#88 | NetSuite Configuring Items for Advanced Revenue Management (ARM)

Once Advanced Revenue Management is set up in your NetSuite account, you need to familiarize yourself with the settings and preferences. In this guide, you will learn how to configure NetSuite Advanced Revenue Management items.

• Overview
• Setting the Revenue Account
• Revenue Recognition Fields

I suggest you watch the video. It’s easier to understand if you are a visual/audio learner. The content below is the same as the video. It’s for those who learn by reading.

Overview

Advanced revenue arrangements are created based on the configuration you specify in the Advanced Revenue Recognition section of the Revenue Recognition /Amortization subtab on item records.

You can configure advanced revenue management for the following item types:

• Assembly including Serialized and Lot Numbered
• Download Item
• Kit/Package
• Inventory including Serialized and Lot Numbered
• Non-Inventory for Sale/Resale
• Other Charge for Sale/Resale
• Service for Sale/Resale

Setting the Revenue Account

In the Accounting subtab as shown below, you’ll see the following:

• Deferred Revenue Account – The default value for this field is determined by the accounting preference, Default Deferred Revenue Account. When no account is set, the system-generated deferred revenue account is used.
• Income Account – This must also have a value.

To set the Deferred Revenue Account, follow these steps:

• Go to Setup → Accounting → Accounting Preferences.
• Click on the Items/Transactions subtab.
• Select preference for Default Deferred Revenue Account.

Revenue Recognition Fields

The following fields in the Advanced Revenue Recognition section of the Revenue Recognition /Amortization subtab are used for revenue management:

• Revenue Recognition Rule
  • Select the revenue rule to use by default for this item for actual revenue recognition plans.
  • The default value for this field is determined by the Default Standard Revenue Recognition Rule accounting preference.

You can set the default value by following these steps:

• Step 1: Set up → Accounting → Accounting Preferences.
• Step 2: Click the General subtab, scroll under the Revenue Recognition section, and then select preference for Default Standard Revenue Recognition.

• Rev Rec Forecast Rule
  • This enables you to create revenue recognition plans for forecasting purposes when actual revenue recognition plans have not yet been created.
  • The default is determined by the same accounting preference as the Revenue Recognition Rule. You may select the same or different rules for actual and forecast rules.

• Create Revenue Plans On
  • Match this with the amount source of the item’s revenue recognition rule.
  • The revenue plans may be created automatically or manually depending on the Revenue Plan Update Frequency setting in your accounting preferences.
  • If you leave the field blank, you can select the value in the revenue arrangement when the item is an element in a contract.
  • Field options are: Revenue Arrangement Creation, Billing, Fulfillment, and Project Progress.

• Hold Revenue Recognition
  • Check this box to delay posting from a revenue recognition plan by putting it on hold.
  • When a revenue plan is on hold, the total balance of the delayed item remains in the Deferred Revenue account until you cancel the hold.

• Item Revenue Category
  • This is a classification for items that have similar characteristics and revenue allocation requirements.
  • The options in this list are configured during set-up to meet the specific needs of your company.

• Allocation Type
  • This field’s default value is Normal.
  • Field options are: Normal, Exclude, and Software

• Revenue Allocation Group
  • The value for this field is used in Group Sum functions in fair value formulas.
  • The option selected here is the default, but you can change it on the revenue element. The available options are configured during system set-up.

• Permit Discount
  • This determines how discounts are handled for this item. It can be As Allowed or Never.

• Default as Delivered
  • Check this box to set this item to a delivered status automatically when it is added to a transaction. Clear this box to leave the delivery status clear by default.

• Direct Revenue Posting
  • Check this box to disable advanced revenue management for this item.
  • When enabled, posting transactions that include this item will post directly to the item revenue account.
  • By default, this box is not checked.

• Auto-Expansion for Revenue Management
  • This box appears only on kit items.
  • This is checked by default, making the parent kit item and its child product items become revenue elements. The child items include the fair value and accounting rules for advanced revenue management.

• Eligible for Contingent Revenue Handling
  • Check this box to indicate that this item is subject to contingent revenue handling. This will also affect revenue allocation.
  • This box appears only when the Enable Contingent Revenue Handling accounting preference is checked.
  • When the Multi-Book Accounting and Revenue and Expense Management features are enabled, an Accounting Book sub-tab is added to the Revenue Recognition / Amortization sub-tab.

Summary
Now, you know how to set the Revenue Account and what the functions are of the 12 revenue recognition fields. To recap the guide, you can click on the links below.

• Overview
• Setting the Revenue Account
• Revenue Recognition Fields