How does Automated Revenue Recognition work in Puzzle?

Puzzle launches Automated Revenue Recognition

Startups must record and track revenue accurately for tax, fundraising, and compliance purposes.

Knowledge is also power. Knowing accurate revenue numbers informs better decision-making, especially when this can be in real-time.

As the first accounting software to integrate directly with Stripe, Puzzle offers a suite of Automated Revenue Recognition features, including:

Automated revenue recognition schedules from Stripe subscriptions
Automated deferred revenue schedules
Automated accrued revenue postings to the general ledger
Real-time MRR, ARR, churn rate, and retention rate calculations
Fast, simultaneous cash and accrual revenue accounting and financials.

Puzzle’s automated schedules and insights eliminate labor-intensive spreadsheet calculations, outdated data risks, and system fragmentation.

For the first time, getting real-time, automated, and accurate revenue recognition from Stripe subscriptions directly in an accounting system is now made possible by Puzzle. Stripe and Puzzle users can now:

Leverage the Puzzle <> Stripe integration for subscription billing to get automated revenue recognition and automated deferred revenue schedules directly in Puzzle’s core accounting system.
Experience time savings of automated revenue recognition from deferred revenue balances.
Access automatically generated revenue metrics like MRR, ARR, retention, and churn.

Why cash and accrued revenue are important for startups

Companies often require both cash and accrued revenue records.

Getting this right from the outside saves significant cost and effort in the future.

As a company grows, accrual financials become essential for investors, lenders, and regulatory compliance. Meanwhile, cash financials help manage cash flow and expenses.

Puzzle offers simultaneous cash and accrued revenue insights, providing significant benefits:

Gain back valuable time. Stop maintaining manual revenue schedules in spreadsheets. Everything is automatically recorded in Puzzle.
Instant access. Get cash and accrual revenue within seconds, not weeks.
Reduce errors. Automate revenue recognition, minimizing mistakes and improving reliability.

Cash, accrual, and recurring revenue insights provide a holistic view of a business, guiding decision-making and strategic planning.

How Puzzle and Stripe work together

Puzzle automatically manages and generates revenue schedules based on service period dates recorded in Stripe, ensuring dependable, up-to-the-minute revenue insights on the Puzzle revenue dashboard.
All ARR, MRR, and revenue schedules are automated through the Stripe API <> Puzzle integration.

Will the Puzzle <> Stripe integration work for me?

The Puzzle <> Stripe integration works best for:

Businesses with fewer than 100,000+ Stripe transactions.
- If you have more than 100,000 transactions, don't worry! We're excited to help you. Just reach out to us at [email protected].
Companies that do not have usage-based Stripe subscriptions.
- But we'd love to work with you if you do have usage-based Stripe subscriptions! Just reach out to us at [email protected].
Companies that do not issue a significant volume of refunds through Stripe.
- We want to make sure all of your refunds are recorded accurately and we'd love to make sure we can handle your transactions. Just reach out to us at [email protected].
Puzzle users who connect their Stripe accounts.
- Automated Revenue Recognition is only available for Puzzle users who have connected their Stripe subscriptions.
- Subscriptions processed outside of Stripe will not be reflected in Puzzle’s automated accrual revenue, deferred revenue, MRR, or ARR calculations.
Companies with subscription-based revenue (annual or quarterly).
- The Puzzle <> Stripe integration works best for companies with subscription-based billings.
- Puzzle’s Automated Revenue Recognition does not currently account for usage and service-based billing.
Companies that do not issue a large volume of manual invoices.
- Puzzle can record and recognize the revenue from manual invoicing for both cash and accrual-based accounting.
- Puzzle does not take manual invoices into MRR, ARR, churn rate, or retention rate calculations.

How to connect your Puzzle and Stripe accounts

Connecting Stripe to Puzzle

A Stripe connection is prompted during onboarding. If you did not connect to Stripe during onboarding, follow these steps.

Log into the Dashboard, then Integrations.
Under Revenue, select Stripe tab.
Connect to Stripe using your Stripe credentials.

Connecting Puzzle to Stripe

You can also pull your Puzzle account directly into Stripe.

Log into Stripe, then More.
Select Apps Marketplace.
In search bar, type Puzzle.
Select Connect.

Puzzle’s Automated Revenue Recognition: How it works

Accurate revenue recognition is a timing exercise tied to subscription products and contract durations. Companies require correct revenue recognition for compliance with investors, lenders, and regulatory requirements, especially for potential public offerings.

Why would revenue be recognized differently?

Cash basis: Revenue is reported upon cash receipt, regardless of when it's earned.
Accrual basis: Revenue is reported when earned, regardless of cash receipt.
Learn more about cash and accrual accounting.

Managing both cash-basis and accrual-basis accounting methods is labor-intensive. That’s where Puzzle <> Stripe's automated revenue recognition simplifies everything. Puzzle <> Stripe seamlessly combines cash and accrual methods, eliminating extra work and manual tasks.

How it works

Puzzle captures the service duration for Stripe subscriptions through the Stripe integration.
Puzzle automatically calculates a revenue recognition schedule for each subscription in Stripe based on the start date and end date of each subscription, based on 360 days. Puzzle uses a 30/360 convention to automatically calculate the pro-rated amount of revenue to be recognized in any given period, with a prorated first month.
Puzzle records the invoice.
Each month, Puzzle automatically recognizes the accurate amount of accrued revenue and reduces the accurate amount of deferred revenue for each subscription.
Puzzle also applies the cash payment received to reduce the Stripe receivable on the balance sheet. Simultaneously, this cash movement creates cash-based revenue.

How to view Automated Revenue Recognition schedules

There are a few ways to access automated revenue schedules in Puzzle.

Option 1: Automated revenue schedule in a transaction

Log into the Dashboard, then Transactions.
Filter by Source and select Stripe.
Select a Stripe transaction for a Subscription payment.
Select Revenue schedule.

In this example:
- Customer Beyonce purchased a 10-month subscription for $12.
- Because this subscription was purchased on September 12, $0.79 was recognized as revenue in the month of September.
- The remaining balance of the invoice is recognized over the duration of the subscription, until June 2024 (month 10).
Option 2: Summary automated revenue schedules
1. Log into the Dashboard, then Accounting.
2. Select Invoices tab.
3. Select Schedules tab.
4. Select any schedule to open up the Revenue recognition schedule.

Automated Cash Revenue: How it works

The Cash Revenue balance from the P&L will always match the Cash Revenue in the Revenue tab.

Users can see real-time cash revenue insights broken down by:

Product
Account
Customer
Insights can also be run for any time period, including:
- Quarter over Quarter
- Month over Month
- Year-to-date
- Custom months and custom days

Automated Deferred Revenue Schedules: How it works

Say goodbye to maintaining deferred revenue schedules in complex spreadsheets.

Users can instantly access an automated deferred revenue schedule by customer or account.

Puzzle’s deferred revenue schedules present:

Opening balances
Invoice totals (from manual invoice or Subscription invoice)
The total amount of revenue recognized, as of the time of viewing. Puzzle uses a 30/360 convention to automatically calculate the pro-rated amount of revenue to be recognized in any given period, with a prorated first month.
Closing balances. The ending balance in the deferred revenue schedules will match the closing balance of deferred revenue on the balance sheet, at any time.

View schedules by:

By customer
By account

Automated Accrual Revenue: How it works

The Accrued Revenue balance from the P&L for 40000-Subscription Revenue will always match the Accrued Revenue in the Revenue tab.
Accrued revenue for other accounts such 42000-Transaction Revenue (one-off sales) are not included on the Accrued Revenue tab.

Users can instantly access real-time accrued revenue broken down by month.

Puzzle automatically posts the amount of revenue that should be recognized in any given month to the general ledger. No more manual journal entries are required.

Accrued Revenue Schedules can be viewed by:

Customer
Account

Revenue recognition in Puzzle, powered by Stripe

When combined, Puzzle and Stripe offer a time-saving invoicing and payment processing solution that integrates directly with accounting software. Companies can:

Instantly access real-time revenue (cash and accrual) within their accounting system without manual and labor-intensive calculations.
Respond to time-sensitive requests from investors and stakeholders who need accurate revenue numbers and revenue schedules on the 1st of the month.
Pull real-time startup insights like MRR and ARR directly their accounting system, without complicated spreadsheets.

To access these benefits, connect your Stripe account to Puzzle.