Last week’s Tip examined how revenue is recorded on an accrual basis in the Farmigo system. This week’s Tip dives a little bit deeper and reviews how these principles are related to your members’ balances.
Your Farmigo system records revenue when it is earned in order to help you account for the way in which subscriptions are managed. If you are accounting for a one time order, then things are pretty simple. For instance, a customer orders an item for $5 and then pays for that item. When it comes to CSAs though, members commit to receive deliveries for a specific season or on a continual basis. They are not placing a one-time order; they are subscribing to your program.
For subscription programs, you need to draw against that prepaid credit as the member receives each delivery. In this case, you want to recognize payment when the goods are delivered since that is when the commitment for the "product" has been attained.
The scenarios outlined below examine how these principles are applied for a seasonal system and an ongoing system. For help identifying how your system is set up, click here.
Read on to learn more.
Your Farmigo system records revenue when it is earned in order to help you account for the way in which subscriptions are managed. If you are accounting for a one time order, then things are pretty simple. For instance, a customer orders an item for $5 and then pays for that item. When it comes to CSAs though, members commit to receive deliveries for a specific season or on a continual basis. They are not placing a one-time order; they are subscribing to your program.
For subscription programs, you need to draw against that prepaid credit as the member receives each delivery. In this case, you want to recognize payment when the goods are delivered since that is when the commitment for the "product" has been attained.
The scenarios outlined below examine how these principles are applied for a seasonal system and an ongoing system. For help identifying how your system is set up, click here.
Read on to learn more.
What if a Member Cancels their Seasonal Subscription?
Let’s say that I want to sign up and commit to a 16 week season season with your program for $20 per delivery. You are managing a seasonal system and your member’s balances are displayed using the Balance Due view. Your members balances are calculated according the following formula:
| Total Credits Committed for the Season (including received and future pending payments) | - | Total Debits Planned for the Season (all deliveries committed for the season) | = | Current Amount Owed |
If I signup for 16 deliveries * $20 = 320 and choose to pay in full, my balance shows that $0 is currently owed because my total received and future pending payments equals the value of the deliveries that I am scheduled to receive for the whole season.
After the 3rd week, I decide to cancel my subscription. Because no more deliveries are scheduled, my balance now shows a positive amount of $260. The revenue earned is $60 and the $260 may be refunded back to me.
After the 3rd week, I decide to cancel my subscription. Because no more deliveries are scheduled, my balance now shows a positive amount of $260. The revenue earned is $60 and the $260 may be refunded back to me.
What if a Member Places their Ongoing Deliveries on Hold?
Let’s say that I want to sign up to receive a delivery of $20 of goods each week from your CSA. You are managing an ongoing system and your member’s balances are displayed using the Balance on Account view. This means that my balance shows how much credit I have on account with you to cover the value of my future deliveries.
If I sign up and choose to prepay for 4 deliveries at a time, I pay $80 at signup and my balance displays a positive amount of $80. After 2 deliveries, my balance shows that $40 is left on my account and you have recorded $40 of earned revenue.
I then placed my deliveries on hold for 2 weeks. You do not earn any revenue from me during this time and $40 remains on my account. When I continue my deliveries, the value of each delivery continues to be deducted from my balance on account and you continue to earn revenue.
After 2 more deliveries, my balance reaches $0 and you have earned a total of $80 of revenue.
If I sign up and choose to prepay for 4 deliveries at a time, I pay $80 at signup and my balance displays a positive amount of $80. After 2 deliveries, my balance shows that $40 is left on my account and you have recorded $40 of earned revenue.
I then placed my deliveries on hold for 2 weeks. You do not earn any revenue from me during this time and $40 remains on my account. When I continue my deliveries, the value of each delivery continues to be deducted from my balance on account and you continue to earn revenue.
After 2 more deliveries, my balance reaches $0 and you have earned a total of $80 of revenue.