SB513 – Introduction to Revenue & Expense Deferrals in D365 Subscription Billing

🌐 Introduction

Welcome to SB513, the first article in our deep-dive series on the Revenue & Expense Deferrals module in Dynamics 365 Finance.

You’ve now set up recurring contracts, invoiced subscriptions, and automated billing cycles through the Recurring Contract Billing engine. But here’s the catch: invoicing a customer doesn’t mean the revenue is earned yet.

This is where the deferral engine steps in—ensuring that revenue is only recognized when it’s actually earned, in line with IFRS 15 and ASC 606.

🧾 What Are Revenue & Expense Deferrals?

Revenue deferral is the process of postponing recognition of revenue until the service or product has been delivered over time.

Imagine you invoice a customer £6,000 upfront for a 12-month CRM subscription (SBX-RNW-ANN1). If you book that entire amount as revenue in April, you’re misrepresenting your earnings—because most of that revenue relates to future months.

Instead, deferral logic does this:

• Invoicing:
  • DR: Accounts Receivable £6,000
  • CR: Deferred Revenue £6,000
• Monthly Recognition (Apr–Mar):
  • DR: Deferred Revenue £500
  • CR: Revenue £500

This ensures your books reflect only the earned portion of revenue for each period.

🔁 Why Does It Matter?

🎯 When Should You Use Revenue Deferral?

Use deferrals when:

• You bill in advance (e.g. annual SaaS contracts)
• Services are delivered over time (e.g. support, retainers)
• Revenue is earned after milestones (e.g. onboarding completion)
• You need to recognize revenue in portions, not lump sums

💡 Common Examples in Subscription Billing

🔄 How D365 Handles Deferrals

D365 Subscription Billing automates the deferral process using:

🎯 You can defer revenue (customer billing) or expenses (vendor-side services). This series will focus on revenue.

🔀 Revenue Deferral vs. Unbilled Revenue

It’s easy to confuse these two. Here’s a side-by-side breakdown:

📦 Real Use Cases (CRM SaaS Context)

🧠 Where It Integrates in Subscription Billing

The deferral engine works directly with Recurring Contract Billing:

1. Billing schedule is created
2. Invoice is generated
3. If item has a deferral template, a deferral schedule is auto-generated
4. Monthly batch job (or manual post) recognizes revenue

🧭 You’ll find deferral configuration linked at the product level, and deferral processing under the Revenue and Expense Deferrals workspace.

✅ Summary

Revenue deferral in D365 isn’t just an accounting tool—it’s a compliance must-have for subscription-based businesses.

By deferring revenue until it’s earned, you: ✅ Stay compliant
✅ Improve financial accuracy
✅ Enable better cashflow & revenue forecasting

🔜 Coming Up Next: SB514 – Setting Up Revenue Deferral Templates and Defaults

In SB514, we’ll roll up our sleeves and configure the building blocks:

• Straight-line and event-based deferral templates
• Duration, frequency, proration options
• Assigning templates to subscription billing items
• Previewing deferral journals before posting

You’ll leave that post with everything you need to get started building recognition logic into your billing lifecycle.

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