How to configure and validate revenue recognition in ScaleXP

Configure, allocate, filter, review, validate MRR, ARR, IFRS, GAAP revenue recognition

Table of Contents

Part 1 — Configure how ScaleXP allocates revenue 1. Understand the automated defaults Review how text recognition reads your invoices Consider the advanced LLM option 2. Set rules where AI is not enough Set account-level rules Set multi-tiered rules where the spread varies Set usage-based rules where you bill by completion 3. Improve your future invoice formats Tighten line item descriptions Separate recurring and one-time revenue accounts Use Classes or Tracking Codes for segmentation Part 2 — Review and validate in the Customers tab 1. Understand the four view types Revenue Recognition Monthly Recurring Revenue (MRR) Annual Recurring Revenue (ARR) IFRS / US GAAP / UK GAAP 2. Understand how to configure Customer tab reports Configure report options Set the report name, date range, and view (recognition type) Choose which data to include Set the Lost after, Reactivated, Data to be Displayed and Show Totals by options Filter by organization, accounts, and tracking codes Save your changes 3. Apply filters for each report Filter Revenue Recognition and IFRS/GAAP reports Filter MRR and ARR reports and configure global settings and KPIs Create and filter new reports 4. Check recognition dates by customer Pick a representative period Open the invoice list under each customer Look for misallocated revenue 5. Review customer numbers and revenue retention Confirm the customer movement counts Check MRR, ARR, churn, and retention 6. Create additional reports as needed Option 1. Create a new report Option 2. Change the details of an existing report and “Save As New” Related articles

This guide walks you through configuring how invoices are allocated across periods, applying filters to the Customers tab, reviewing recognition dates customer by customer, and validating MRR, ARR, and IFRS/GAAP reports before turning on automated month-end journals.

Part 1 — Configure how ScaleXP allocates revenue

ScaleXP allocates revenue automatically using a mix of text-recognition AI on your invoice line items and any account-level or invoice-level rules you set. This part walks you through the defaults, then through the rule-based options for cases where text recognition alone is not enough, and finishes with the invoice-format best practices that make future months easier.

1. Understand the automated defaults

By default, ScaleXP uses artificial intelligence to calculate revenue recognition from the text on your invoices and from the invoice line item dates.

Review how text recognition reads your invoices

See How ScaleXP reads dates for best practices on line item dates and descriptions, with worked examples of clear and unclear line item text.

When you first connect ScaleXP, it is worth reviewing how this is working on invoices you have already issued. Historical invoice formats commonly contain several conflicting data points that throw off the AI’s revenue period — we highly recommend spot-checking, or fully reviewing, all invoices for a representative time period to see how ScaleXP is interpreting them.

For the full mechanics of how revenue is spread across months once dates are read, see How ScaleXP allocates the spread of revenue and determines deferred revenue amounts.

Consider the advanced LLM option

If you are on an appropriate price plan, you may be eligible for ScaleXP’s more advanced LLM-based text recognition. If this would help with complex line item descriptions and you have not already had it enabled, email support@scalexp.com to discuss it further.

2. Set rules where AI is not enough

You may want to set rules for revenue allocation rather than rely on text recognition. There are several rule types depending on whether the rule applies to a whole nominal account or to individual invoice lines.

Set account-level rules

For rules that apply at account level — for example, “spread anything posted to this account evenly over twelve months” — see How to set rule based revenue allocations .

Set multi-tiered rules where the spread varies

Where the allocation should vary based on the invoice content or amount, use a multi-tiered rule. See How to set up a complex, multi-tiered revenue allocation rule. Also see How to handle revenue recognition for multi-year contracts with different annual amounts, free periods, and contract extensions.

Set usage-based rules where you bill by completion

For revenue recognized by percentage of work delivered or units consumed, set a usage-based rule. See How to set up usage based revenue recognition .

3. Improve your future invoice formats

A small change to the way you write new invoices makes automated revenue recognition far more reliable going forward.

Tighten line item descriptions

Apply the patterns in How ScaleXP reads dates — clear, concise line item descriptions with a single unambiguous date range work best.

Separate recurring and one-time revenue accounts

Keep recurring revenues and one-time revenues in separate GL accounts. This gives you much more flexibility when generating automated metrics like MRR, ARR, and churn.

Use Classes or Tracking Codes for segmentation

Make use of QuickBooks Classes and Locations or Xero Tracking Codes to capture product, department, or geography on every invoice. ScaleXP can then filter and segment metrics, reports, and journals by those dimensions automatically.

Part 2 — Review and validate in the Customers tab

Once your allocation is configured, the Customers tab is a great place to review the result. ScaleXP offers four view types — Revenue Recognition, MRR, ARR, and IFRS/GAAP — and several default reports, but you will need to configure these reports and apply filters before the numbers are meaningful. This section walks through each view type, the report options, and the checks to run before you move on to journals.

1. Understand the four view types

The Customers tab offers four ways of looking at the same underlying invoice data, each suited to a different purpose.

Revenue Recognition

Revenue Recognition shows revenue allocated to the period in which the service is provided, taking into account partial months but ignoring invoice date. This is one of the two views that can be used for month-end journals. See How ScaleXP allocates the spread of revenue and determines deferred revenue amounts for the full mechanics.

Monthly Recurring Revenue (MRR)

Monthly Recurring Revenue shows revenue allocated to the service date, like Revenue Recognition, but shows a full month of revenue in the start month and no revenue in the end month — a full month view reflecting the amount of recurring revenue per month. This view is used for analytics and KPIs and is initially set as the global source for MRR metrics. See How to show a full month view of revenue (as used for MRR) .

Annual Recurring Revenue (ARR)

Annual Recurring Revenue shows an annualized version of MRR, reflecting a full year of revenue based on revenue in the selected month. ARR in this report is defined as MRR × 12. See How to define and report on annual recurring revenue (ARR) by customer.

IFRS / US GAAP / UK GAAP

IFRS / GAAP shows revenue allocated to the period in which the service is provided, taking partial months into account — but any revenue earned prior to the invoice issue month is allocated to the month the invoice is issued. This view can also be used for month-end journals. See How to set journals to IFRS or GAAP revenue recognition rules so that backdated revenue is recognized at time of invoice. The trade-off between this view and the Revenue Recognition view for journal posting is covered in How to set up revenue recognition journals in ScaleXP.

2. Understand how to configure Customer tab reports

Configure report options

Each Customers tab report has a configuration panel that controls what data is included and how it is summarized.

Set the report name, date range, and view (recognition type)

Report Name is editable at the top of the configuration panel. View switches between Revenue Recognition, MRR, IFRS/GAAP, and ARR.

Choose which data to include

Here you can choose to include or exclude Accrued Revenue which is not from an Issued Invoice.

If you are on the Growth or Scale subscription tier and have your CRM connected, Included Data lets you fold future invoices into the view: Future Invoices (year 2 and 3 invoices on a three-year deal, for example), and Renewals (a renewals schedule generated from your contracts).

Best practice is to Save as New when using these revenue types so your forward-looking view is separate from issued-invoice reporting. See Updating contracts: how to make changes to contracts in ScaleXP (using ScaleXP Invoicing).

Set the Lost after, Reactivated, Data to be Displayed and Show Totals by options

Lost after defines the “grace” period — the number of months without revenue from a customer before they are treated as lost.
Reactivated before controls the time elapsed before a customer is considered “new” rather than returning.
Data to be Displayed controls which summary rows appear at the top of the report: Total Revenue, New Revenue, Lost Revenue, Upsell Revenue, and Downgraded Revenue. Most customers hide the latter four on Revenue Recognition reports and show them only on MRR, since they are typically used for business analysis rather than accounting or audit purposes.
Show Totals By controls the subtotals shown at the top of the page for each section. By default, the split is by GL code, but you can change this to reflect tracking codes, classes, locations, or your own customer tags. See How to report on tracking codes for customer data and Customer tags: how to add new fields to the customer page reports.

Filter by organization, accounts, and tracking codes

For consolidated companies, Organisation filters by subsidiary at the parent level.
Accounts filters out nominal accounts that should not appear in the report — we recommend using this on your MRR report so only recurring revenue accounts are included.
Tracking Codes or Classes filters by department, product, or other tag.
Invoice Source lets you include all invoices, or only those added directly into ScaleXP, those imported from Stripe, or those from your accounting system.

Save your changes

Save Report saves the changes to the existing report and overwrites your previous settings. To keep the old report and create a new one with your changes, use the New Report button at the top left of the page instead.

3. Apply filters for each report

Use filters to ensure each report is showing the data appropriate for its use. See How to filter accounts on the customer page.

Filter Revenue Recognition and IFRS/GAAP reports

Set these reports to include only the accounts you want feeding deferred and accrued revenue journals.

By default all accounts are included until at least one is ticked, after which only accounts with a blue tick are included.
When using revenue recognition journals, it is really helpful to have a report saved to match your journal settings, for easy reconciliation at month and year end.

Filter MRR and ARR reports and configure global settings and KPIs

Set MRR and ARR reports to include only the recurring revenue accounts that should feed your KPIs and churn analysis.

The global MRR report drives every dashboard, metric, and graph that uses MRR in the rest of the system, so this filter is particularly important to get right.

Create and filter new reports

You may want to create several MRR and ARR reports to reflect different segments and enable custom metrics such as churn and cohort analysis. See How to create a new report on the customers page; how to use customer page reports throughout the system and Cohort analysis: how to add a cohort chart in ScaleXP

4. Check recognition dates by customer

Once filters are applied, work through the Revenue Recognition report a customer at a time to confirm ScaleXP has interpreted each invoice correctly.

Pick a representative period

Pick a meaningful range — the previous twelve months is a good default — and review the revenue schedule customer by customer, month by month, for a representative sample of customers.

Open the invoice list under each customer

Click the dropdown arrow next to each customer to reveal the invoices behind that customer’s revenue. Click any invoice to see the line item details and how ScaleXP has interpreted the spread.

If no rule is set, ScaleXP spreads the revenue from the Start Date to the End Date using the logic in How ScaleXP allocates the spread of revenue and determines deferred revenue amounts. If a rule is set, you will see a rule symbol in place of the Start Date or End Date — click the symbol to see which rule has been applied.

Look for misallocated revenue

Look for invoices showing revenue in a period they should not, and for invoices missing revenue in a period they should cover. If a date needs to change, you can correct the invoice, correct many invoices in bulk, or request a manual upload — see What to do if the system is not recognizing revenue dates correctly; how to change invoiced revenue start and end dates. You can also set an account rule or invoice-specific rule using the options in Part 1.

5. Review customer numbers and revenue retention

The summary tables at the top of the Customers tab give you the customer-count and revenue-retention picture. Use them to validate that your filters and rules are producing sensible business metrics, not just sensible journal numbers.

As a reminder, you can set these up under Data to be Displayed in the Configure Report options described above.

Confirm the customer movement counts

Review Active, New, Lost, Upsell, Downgrade, and Reactivated customer counts and make sure they match your expectations for the period. For background on how each is calculated, see Customer page summary reports and how they are calculated .

Check MRR, ARR, churn, and retention

Open the default dashboards and confirm MRR, ARR, churn, and revenue retention all look correct. If they do not, adjust the filters or invoice-level rules from earlier steps and recheck — see How to change MRR and My metric definitions are not correct. How can I review them? for further detail.

6. Create additional reports as needed

The default reports are a starting point. You will likely want a separate view per business question — recurring revenue only, one-time revenue only, by tracking code, by entity, by product line.

Option 1. Create a new report

Select New Report at the top left of the Customers tab, then choose the View you want.

Option 2. Change the details of an existing report and “Save As New”

For example to change the view on a report you already have, keeping the account code selections and other configuration details, select the report, click Configure Report, and choose a different View.

Save using Save As New. Don't forget to rename the report appropriately for the new view.