Where to see revenue recognition, MRR and ARR

Customers (top navigation bar) provides information about customer numbers and revenue, including deferred revenue, MRR, ARR, IFRS/GAAP accounting view and detailed information on customers lost, customers gained, upsells, and downgrades. 

ScaleXP provides several revenue reporting views using the Customer tab (top bar).

Several reports are provided by default, but you will need to configure these reports to ensure the information is meaningful.

Revenue Recognition report options

Revenue Recognition:  shows revenue allocated to the period in which service is provided, taking into account partial months but ignoring invoice date.  This is one of the two views which can be used for month end journals. How does ScaleXP allocate the spread of revenue? 

IFRS/ US GAAP: as above, shows revenue allocated to the period in which the service is provided, taking into account partial months.  However, any revenue earned prior to the invoice issue month is allocated to the month the invoice is issued.  This view can also be used for month end journals. How to set journals to IFRS or GAAP revenue recognition rules so that backdated revenue is recognised at time of invoice .

Monthly Recurring Revenue:  shows revenue allocated to service date, as Revenue Recognition, but shows a full month of revenue in the start month and no revenue in the end month - that is, a full month view reflecting the amount of recurring revenue per month.  This view is generally used for analytic purposes and for metrics and KPIs.  It is initially set to be the global source for MRR metrics.   See more in How to show a full month view of revenue (as used for MRR). 

Annual Recurring Revenue: shows an annualised version of MRR, reflecting a full year of revenue based on revenue in the selected month.  ARR in this report is defined as MRR x12.  How to report on Annual Recurring Revenue (ARR) by customer .

You can set up as many different versions of each of these reports as you like and then use the output of these reports across the system (reports, dashboards, presentations).

Select from these options when creating a new report or configuring an existing one.

Each view can be further customised and used in metrics and other reporting.

Customer information in these reports

The tables at the top of the Customer page summarise the total accounting revenue and customer count for that month (or full month revenue / customer count if this option is selected).

To see which customers are included in any revenue amount or customer count on the Customer page, click the i next to the revenue numbers or customer counts for a breakdown by customer.  

The customers in the summary and also the detail by customer below are colour coded as follows:

• Green:  New Revenue; New Customers
• Red:  Lost Revenue; Lost Customers
• Blue:  Upsells or revenue increases
• Amber (Orange):  Down-sells or revenue decreases
• Turquoise (Cyan): Reactivated customers or revenue

Customer page summary reports and how they are calculated: how to analyse new, lost, upsold, downgraded, active customers and revenue changes    

Configuring your revenue data upon initial setup

Before configuring reports, we recommend you validate the data in ScaleXP to ensure you have a clean starting position and are using best practices to ensure accurate data going forward.

ScaleXP uses artificial intelligence to calculate your revenue recognition from the text on your invoices. It is common that historical invoice formats contain several data points which can cause conflicts and cause your revenue recognition to look off. A one time clean-up will ensure your revenue recognition schedule is accurate, which will provide accurate customer numbers (Active, New, Lost, Upsell, Downgrade & Reactivated) as well as Deferred Revenue,  Accrued Revenue, MRR and ARR. It is highly recommended you review all invoices which do or should impact the current fiscal period.

Follow these steps to configure your revenue recognition data when connecting to ScaleXP for the first time:

1. Learn how ScaleXP recognises revenue as seen in the monthly amounts by customer in the Customers Page reports - See How does ScaleXP allocate the spread of revenue? 
2. Learn how ScaleXP calculates customer numbers and revenue retention information as seen in the summary tables at the top of the Customers Page reports - See Customer page summary reports and how they are calculated: how to analyse new, lost, upsold, downgraded, active customers and revenue changes   
3. Learn how ScaleXP reads dates.  How ScaleXP reads dates This article contains best practices for line item dates and descriptions and several examples of good and bad invoice line item descriptions.
4. Review the "Revenue Recognition" report on the Customers page
   • Pick an important period like the previous 12 months
   • Review the revenue schedule customer by customer, month by month
   • Click the dropdown arrow next to each customer to review the invoices
   • Look for invoices showing revenue in a period they shouldn't
   • Look for invoices not showing revenue in a period they should
   • Review the Customer Numbers (Active, New, Lost, Upsell, Downgrade, Reactivated)
5. Change the invoices
   • If you have not previously separated recurring revenues and one time revenues into separate GL accounts, you may want to do so for ScaleXP's SaaS metrics to be accurate. You can change the invoices in your accounting system to point relevant line items to the appropriate GL account.
   • If your historic invoice formats are not clear (see above), ScaleXP may not accurately capture the revenue recognition period.   You have several options for changing the dates to reflect revenue correctly.  Read this article for more information: The system has not recognised dates correctly.  Why? How can I change them? 
6. Change your ongoing invoice format so deferred revenue recognition is automated
   • Include clear and concise descriptions of line items with limited data points 
   • Remember to use the best practices in this article: How ScaleXP reads dates 
7. Check the default reports and dashboards to validate MRR, ARR, churn, revenue retention and all other affiliated calculations look accurate.
   • These metrics rely on a baseline of proper GL structure, proper configuration of ScaleXP (see below) and cleaned up data.  
   • You must clean your data before relying on the metrics in the system.

Setting up your default Customer page reports

All reports on the customer page are based on revenue recognition dates allocated to invoices.  These invoices are automatically imported from your accounting system from the start date you specified when you first connected.   If you need to change this date, contact support@scalexp.com.

ScaleXP automatically assigns revenue recognition dates based on text in your invoice line item descriptions.  Read more here about how ScaleXP reads dates from your invoices:  How does ScaleXP allocate the spread of revenue? 

If you need to change revenue allocation dates, you have several options.  You can correct each invoice, correct many invoices, or request a manual upload.  Read more about those options here: The system has not recognised dates correctly.  Why? How can I change them?   You can also choose to set an account rule or allocate revenue specific to each invoice rather than over a time range.  Read more about account rules here and about usage based revenue allocations here.

It is very important to ensure you are happy with the revenue allocation rules being used before moving on to create your MRR, ARR, and other customer page reports in ScaleXP.  

Once you are happy with the allocation of invoiced revenue in ScaleXP, you are ready to move on to analyse your data and create your customised metris and reports.

Applying relevant filters to the revenue recognition and MRR reports

Start by applying the relevant filters to the revenue recognition report.   

• Set a date range to analyse (top of page, left of accounts filter)
•  Go to Configure Report (top right of the table).   

• Choose Accounts to include in Revenue Recognition only if there are any revenues which should not be included.  By default all accounts are included until at least one is ticked, then only the ones marked with a blue tick box are included.
• Rename your report, if desired, and set any other filters.  
• How to view MRR and/or deferred revenue by income type; how to filter accounts on the Customer page 
• Click Save Report.

When you've applied and saved your filters, you're now ready to review the Revenue Recognition table Month by Month, Customer by Customer and Invoice by Invoice, including line item details.

In the table, next to any customer, you can see a down arrow to show all the invoices referenced in the revenue table. On each invoice, you'll see a pencil. Clicking the pencil will show you the invoice and line item details, including how ScaleXP has interpreted the spread of revenue.

We highly recommend spot checking or reviewing all invoices for a time period to see how ScaleXP is interpreting your invoices. If necessary, adopting new invoice naming conventions will help ScaleXP recognize and defer your revenue accurately. See how ScaleXP reads the data and text from your invoices here: How ScaleXP reads dates 

The system has not recognised dates correctly.  Why? How can I change them? 

See this article to configure your MRR throughout the system: How to change MRR 

Creating additional reports on the Customer tab

To create a new report on the Customer tab, select New Report at the top left, then select the desired View.

To change the view of an existing report, select the report in the sidebar at the left, then Configure Report and select desired View.

 

Configuring report options

Report Name: You can rename your report here.

View: This switches between four views: Review Recognition, MRR, IFRS / GAAP and ARR.  See descriptions of each in “Revenue Recognition Report Options” above.

Date Range: The start date controls the first visible month in the table for which revenue exists. The end date controls the final visible month in the table for which revenue exists.

Invoice Source: You can choose all or select only those added directly into ScaleXP, those added from Stripe, or those added from your accounting system.

Included Data: If you're on the Automations + CRM/Forecasting subscription tier, when you've connected your CRM to ScaleXP, you will have access to the Contracts functionality. This enables you to create contracts which include Pending Invoices (Future Invoices yet to be issued Ex. Year 2 and 3 invoices on a 3 year deal), Renewals (ScaleXP creates a renewals schedule from the contracts), and Booked MRR (If you count customers on a contract towards your MRR even if their contract terms have yet to take effect). It is recommended to "Save as New" when using these revenue types to have a separate view of future revenue compared to issued invoices.

Organisation: If you have a consolidated company, you can filter by subsidiary at the parent level.

Accounts: Use this to filter out any nominal accounts for the given report. This is more common for MRR as only recurring revenue accounts should be included.

Tracking Codes or Classes: Here you can filter for tracking codes or classes such as department, product, etc.

NOTE: We highly recommend configuring the global MRR report to only include recurring revenues. Reports, Dashboards and Graphs using MRR for calculations refer to this filter.

Lost After: This defines the "grace" period for number of months without from a customer before you treat them as lost. This is reflected in the Revenue and Customer Numbers tables controlled by the Data to be Displayed filter.

Data to be Displayed: Reports in the Customers tab can include summation rows for Total Revenue, New Revenue, Lost Revenue, Upsell Revenue and Downgraded Revenue. Most of our customers hide the latter 4 from the Revenue Recognition reports and only display them on MRR as they're typically used for business analysis and not accounting/audit purposes.

Save Report: Saves the changes to the existing report. This will over-write your previous saved settings. To save a new report and keep the old one, use the "New Report" button at the top left of the page.

Read more on related topics in these articles:

How to create a new report on the Customers page; How to use Customer page reports throughout the system 

How to view MRR and/or deferred revenue by income type; how to filter accounts on the Customer page 

How to create a metric, report, or chart using Customer page reports 

Choosing a report for revenue recognition journals

For purposes of deferred revenue journals, ScaleXP provides the option to choose between the IFRS/GAAP and Revenue recognition views.

Here is a quick comparison of the pros and cons of each option:

IFRS/GAAP view - If you are not restating prior months to account for back-dated invoices, this view makes it easy to align ScaleXP reporting with your accounting system and thus to validate and document your accounting revenue. However, it means that your accounting view will not exactly match the Revenue Recognition, MRR, and ARR views, all of which will continue to recognise revenue in the month of service, irrespective of invoice date.

Revenue Recognition view - If you wish to perfectly align your accounting revenue with the timing of services and are happy to create journals in prior months for back-dated revenue, then this view is for you. Best practice is to create accrued revenue in the months prior to the invoice being issued. Should you not accrue revenue, the system will effectively generate negative deferred revenue in prior months instead. This is because, if the system does not see the revenue as accrued, it will defer revenue that has not yet been invoiced.