Revenue Recognition and Prepay with Drawdown
The Advanced Revenue Management (Essentials) feature works together with the Prepay with Drawdown feature. This integration lets you accurately recognize revenue for both prepay and usage elements.
To enable the Prepay with Drawdown feature, go to Setup > Company > Setup Tasks > Enable Features (Administrator). On the Transactions subtab, in the Billing section, check the Prepay with Drawdown box. Prepay with Drawdown can only be enabled if the Advanced Subscription Billing feature is enabled and the Create Revenue Elements for Subscription Revisions accounting preference is disabled.
The Prepay with Drawdown feature lets customers pay a specified amount in advance before using the service lines in their contract. The upfront payment is the sales amount on the prepay element, and it is fully billed at the start of the subscription. When usages are recorded, the service rate is used to calculate the amount subtracted from the prepay element and transferred to the usage elements. Invoices are then created to decrease the bill amount on the prepay element, thereby increasing the sales and bill amount on the usage elements.
At the end of subscription term, the service provider can refund any remaining amount on the prepay element or recognize the remaining amount without a refund.
When configuring subscription items for Prepay and Usage subscription line types, ensure the Create Revenue Plans On field is set to Subscription Events and the Allocation Type field is set to Exclude. If these fields are populated with different values, then they get overridden to the preceding values when you create a corresponding revenue arrangement for the subscription. For more information about configuring subscription items for revenue recognition, see Configuring Subscription Items for Revenue Recognition. For information about creating the prerequisite parts of a subscription, see SuiteBilling Management.
You have two options when setting the Charge Frequency on the price book's prepay line:
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Auto-Refill – NetSuite generates another prepayment amount when the prepay minimum balance is reached. You set the prepay amount and prepay minimum balance in the price plan. For more information, see Creating Price Plans.
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One Time – If the prepay amount is fully used, NetSuite converts you to pay-as-you-go. As usages are recorded, they are added to the corresponding usage elements, without involving the prepay element. This causes an increase in the sales amount on the usage elements, which are then directly billed.