Service Revenue Recognition in ERP with Field Service Data
Service revenue recognition is more complex than product revenue because service performance obligations span time, involve variable consideration, and often bundle with product sales. ASC 606 and IFRS 15 require organizations to recognize revenue as performance obligations are satisfied, which means the ERP revenue recognition engine needs data from the field service platform about work completed, milestones achieved, and hours delivered.
Revenue Recognition Models for Field Service
Different service business models require different revenue recognition approaches. Time-and-material contracts recognize revenue as labor and parts are delivered. Fixed-price contracts recognize revenue over time using an input or output method. Subscription contracts recognize revenue ratably over the contract period. The ERP must support all these models and receive the right triggers from the field service platform.
- Time-and-material: revenue recognized when technician labor hours and parts consumption are posted to the ERP service order
- Fixed-price: revenue recognized using percentage-of-completion based on hours incurred vs. estimated total from the work order
- Subscription: revenue recognized ratably over the contract period regardless of actual service delivery volume
- Outcome-based: revenue recognized when measurable outcomes (uptime percentage, resolution within SLA) are achieved and verified
- Hybrid contracts with multiple performance obligations require allocation of transaction price across each element per ASC 606 step 4
Data Flow from Field Service to ERP Revenue Module
The field service platform generates the events that trigger revenue recognition entries in the ERP. Work order completion, milestone sign-off, contract period expiration, and customer acceptance are all events that the ERP revenue recognition module consumes. The integration must deliver these events with sufficient detail for the ERP to determine the correct accounting treatment.
- Work order completion event sends actual labor hours, parts cost, and completion timestamp to ERP for T&M revenue posting
- Milestone completion certificate from the field service platform triggers ERP revenue recognition for the associated performance obligation
- Contract period boundary events from the billing schedule trigger ERP ratable revenue recognition journal entries
- Customer acceptance signature captured on the field service mobile app satisfies the ERP acceptance criterion for revenue release
- Variable consideration estimates in the ERP adjust based on actual field service performance data using the most likely amount method
Audit Trail and Compliance Requirements
Revenue recognition under ASC 606 requires extensive documentation of the five-step process: identify the contract, identify performance obligations, determine transaction price, allocate the price, and recognize revenue as obligations are satisfied. The audit trail must span both the field service platform and the ERP, linking contracts, work orders, and journal entries into a traceable chain.
- Contract identification linkage connects the field service Service Contract to the ERP revenue contract with matching reference IDs
- Performance obligation mapping documents how each service deliverable in the field service platform maps to an ERP revenue line
- Transaction price allocation records show how bundled product-and-service deals split revenue across obligations in the ERP
- Revenue recognition event log in the ERP captures the triggering event, source system, timestamp, and amount for each journal entry
- Period-end reconciliation report compares field service platform delivery data with ERP recognized revenue to identify timing differences
Need help with ASC 606 compliant service revenue recognition? Our finance and field service specialists can align your systems.
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