How revenue is recognized in VOGSY

VOGSY facilitates revenue recognition by structuring project financials around deliverables linked to specific revenue types and ledger accounts. This allows for automated, compliant, and detailed revenue tracking and reporting within its integrated project and financial management framework.

Recognition methods (e.g., upon delivery, over time, based on milestones) align with standard accounting principles like ASC 606 and IFRS 15.

The core mechanism within VOGSY revolves around the configuration of Revenue Types and their connection to the general ledger.

VOGSY uses "Revenue types" to categorize revenue and costs associated with different services delivered through projects.  

Each project deliverable is associated to a specific Revenue type.

That Revenue Type determines the corresponding ledger accounts for revenue, costs, and work-in-progress (WIP) tracking.

A standard revenue type is available by default, but users can create additional types to support more detailed reporting.  

• Revenue is recognized over time.

• The measure of progress is typically based on the inputs (hours worked, materials consumed).

• The "right to invoice" practical expedient can be applied, meaning revenue recognized in a period typically equals the amount billable for the time and materials provided during that period, according to the contract rates.

• This is generally simpler than revenue recognition for fixed-price contracts, which often require more complex estimations of percentage completion based on total estimated costs or efforts.

Valuating Work in Progress (WIP) for fixed-price projects is essential for accurate financial reporting (recognizing revenue) and effective project management (understanding profitability and progress). Since the total revenue is fixed, the key is to determine how much of that revenue has been earned based on the progress made.

Occasionally, the WIP needs to be adjusted.

• If the amount of WIP exceeds the fixed price, it needs to be adjusted to the expected revenue level defined in the fixed price. A provision can be created in the back office to adjust the cost of the deliverable.

• If the amount of WIP is lower than expected based on the percentage completion of the deliverable, a provision can be created to recognize more revenue.

These adjustments can be managed in VOGSY’s back office through Valuate Work in Progress.

When a fixed-price deliverable tied to a revenue milestone is closed, VOGSY immediately triggers recognition of the corresponding portion of contract revenue, ensuring that financial reporting reflects project completion in real-time.