Revenue recognition for a deal - new property or new stage?

[Edyta7510]

Hello, 

I'm in B2B business. Our sales pipeline's last stage is today "CLOSED WON". This means a customer issued a PO number for the product. 

We recognize the revenue only on the actual product shipment/when customer gets invoiced. In some cases revenue is recognized many months following the reception of a PO (when deal is marked as closed won). 

In order to be able to track precisely recognized revenue/revenue to be recognized per quarter I was thinking about using one of the 2 options as follows: 

- A: create 2 additional custom properties: (1) invoiced (yes/no) (2) invoice date 

- B: create another stage in the pipeline called "Recognized revenue" and move deal there when it's invoiced. 

There may be more options available - can you let me know your thoughts on which of these would make it easier for us to manage future reporting? 

Thanks!

Edyta

[karstenkoehler · Accepted solution]

Hi @Edyta7510,

Great question. For reporting, these are virtually the same. In both cases, you'd filter by a deal property (either Deal stage is any of Recognized revenue or Invoiced is any of Yes or Invoice date is known).

Using the deal stage has advantage: HubSpot would automatically calculate the time in previous deal stage – allowing you to report on how long it usually takes for invoices to be paid. Nothing that you couldn't build yourself with a calculated property however (time between close date and invoice date).

This automatic calculation for the time in deal stage would also be the disadvantage: You'd have to update the deal stage exactly on the day when the invoice is paid. With the custom properties option, you can backfill the invoice date a few days later, too.

Personally, I'd create custom properties.

Hope this helps!

[Edyta7510]

Thanks much @karstenkoehler I've just created that additional field. It seems to be working fine

[karstenkoehler · Accepted solution]

Hi @Edyta7510,

You'd probably have create an additional field that keeps track of how much revenue exactly was recognized (a custom currency property). That way, you could see the progress. Not perfect, but the easiest workaround that comes to mind.

Best regards!

[karstenkoehler · Accepted solution]

Hi @Edyta7510,

Great question. For reporting, these are virtually the same. In both cases, you'd filter by a deal property (either Deal stage is any of Recognized revenue or Invoiced is any of Yes or Invoice date is known).

Using the deal stage has advantage: HubSpot would automatically calculate the time in previous deal stage – allowing you to report on how long it usually takes for invoices to be paid. Nothing that you couldn't build yourself with a calculated property however (time between close date and invoice date).

This automatic calculation for the time in deal stage would also be the disadvantage: You'd have to update the deal stage exactly on the day when the invoice is paid. With the custom properties option, you can backfill the invoice date a few days later, too.

Personally, I'd create custom properties.

Hope this helps!

[Edyta7510]

Thanks so much @karstenkoehler 

Your valuable input is always appreciated! I'll go for the custom property then. The need to update the deal stage exactly on the day when the invoice is paid would be too difficult to manage. 

[Edyta7510]

Hello, 

I do have a follow-up question to the previous one. 

I created custom deal properties: Recognized revenue (yes/no - dropdown) + Recognition date (date picker). 

There are some deals, however, that are somewhere in between. 

Example: For our product deals, deal is set for the entire year, but product shipments (and therefore revenue recognition) are done on a monthly or quarterly basis. I will need to capture that information somehow on a deal (I do not want to split it into separate deals ). @karstenkoehler any idea how this could be managed ? 

Really appreciate your input!

Regards, 

Edyta