Prepaid subscriptions charge the entire revenue for the subscription upfront and send out shipments later, which has implications for your accounting and finance teams. This article outlines three ways to retrieve data related to prepaid subscriptions to understand their revenue and order status.
Overview
Prepaid subscriptions may have a different set of accounting principles for revenue recognition than standard pay-as-you-go subscriptions. In particular, prepaid subscriptions typically require the use of deferred revenue. While Ordergroove is not the system of record for your financial data, we’ve invested in making life as easy as possible for your finance and accounting teams when running prepaid subscriptions.
Option #1 Leverage the order tagging in Shopify
There are two types of orders during the life cycle of a prepaid subscription, the paid order that starts a new prepaid cycle and the subsequent free orders to complete the prepaid cycle. Both of these types of orders are placed through Shopify with specific tagging so that you can link the free orders back to the paid order for the purposes of revenue recognition.
Recommendation
- Use the _ordergroove.subscription.prepaidOriginOrder tag to link free orders back to the order where funds were captured. This is the key piece of data to use for revenue recognition.
Option #2 Prepaid data exports
We have built out specific prepaid reports that will allow you to easily understand your prepaid data at both the subscription and order level. These reports can be used to augment and verify the transactional data flowing through your ecommerce and accounting systems. Typically the order level reports will be the most important for the purposes of revenue.
Recommendation
- The Orders - All Prepaid report includes all individual orders; one subscription has multiple orders. You can filter by date to sum how many upcoming shipments have to be sent out.
Option #3 Prepaid analytics
In addition to providing you insight into how your prepaid program is performing, the Analytics section of Ordergroove can give you an understanding of your unsent prepaid orders as well. This will allow you to see at a glance how much prepaid revenue is still outstanding for your program.
Recommendation
- Take a look at Analytics > Prepaid Revenue > Revenue by Payment Date — Dynamic. The last column Not yet placed sums the amount of revenue for product that has not been fulfilled.
Notes
While Ordergroove is not a revenue recognition platform and accounting is handled outside of our workflows, we have customers live with prepaid subscriptions using a wide variety of accounting systems (e.g. NetSuite) and 3PL systems (e.g. ShipStation). If you have questions about your particular software stack please don’t hesitate to reach out.