Managing recurring revenue in NetSuite: Your top 5 questions, answered

Hopefully, for your sake, that process is automated. Then again, if you’re here, maybe it’s not.

Either way, if you’re looking to learn about recurring revenue management in NetSuite, you’ve come to the right place.

What follows is a brief intro to NetSuite Advanced Revenue Management (ARM), as well as five common questions—and their answers—about how the platform works and how you can get the most out of it.

Ready to get started? Let’s dive in.

An intro to recurring revenue management with NetSuite

These days, every subscription-based business needs a subscription billing (or recurring billing) platform to keep up with the pace of commerce.

But what about revenue management and recognition?

Recurring revenue management is an integral part of any subscription business and, without the proper platforms and processes, finance teams are toast.

Enter Advanced Revenue Management (ARM) with NetSuite.

NetSuite ARM—which helps you become and stay compliant with ASC 606 revenue standards—uses a rules-based event framework to automate every aspect of recurring revenue, including:

• Forecasting
• Allocation
• Recognition
• Reclassification
• Auditing

Instead of manually handling one, or all, of these processes, ARM handles them automatically, allowing you and your team to focus on other financial priorities for the organization.

It’s just another piece of the puzzle of optimizing workflows to ensure consistency, accuracy, and speed in today’s on-demand economy.

Now, let’s look at five frequently asked questions about ARM to learn how it works and how it can transform the way you manage recurring revenue.

Revenue Recognition

How does NetSuite ARM assist in the recognition of recurring revenue?

NetSuite ARM helps you configure the proper recognition of recurring revenue based on your company’s revenue accounting guidance. ARM also automates the revenue recognition process and continuously updates to ensure you’re abiding by compliance standards.

ARM does this via a series of inputs and configurations. Here are a few of the most important ones:

Revenue Recognition Rules and Dates

The Revenue Recognition Rules and Dates inputs in ARM define recognition method, amount source, and start and end date sources, each of which is a key element of RevRec. It’s vital to have these specific elements configured for proper, repeatable, and automatic revenue recognition.

Revenue Allocation

The revenue allocation formulas  inside of ARM enables you to distribute revenue in proportion to the calculated fair value of your sold products and/or services.

Fair Value Price Lists and Formulas

These are lists of records that are used to specify the fair value (or stand-alone selling price) for items. When you wish to allocate revenue in particular revenue arrangements inside ARM, you use a fair value price list and formula.

Sales Orders and Invoices

How do NetSuite ARM users ensure that sales orders or invoice lines are properly represented as performance obligations?

As a general rule of thumb, an individual sales order line in native NetSuite would source a single revenue element, which would be representative of the performance obligation. When it comes to sales orders and invoice lines, ZoneBilling (built for NetSuite) allows flexibility: separate lines on a transaction can be bridged together as a single performance obligation, or separated apart as different performance obligations, bundling and packaging becomes easier, and revenue forecasts remain more up to date with upsells/downsells.

Unbilled Revenue Position

What considerations does a revenue accountant using NetSuite ARM need to know about their company’s unbilled revenue position?

It is not uncommon for a business to have the need to recognize revenue for a product or service, in advance of that product or service being billed to the customer. Hence the need to manage Unbilled Revenue (or “Contract Asset”) GL accounts. NetSuite helps automatically detect this imbalance between Revenue and Deferred Revenue down to the item level, and automatically books a reclassification entry to Unbilled Revenue.  

Contractual Rate Adjustments

How are contractual rate adjustments managed in NetSuite ARM in the context of recurring revenue recognition?

If there are contractual rate adjustments, then the most straightforward way to configure that inside NetSuite ARM is to have a single revenue element that has the total value of that performance obligation with revenue recognition rules that specify you’re going to recognize it—ratably—from the start date to the end date. This can be particularly difficult to handle using Sales Orders alone, and why many customers use ZoneBilling to manage these contractual rate adjustments and send the correct data inputs to ARM.

Contract End Date Extensions

How are contract end date extensions managed in NetSuite ARM in the context of recurring revenue?

Revenue Elements ‘End Date’ can be adjusted inside of ARM. If an End Date is extended, the revenue element can take the remaining Deferred Revenue Balance and spread it over the new remaining term. This change certainly works on the revenue side of things, if there are no adjustments needed to billing. However, what if the same scenario was true, but we also needed to extend their monthly billing for additional periods.

This is where ZoneBilling can help keep both Billing & Revenue in sync for any type of contract modification, including end date extensions, accelerations, cancelations, and price or quantity adjustments

Moving forward with NetSuite for recurring revenue management

And there it is—managing recurring revenue in NetSuite in a nutshell.

The benefits of NetSuite ARM are limitless, but we know learning the ins and outs of the platform and getting started on it can be a laborious process.

So, we hope you bookmark this tab and use these frequently asked questions to guide you along your journey. That being said, there’s a good chance you still have an unanswered question or two.

If that’s the case, shoot us a note on our LinkedIn page with your questions and we’ll get back to you ASAP so that you can make the most out of managing recurring revenue in NetSuite.