Is your Professional Services firm ASC 606? OpenAir can do that.

PSA firms that recognize revenue using ASC 606 standards need the ability to allocate revenue as services are delivered, and this can feel like a heavy lift for organizations with rigid preexisting billing practices. Thankfully, OpenAir can help with ASC 606 compliance by using charge stages and milestone billing rules.

Charge stages enable companies to track their progress in fulfilling performance obligations, allowing for accurate revenue recognition. Meanwhile, milestone billing rules let companies bill customers based on the completion of specific project milestones, such as the delivery of specific deliverables. By using “% Complete” billing and recognition rules, companies can align their billing with the achievement of performance obligations, ensuring that their revenue recognition is in compliance with ASC 606.

A practical solution using Netsuite OpenAir is to leverage these two for a cohesive process flow within a project.  See the following use-case:

1. Widget Company Inc. has a $100,000 contract with their client where they invoice 50% upon 50% delivery of services, and invoice the remaining 50% upon completion of the engagement.
2. The company needs to recognize the $100,000 incrementally as services are delivered
3. Therefore, the $50,000 invoices (x2) should be separated from recognition

To solution this, OpenAir needs a charge stage for invoicing only, that can be excluded from recognition, and % complete billing and recognition rules.

1. Ensure you have a charge stage that can be used for invoicing only.

2. Add a Milestone that tracks % completion for the $100,000 deliverable

3. Add two % Complete Billing rules that bill $50,000 at 50% completion and $50,000 at 100%

4. Set the Charge stage for those Billing rules to the “Invoice Only” stage

5. Add a % Complete Recognition rule that recognizes $100,000 against the percentage of the Milestone

6. Allow the Milestone to drive both. In this screenshot, a Milestone at 70% completion will bill $50,000 and recognize $70,000

7. Note: You can allow for blended projects by using filters to ensure T&M is recognized As-Billed, but Milestones are recognized separately. Simply set an As-Billed rule to only include Open charge stages to allow for this:

OpenAir is an excellent tool for managing ASC 606 compliance through its charge stages and milestone billing rules. By helping companies track their progress and align their billing, OpenAir ensures accurate and compliant revenue recognition. If you’re looking for a way to ensure that your financial reporting is transparent, consistent, and reliable, OpenAir may be the solution for you!