Identify the promises in the contract
The agreement may include ongoing access, setup work, usage charges or other services. Those elements and any cancellation or credit terms matter to the accounting review. The accountant determines the recognition policy; a payment platform’s default report does not establish it.
Retain the customer reference, contract dates, amount, service period, invoices, credits and cash received. Changes to plans or terms should preserve the original history so the monthly schedule can explain the movement.
Illustrative example: a simple annual service
Assume a Burnaby software firm collects $60,000 excluding tax for a single 12-month service obligation, with even delivery and an approved straight-line recognition policy. On those simplified assumptions, the schedule recognizes $5,000 per month.
After three completed months, $15,000 has been recognized and $45,000 remains for future service under that policy. This is not a universal formula for all software contracts. Setup obligations, variable usage, refunds or different delivery patterns can require another analysis.
Reconcile the schedule with billing and cash
The subscription schedule should tie to customer invoices, receipts and the relevant ledger accounts. Processor fees, withheld reserves and settlement timing explain why the bank deposit may differ from the amount paid by customers. Do not reduce revenue silently to match a net payout.
Tax timing is assessed separately from the accounting recognition schedule. Allocating service revenue across months does not by itself establish when GST or PST must be charged or remitted. Retain the facts needed for that review.
Use the cash view for operating decisions
Upfront collections can fund payroll and hosting while also creating future delivery commitments. A cash forecast should include those obligations and realistic renewal assumptions. A high bank balance immediately after annual renewals is not proof that the entire amount is available for discretionary spending.
At each close, check new plans, cancellations, credits and completed service periods. Compare the ending schedule with the ledger and explain significant differences. That routine gives management a clearer view of recurring activity without confusing a successful collection cycle with a sudden increase in monthly earned revenue.
Put this into practice
Sources and current guidance
A practical next step
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