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Deferred Revenue Management In Odoo

Deferred Revenue Management In Odoo

In this Odoo tutorial, learn how to manage deferred revenue in your Odoo 16 accounting module. Follow step-by-step instructions to create and manage the deferred revenue and deferred revenue model into your Odoo instance. 

Customers that make advance payments for goods or services they will not receive later are said to be making deferred revenues, also known as unearned income.

These upcoming revenues need to be recorded as liabilities, on the company’s statement until they can be acknowledged either immediately or, over a timeframe, on the Profit and Loss Statement.

For example, let us assume we sell a 12 month extended warranty for $ 1200. We have already received the money now while selling but haven’t earned it yet. 

And that is why we will post this new income in a deferred revenue account rather than a default income account and we have further decided to recognize it monthly. Every month, for the next 12 months, $ 100 will be identified as revenue.

Such transactions must be posted on DEFERRED REVENUE ACCOUNT rather than on the default income account.

To configure account in the Chart of Accounts, go to Accounting ‣ Configuration ‣ Chart of Accounts, click on Create, and fill out the form.

Define code > type should be “current liability > automate deferred revenue = no , create in draft or create and validate.

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How to Post an income to the right account:

Select the account on a draft invoice:

On a draft invoice, select the chosen account for all the products of which the income must be deferred.

How to create deferred revenue model:

In Odoo, you are able to create Deferred Revenue Models in order to create your Deferred Revenue entries faster.

To create a model, navigate to accounting ‣ Configuration ‣Deferred Revenue Models, Now, click on Create, and fill out the form to create a new entry.

Steps to Create Deferred Revenue Model:

Go to accounting module > configuration > Deferred revenue model > create it > define name of the model and details of depreciation period and method > define deferred revenue account (it should be type current liabilities and also select automation of deferred revenue ) > add revenue account > save it.

Steps to Create Deferred Revenue Model

Steps to Create Deferred Revenue Model

Steps to Create Deferred Revenue Manually:

Go to accounting module > accounting > deferred revenue > new > define name of the deferred revenue , define recognition values ,depreciation method , residual amount to recognize and accounting details > save it > click on compute revenue > you can see entries will be popped up in the new tab revenue board.

Steps to Create Deferred Revenue Manually

Wrap up

To wrap it up, Odoo's deferred revenue management is the essential key to financial transparency and strategic benefits. This will streamline revenue recognition, further ensuring compliance and taking informed decisions. 

By gaining expertise in this, you optimize revenue streams, enhance customer relations, and drive growth. You can Implement these strategies to unlock your business's financial potential to its fullest.

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