Zuora Can't Handle the "Upfront Billing Model"
It is a standard practice in the SaaS industry to invoice customers when a deal is signed (upfront billing), prior to the subscription going live as a result of timing of implementation and when revenue should be recognized.
At my current employer, we invoice customers once implementation is complete. For example, If a customer signs a deal with us on January 1 and the implementation process is completed on March 1, we will invoice the customer on March 1 with a subscription period of 3/1/2014 - 2/28/2015. We are planning to shift to and "upfront billing" model in which we will start billing customers when a contract is executed (in the above scenario, on January 1). Zuora is suppose to be this subscription billing platform that can handle complexity, but I am starting to realize that something as simple as the above scenario is difficult to achieve.
Is there anyone out there that can help us achieve the following scenario:
Company ABC signs a contract with Customer XYZ on January 1, 2014 for the following:
Implementation Services: $10,000 (One time charge)
Subscription License: $120,000 (Recurring)
The total Contract Value is $130,000. Generally, implementation is completed between 4 - 6 weeks and the customer will be notified when provisioned. The Customer has an "Auto Renew" clause. Company ABC invoices Customer XYZ for $130,000 on January 1, 2014. The invoice is synced to NetSuite and triggers the "Delay Rev Rec" check box so no revenue on the invoice is recognized in the Accounting system. In NetSuite, the backend entry is as follows:
Debit - Accounts Receivable: $130,000
Credit - Deferred Revenue: $130,000
Customer XYZ finally pays $130,000 on January 15, 2014.
On February 15, Company ABC completes the implementation process and the Customer's subscription is activated with a subscription period of 2/15/2014 - 2/14/2015.
The invoice is re-synced to NetSuite to updated the original invoice to do the following:
1. Uncheck the "Delay Rev Rec" checkbox in NetSuite and recognized entire $10,000 Implementation Fee as revenue on 2/15/2014.
2. Uncheck the "Delay Rev Rec" check on the Subscription License and update the Rev Rec Start and End Dates to 2/15/2014 - 2/14/2015, so that NetSuite earns $120,000 ratably over the subscription period.
3. Since the invoice in Zuora was set to "Auto-Renew," the renewal invoice in Zuora for the recurring license will automatically use the "Service Activation Date" of 2/15/2014 as the beginning period for the renewal and have a subscription period of 2/15/2015 - 2/14/2016, without having to do a workaround and update the T&Cs.
I've been going back and forth with Zuora Support and still cannot find resolution on how to make this work between Zuora and NetSuite. The Upfront model is not new to the SaaS industry and is a standard practice in the space. Moreover, this is also extremely important for proper revenue recognition in accordance with US GAAP. The current work arounds that being provided by Zuora Support is not scalable and just adding additional workload.
Using SFDC to manage our subscriptions and using the Celigo Connector to integrate to NetSuite would be a more scalable option than what Zuora currently offers.
If anyone can help me with this or are having the same issues, please contact me.
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