Handling Shortfall Amounts
Your accounting may require to book shortfall amounts to a dedicated account.
Understanding Revenue Shortfall
Generally, a shortfall is the difference between the actually available amount of money and the originally expected or required amount. With respect to revenue, it is the difference between the earned and the expected income.
These differences occur, for example, when billing usage data with a minimum base price: the actually achieved price that results from the consumption may be smaller than the defined minimum price.
Shortfall Support in JustOn
JustOn Billing & Invoice Management can generate separate booking details for shortfall amounts – the difference between some actually accrued costs and the defined minimum price.
Consider the following use case: You invoice usage costs with a fixed minimum base price. That is, you combine usage data billing with price tiers, where the first tier has defined a flat price. Now assume that the actually achieved quantity of an item is smaller than the quantity for the flat price tier.
You invoice the flat price, but your accounting may need to separately track
- the revenue resulting from the actual consumption, and
- the revenue resulting from the difference billed by implication.
To support this scenario, you apply the recognition rule Shortfall.
Implementation
The Shortfall recognition rule requires the following invoice line item fields in particular:
| Field | Description |
|---|---|
| Base Quantity | The actually achieved quantity, determined via usage data billing. |
| Quota Quantity | The quantity specified for the flat price tier. |
| GL Account | The G/L account used for the revenue resulting from the actual consumption. The value is taken from the G/L Account field of the Assignment Rules - G/L Account custom setting. |
| GL Account 2 | The second G/L account, used for the revenue resulting from the shortfall amount. The value is taken from the G/L Account 2 field of the Assignment Rules - G/L Account custom setting. |
JustOn applies the Shortfall recognition rule if the following conditions are met:
(1) The fields Base Quantity and Quota Quantity of the invoice line item are set, which implies
- a price tier with the price type
Flat - usage data billing properly set up to determine the actual quantity
(2) The value of Quota Quantity is higher than the value of Base Quantity.
(3) The field Recognition Rule of the invoice line item is set to Shortfall.
If the conditions are not met, JustOn uses the recognition rule Default.
Workflow
Now if enabled and set up accordingly, JustOn creates two booking details when finalizing the invoice:
- one for the revenue that results from the tracked product consumption
-
a second one for the revenue that results from the shortfall amount, that is, the difference between the actually incurred costs and the defined minimum price
Make sure you have two G/L accounts set in
GL AccountandGL Account 2.
The invoice line item total (the defined minimum flat price) is split proportionally according to the determined quantity, as illustrated in the following example:
Price tier:
| Quantity | Price | Price Type |
|---|---|---|
| 500 | 1000,00 | Flat |
With an actual consumption of 400, the invoice line item has the following quantity information:
| Field | Value |
|---|---|
| Base Quantity | 400 |
| Quota Quantity | 500 |
Applying the proportional distribution, this produces the following booking details:
| # | Booking Account | Calculation | Amount |
|---|---|---|---|
| 1 | G/L Account | (400 / 500) * 1000,00 | 800,00 |
| 2 | G/L Account 2 | (100 / 500) * 1000,00 | 200,00 |