The article further explains how Puzzle <> Stripe works. It captures the service duration for Stripe subscriptions, calculates a revenue recognition schedule for each subscription, and uses a 30/360 convention to calculate the pro-rated amount of revenue to be recognized in any given period. Puzzle also records the invoice, recognizes the accurate amount of accrued revenue, reduces the accurate amount of deferred revenue for each subscription, and applies the cash payment received to reduce the Stripe receivable on the balance sheet.
Key takeaways:
- Revenue recognition is crucial for compliance with investors, lenders, and regulatory requirements.
- Revenue can be recognized differently based on cash basis (reported upon cash receipt) or accrual basis (reported when earned).
- Puzzle <> Stripe's automated revenue recognition simplifies the process by combining cash and accrual methods.
- Puzzle captures service duration, calculates a revenue recognition schedule, recognizes the accurate amount of accrued revenue, and applies the cash payment received to reduce the Stripe receivable on the balance sheet.