Scenario: we receive an rental SaaS invoice for one year
We create and post an invoice journal, and D365 F&SCM should post this in a prepaid account (balance sheet) and create an accrual schedule to accrue the cost into the correct period.
The following accounting entries are expected:
Invoice posting:
Prepaid expense (Purchase accrual) Debit 10 000 €
Vendor balance Credit 10 000 €
Monthly entry:
Rental SaaS expense Debit 10 000 €/x days in month
Prepaid Expense (Purchase accrual) Credit 10 000 €/x days in month
We finally have a solution to cover that basic requirement. I have never been a big fan of accrual scheme and it did not work with purchase orders. I will show a solution for that in another article. The subscription billing module released by Microsoft brings up a lot of new functionalities which can be used by any industry.
Prerequisites :
Turn on the following features in the Feature management workspace:
- Subscription billing
- Revenue and expense deferrals
We also need to set up a little bit D365 F&O.
Set up Deferral template
Go to Subscription billing > revenue and expense deferrals > Setup > Deferral templates
It is very useful to have the option to select Fiscal periods in the Period frequency field. Create as many templates as your company needs.
Define default posting profile for Schedule posting
Go to Subscription billing > Revenue and expense deferrals > Setup > Deferral defaults
The recognition account can still be amended at a later stage.
Process flow :
Go to Accounts Payable > Invoices > Invoice journal
Create an Invoice journal
Enter the line details
Select Deferrals
Validate posting set up. You can still modify them later if a mistake is made here.
You can update the recognition account and the scheduling template as per your need
The deferral start date is also amendable.
You can Preview the schedule. D365 F&O has distributed the credit amount based on number of days in that month. The fiscal period is used in my case as I set it up that way. The Gregorian calendar could be applied as well.
No more calculation in Excel, it won't make all Accounting clerks happy I know !
Post vendor invoice and review Deferral schedule
Review the voucher once the invoice journal is posted
Then, go to Subscription billing > Revenue and expense deferrals > Deferral schedules > Active deferrals schedules
Once the vendor invoice is posted, you realize that you made a mistake and selected the wrong schedule template. No worries, you can modify the schedule !
Click Modify schedule
Turn on Schedule from template
Select a new template
Click Preview, review the simulation, then click OK
Same thing could be done for the accrual account or the recognition account. That’s very flexible.
Post month recognition and review
You can follow-up the amount booked in your P&L and what’s remaining
If you want to book the entry in one month, select the schedule line and click Recognize
Select the journal name, then View Preview
Finally click Process
A journal is automatically created and posted.
Select the Journal batch number to see it.
In addition, the recognized amount on the active schedule is updated accordingly.
That's it, you can review on a monthly basis, and an audit trail tracks all actions.
The same kind of feature can be used for purchase orders.
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