Earning cash and generating revenue is a fundamental aspect of doing business. Regardless of whether you’re selling hot dogs, clothing, or running a large hotel franchise – every company’s success depends on revenue. However, in the accounting world recognizing revenue can be a bit more complicated.
You would think that a business simply has to record the amount of cash from sales. There’s actually much more to it in accrual-basis accounting. The accounting principle of revenue recognition means that businesses only recognize revenue when it’s earned, not when cash is received.
Revenue recognition in accrual-based accounting can vary depending upon the nature of the industry. The problem is revenue recognition isn’t always black and white. In fact, it can vary greatly depending upon the nature of the good or service received.
Revenue Accounting in the Real-World
The revenue recognition principle states that revenues are recognized and tracked at the point-of-sale rather than when cash or other funds are received. Every exchange between a merchant and a customer involves the sale of a product or service. The customer receives the goods or service and offers payment to the merchant. The merchant receives the payment and in turn provides the goods or service. Although it seems simple, there’s actually a lot more to revenue accounting.
In today’s advanced world, exchanges between merchants and customers are facilitated using technology such as point-of-sale systems. First, comes the authorization stage in which the merchant must obtain approval for payment from the issuing bank. Next, comes the authentication stage in which the issuing bank verifies the validity of the customer’s credit card using fraud protection tools. Then comes the clearing stage in which the transaction is posted to the cardholder’s credit card billing statement and merchant statement. As you can see, there’s several participants involved throughout the credit card transaction process including the cardholder, merchant, merchant’s bank, service provider, credit card network, and issuing bank. With so many moving parts, it can be difficult for companies to manage their revenue accounting without the right tools in place. That’s where Docyt can help.
Docyt Helps Businesses with Revenue Accounting
Docyt’s accounting automation software helps businesses track daily and monthly revenue transactions. Docyt pulls in bank account transactions and the daily revenue system report. End users can compare what the revenue report said versus what was actually deposited into their bank account.
Docyt gives you complete visibility of what you’ve earned by payment processor, spend category, and by day. You’ll be able to track customer purchases, type of payment, and even the type of credit card used. You can see daily revenue reports for each location and a consolidated report for all businesses. If you have multiple revenue-generating departments, Docyt can help you see revenue by department in addition to a rollup for the entire business.
Docyt makes life simpler for business owners. If you’re searching for an automation software platform that will help manage your accounting, Docyt has your back.
Docyt Simplifies Revenue Accounting
Docyt helps businesses keep track of their revenue accounting with confidence. Get real-time financial insights, reconcile daily revenue, and stay on top of revenue reports and bank deposits. Revenue is the most important factor for business success, Docyt can help you manage it.
If you’re searching for a tool to manage your revenue accounting, schedule a free consultation today.