Revenue Recognition Prerequisites for Month-End Close in Zuora Billing

By Lana Lee posted 09-20-2023 15:42


Making the proper preparations for your month-end close process is an important step to avoid common mistakes and other pitfalls. In our September finance workshop, Enterprise Services Manager Monique Romero shared an overview of prerequisites one should take for month-end close for accounting close and revenue recognition.


Revenue Recognition Prerequisites for Month-End Close

  1. Setup revenue automation start date (RASD)
  2. Setup revenue recognition rules 
  3. Configure codes and revenue recognition rules on product rate plan charges

Prerequisite 1: Setup Revenue Automation Start Date

Revenue schedules will only be generated for transactions generated after this date

  • Provide the revenue start date (Under Settings->Z-Finance Settings->Configure Aging Revenue Start Date

Prerequisite 2: Setup Revenue Recognition Models

A revenue rule model is the underlying template used to create revenue rules. A rule is an instance of a rule model that you can create and apply to a product charge. The revenue rule includes various configurations such as recognition start and end dates. Rules are assigned to your product rate plan charges.


  • Daily recognition over time - Revenue is recognized evenly each day over the recognition term, with some exceptions discussed below.
  • Manual recognition - Revenue is distributed manually over the recognition term. 
  • Full recognition on a specific date - All revenue is recognized on a specific date.
  • Monthly recognition over time - Revenue is recognized evenly into each month. Requires monthly accounting periods.
  • Full recognition upon invoicing - All recognition is recognized on the invoice date.

Prerequisite 3: Setup Revenue Recognition Rule

For each product rate plan charge, you need to configure 3 fields:

  1. Revenue Recognition Rule - Represents the type of rule you want to use to recognize deferred revenue. 
  2. Recognized Revenue Accounting Code - Represents the offsetting earned revenue account to the deferred revenue account that accrues over time. 
  3. Deferred Revenue Accounting Code - Represents the initial revenue/income account if there is deferred revenue for a charge.

A discount charge model rate plan also has a “Use discount specific accounting codes and rule to manage revenue”. If this is checked, the discount will follow its own defined revenue recognition rule and use its own accounting codes. Otherwise, the discount will follow the rules and accounting codes of the charge it is discounting.

Setup Revenue Recognition Rule

Daily Over Time Revenue Formula

Daily Over Time Revenue Formula

The remaining amount will be spread over the trailing days of the recognition term. This is Round Trailing, which is selected in the revenue rule.

Example Charge

  • A $50 monthly charge with recognition dates of 1/15-2/14 will have a daily rate of $50/31=$1.6129=$1.61.
  • The remainder of $50-$1.61*31=$.09 will be spread over the last 9 days of the service period.
  • The first 22 days will recognize revenue at $1.61/day and the last 9 days will be recognized revenue at $1.62/day.

Monthly Revenue Formula

Monthly rate for revenue recognition is calculated as the total is divided evenly into each month (including months with 28 and 31 days)

The remaining amount will be spread over the trailing months of recognition term (This is Round Trailing, which is selected in the revenue rule).

Example Charge 

A $350 monthly charge with a term of 12 months will have $350 recognized each month for 12 months. 

Review your Accounting Close Prerequisites

Before performing your month-end close, make sure your revenue recognition is prepared correctly. Check out the accounting close prerequisites to ensure that everything is squared away before you begin reviewing the month-end close process.

Find out about the next Finance Workshop by subscribing to the Community News. Follow these steps to sign up and select the frequency you’d like to receive emails.