Monthly Memberships and Deferred Revenue
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10-26-2022 11:30 AM
Hello!
We are new to monthly memberships and slowly shifting all our current fixed, annual members to monthly, ongoing. Something we are running into is this:
- customer pays 2 months
- we go out month 3 and perform their heating inspection and due to age/efficiency they decide to replace their unit
- we give them 12 months free of their membership
- now their deferred revenue is -$137, but we gave them 12 months for free so we change their next billing date.
How do you account for that -$137 that we will never make up? Or do you?
Any advice on this is appreciated!
- Labels:
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Customer Memberships
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Deferred Revenue
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12-31-2022 12:20 AM
This is a good question. Few things you could do.
1) you could continue charging the monthly amount for the remaining 10 months of the original agreement (assuming a 12 month agreement) and let them know the 12 free months will be added to the end of that period.
2) not knowing exactly how the -$137 from your example is calculated, you may be able to “cancel” the membership which would generate a cancellation balance invoice. If the customer owes money, you can decide as a business what to do with the AR. Collect it, include it in the new unit price, write it off, etc.
Let us know if you’ve come up with any other good way to address this.
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10-26-2022 12:47 PM
I already told you. Pretend it doesn't exist!
Jessica Woodruff Smith, LadyTitans Co-Founder & Process Manager at AirWorks Solutions
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10-26-2022 01:51 PM
accounting doesn't like that answer..... HAHAH. wanting to see other ways people handle it other then the long drawn out way ST told me to handle it.... i KNOW there is a better way.
