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Joshua61
January 30, 2022
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Can QuickBooks automatically recognize revenue monthly for long term contracts for annual licenses?

  • January 30, 2022
  • 1 reply
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Our business sells long-term contracts and QuickBooks recognized all income when the invoice is created. Is there a way to have it recognize income on an accrual basis as income is earned each month as the license is fulfilled? 

Best answer by Rainflurry

You can set up a recurring journal entry to debit the liability account and credit income if QB records the initial sale to a liability account.  You will need to manually set up a template for each customer so you can specify the amount of the entry, the start date, and the end date.    

1 reply

T
Teri11_2
January 30, 2022

Great that you know to accrue revenue as earned on your long-term fixed price contracts for licenses. Sorry I can't say I have tried this on QBO to answer the question you asked, but by giving a non-answer here, often that prompts others to respond with a better answer so hoping to help you by posting this. I would say that you don't really want to ever have revenue accrue without some sort of trigger that you control to indicate timing at least with a renewal date and contract POP established so that you can maintain control over that annually or monthly since the last thing you want is to generate more revenue to pay taxes on unless you actually bill that and get paid for it. Since it is FP and you know the timing in advance, I would think you could generate invoices in advance to accrue at that point vs. waiting for cash payment since that it what you are trying to rectify here.  

J
Joshua61Author
January 31, 2022

Hi Terri, 

 

Thanks for your response.

 

My problem is that at the point of sale or when we generate the invoice QB accrues the entire amount. We use QB to send invoices, but it technically should not be revenue until the services are performed at the end of each month... I want to change how it recognizes that revenue... Is this possible?

M
MirriamM
January 31, 2022

Hi there, Joshua61.

 

Let me information about how invoices work in QuickBooks Online (QBO).

 

In QBO, there are two accounting or reporting methods that the system supports. These are Accrual and Cash basis.

 

If you're using an Accrual basis:

  • In this accounting method, the time when you enter a transaction and the time when you actually pay or receive cash may be two separate events.
  • An accrual-basis report shows income regardless of whether your customers have paid your invoices and expenses regardless of whether you have paid all your bills.

 

If you're using a Cash basis: 

  • A bookkeeping method in which you regard income or expenses as occurring at the time you actually receive a payment or pay a bill.
  • A cash-basis report only shows income if you have received cash and expenses if you have paid cash.

 

In the case that you have, to isolate the issue, I recommend checking the Accounting method set up on your account. It might be an Accrual basis that's why invoices are automatically recognized as income.

 

To verify, here's how:

  1. Click the Gear icon at the top.
  2. Select Account and settings.
  3. In the left menu, click Advanced.
  4. Go to the Accounting section.
  5. See the Accounting method selected.

 

For more guidance about cash and accrual accounting, see this article: Choose between cash and accrual accounting methods in QuickBooks Online.

  

If you have any follow-up questions about your invoice transactions, please let me know by adding a comment below. I'm always here to help. Keep safe!

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