different matching criteria that return the same contingency. And, you can define multiple rules with the same matching criteria that return multiple contingencies.
Rule parameters that you can use during rule definition include:
Accounting Rule
Batch Source
Bill To Customer
Bill To Site
Customer Profile Class
Inventory Item
Memo Lines
Operating Unit
Ship To Customer
Ship to Site
Transaction Type
Note: You cannot assign contingencies to transaction lines that have deferred account rules.
Related Topics
Event-Based Revenue Management, Oracle Receivables User Guide
Evaluating Invoices for Event-Based Revenue Management, Oracle Receivables User Guide
Use the Revenue Policy page to specify your enterprise revenue policies. The Revenue Management Engine uses the information that you enter in this page to make automatic revenue recognition decisions for your manually entered and imported invoices.
The Revenue Management Engine compares each invoice against the revenue policy information that you state here. Any deviations cause the assignment of revenue contingencies to the invoice or invoice line, which impact the timing of revenue recognition for those invoices. See: Event-Based Revenue Management, Oracle Receivables User Guide.
Note: Even if you do not specify anything in this page, Receivables can still automatically defer or recognize revenue for your invoices. If one or more revenue contingencies exist on a billing line, then Receivables enables collectibility analysis for that line, and bases revenue decisions on the contingency. See: Evaluating Invoices for Event-Based Revenue Management, Oracle Receivables User Guide.
Use the Revenue Policy page to enter information about:
The credit classifications that identify your high risk, noncreditworthy customers.
If you enter or import an invoice for a customer that is associated with one of these credit classifications, then:
Receivables assigns the Customer Creditworthiness contingency on the invoice.
The Revenue Management Engine immediately defers revenue on the entire invoice.
Receivables recognizes revenue for this invoice only to the extent of payments received.
The standard refund period that you typically offer to your customers.
When you enter or import an invoice with a line that is associated with a contract, the Revenue Management Engine analyzes the contract details. If the contract offers a refund period that exceeds the refund period specified here, then:
Receivables assigns the Refund contingency on the invoice line.
The Revenue Management Engine automatically defers revenue on that invoice line.
Receivables recognizes this line's revenue only after the refund policy period expires.
The maximum time period before a payment term becomes extended.
If you enter or import an invoice with a payment term or installment schedule that exceeds the threshold specified here, then:
Receivables assigns the Extended Payment Term contingency on the invoice.
The Revenue Management Engine automatically defers revenue on the entire invoice.
For example, you enter a maximum payment term threshold of 180 days, and you later enter or import an invoice with a payment term that has four installments (Net 60, Net 90, Net 120, and Net 200). Receivables defers the entire revenue amount on the invoice because the last installment exceeds the 180-day threshold by 20 days.
Receivables recognizes revenue for this invoice only to the extent of payments received.
Prerequisites
Optionally define credit classifications and assign them to your customers:
Use the Assign Customer Credit Classification program when you are first implementing event-based revenue management, or if you want to update multiple customers at once.
See: Assigning Credit Classifications to Accounts, Oracle Credit Management User Guide.
Otherwise, assign the credit classification at the customer profile class level, or at the customer account or site level.
Navigate to the Revenue Policy page using the Revenue Management Super User responsibility.
Select the operating unit that you want to define this revenue policy for.
In the Credit Classifications region, select up to three credit classifications that identify your high risk, noncreditworthy customers.
In the Standard Refund Policy field, enter the standard refund period that you typically extend to customers.
In the Standard Payment Term field, enter the maximum time period before a payment term becomes extended.
Related Topics
Event-Based Revenue Management, Oracle Receivables User Guide