Create a revenue recognition rule
Overview
This guide explains how to create a new revenue recognition rule using the Create Revenue Rule interface. You will define the rule's details, choose how revenue is distributed, and specify the conditions under which the rule applies.
Navigate to Accounting > locate the Revenue Recognition section at the bottom > click Revenue Rule Library > click CREATE NEW REVENUE RULE button.
Step 1: Define rule information
In the Rule Information section, enter the basic details for your rule.
| Field | Required | Description | Example |
|---|---|---|---|
| Name | Yes | A unique, descriptive identifier for the rule | Monthly SaaS Subscription Rule |
| Description | No | A brief explanation of the rule's purpose and behavior | Recognizes revenue monthly for SaaS plans |
| Revenue Account | Yes | The revenue account where recognized revenue will be posted | Select from dropdown |
Step 2: Configure revenue distribution
This section determines how and when revenue will be recognized.
2.1 Select the satisfaction type
| Satisfaction Type | Description | Additional Field |
|---|---|---|
| Point in time | Recognize the entire revenue amount at a single moment | Trigger point (e.g., Invoice approval) |
| Over time | Recognize revenue spread across a period | Revenue distribution method dropdown |
2.2 Choose the revenue distribution method
(Applicable when Over time is selected)
| Method | Description |
|---|---|
| Equally by days | Allocate revenue proportionally based on the exact number of active service days within each calendar month |
| Equally by month | Allocate the same revenue amount to each month, regardless of the number of days |
| Configurable days monthly | Similar to Equally by month, but calculates a daily baseline rate and multiplies it by the total days in each specific month — longer months recognize proportionally more revenue |
| Usage based | Recognize revenue based on actual metered consumption during the period |
| Entitlement based | Defer revenue at purchase and recognize only when upfront value (credits, free units, feature access) is consumed, delivered, or expires |
| Aggregate based | Distribute revenue based on the proportion of total expected activity delivered in the period — calculated as (Period Activity ÷ Total Expected Activity) × Contract Value |
| Equally by months with estimated transaction price | Allocate equally by month using an estimated total transaction price, with true-ups applied later when actuals are finalized |
2.3 Adjust closed revenue difference
(Applicable when Over time is selected)
| Option | Description |
|---|---|
| Front load | Apply the difference entirely to the earliest open period |
| Straight line | Spread the difference evenly across all remaining open periods |
| Back load | Apply the difference entirely to the last open period |
Step 3: Set criteria for rule application
In the Criteria section, define which products or performance obligations the rule applies to.
| Field | Description | Examples |
|---|---|---|
| Column | The product attribute to match against | Product, Pricing model, Contract item name, Product start date, Business entity |
| Condition | The comparison operator | equals (exact match required) |
| Value | The value the column must match | Specific product name or attribute value |
- Click + Add filter to add more conditions.
- Multiple conditions use AND logic: a product must meet all conditions to match the rule.
- To link multiple products to a single performance obligation, select Add more products to the POB.
Step 4: Save your rule
| Action | Description |
|---|---|
| Review | Confirm all fields are complete and correctly configured |
| Save (top-right) | Creates the rule and makes it available for revenue recognition processing |
Once saved, the rule will be available for allocation in revenue recognition processing.