Most companies have an existing accounting system (e.g., Quickbooks) and are deploying Fusebill to help manage subscription invoicing. This paper discusses best practices for taking advantage of both Fusebill and the accounting system while retaining accuracy and data integrity.
Most companies use an accounting system to manage their P&L. Some companies also use their accounting system for other purposes like invoicing, dunning, order tracking and collections.
Fusebill manages the invoicing for both one time and subscription sales: calculating what is owed, taxes, sending invoices, charging credit cards, sending dunning emails and more. Revenue recognition is also managed within Fusebill.
When transaction level details are maintained in two systems unless the two systems are continuously kept aligned there is the risk of duplicated or missing data.
Best Practice: Fusebill Manages all Subscription Customers
To take advantage of Fusebill’s automated feature set, Fusebill should be used as the master customer sub ledger for subscription management and billing:
Fusebill calculates the amount owing and applies taxes (as needed). On an account’s billing day, Fusebill creates an invoice, delivers to the customer, and collects automatically (optional). For invoices not paid within their terms, dunning messages are sent; AR Aging reports show outstanding amounts (Table 1). On a monthly basis, reconcile cash collections and then use summary journal entries to update ledgers in the accounting system.
With this approach, Fusebill manages the details of individual customers, subscriptions, and invoices; there is no need for the accounting system to track these details.
Table 1 - Fusebill and Accounting Responsibilities
The process implications are:
- Offline payments (i.e. via check or wire transfer) must be recorded in Fusebill and associated with the corresponding invoice. Online payments via credit card or ACH are automatically recorded by Fusebill.
- Offline payments (i.e., via check or wire transfer) must be recorded in Fusebill and associated with the corresponding invoice. Online payments via credit card or ACH are automatically recorded by Fusebill.
- All adjustments (including discounts or refunds, write-offs or balance adjustments) should be made in Fusebill. Credit card chargebacks and NSF checks should also be recorded in Fusebill.
- Any dunning or collections capabilities in the accounting system should be disabled.
- Disputed invoices should be set to status “Disputed” to avoid dunning emails.
- Cash should be reconciled regularly (at least monthly) to ensure all chargebacks and payments have been correctly recorded.
- Journal entries should be made in the accounting system prior to any closing (see details below).
Fusebill provides standard reports that specify the required journal entries. The following steps should be followed:
- Reconcile cash collected to bank records. Using the RECONCILIATION report, drill into the details and ensure that all transactions are accounted for. The CASH report details all payment activity for a given date range, indicating the payment method. (see Figure 1)
Figure 1 Fusebill Cash Report
- Generate appropriate journal entries by using the RECONCILIATION report. The RECONCILIATION report (Figure 2) shows the opening balance, credits, debits, net change, and closing balance for a specified time period. It shows the changes in each of the following ledgers:
- Accounts Receivable
- Deferred Revenue
- Taxes Payable
- Earned Revenues
- Write Offs
Figure 2 Fusebill Reconciliation Report
To provide audit-ability, details of each transaction can be accessed by drilling into the report details.
Alternative – Accounting System as System of Record with invoicing triggers only
Fusebill can also be used only to generate invoicing triggers which are used by a primary customer management system. This scenario arises in environments where there is a centralized CRM system for multiple product lines, and invoices need to reflect information from Fusebill and other billing systems. Fusebill generated data is used to prepare consolidated invoices using both Fusebill and non-Fusebill invoicing data. Information from Fusebill is used to populate the consolidated invoices at one of two levels:
- Summary invoice information is entered as a single line item on the consolidated invoice, without a detailed breakdown; or
- Transaction level details are provided showing individual subscription product charges and adjustments.
This can be readily supported through reports or through API integration; the volume of information required for makes this more suitable for API integration.
- Ensure Fusebill’s automated invoicing, collections and dunning features are turned off:
- Set customer billing email address to an internal address;
- Turn off dunning emails;
- Ensure no credit card information is stored with accounts;
- Record invoices as paid in Fusebill; otherwise the reports will be misleading;
- Do not use Fusebill AR Aging reports;
- Subscription changes, including pro-rating, should be applied in Fusebill directly.