Managing Discounts in NetSuite

Overview

About the Client

Our client is a leader in water quality management, focused on providing safe drinking water to communities across the country. They use advanced technology to simplify lead and drinking water testing, helping utilities meet regulatory standards while prioritizing public health. By incorporating innovative data analytics into their platform, our client enables municipalities to tackle water quality issues proactively, promoting transparency and sustainability that improve efficiency and build community trust. Through these efforts, our client is working towards a future where everyone has access to clean, safe water.

The Challenge      

• The client was utilizing NetSuite’s Revenue Recognition feature to manage their revenue across the platform, but encountered a challenge in needing to recognize the net amount of a transaction and the associated discount in two distinct GL accounts.
• NetSuite’s restriction on linking a single item to multiple GL accounts complicated the separate recognition of the net amount and discount, as it prevented the creation of distinct revenue elements to capture their different GL impacts.
• Attempting to create a new discount type item to record the discount value in a different GL account added complexity to the situation, as it lacked any association with the revenue or GL accounts, and efforts to use a different item type were hindered by restrictions on negative values.

Our Solution 

• To address the issue, we implemented Charge Items as discount items for parent items requiring revenue recognition in two separate GL accounts. Each Charge Item mirrors the revenue details of its parent but is linked to a different GL account. This solution effectively resolved the challenges of missing revenue data for discount items and the negative value restrictions of other item types.
• When Revenue arrangement is generated for the Sales Order, a distinct revenue element will be created for the discount item. This element will acknowledge the contra revenue associated with the discount in the Discount GL account, ensuring that the impact on the GL is accurately represented.

Technology & tools used

NetSuite:

• Revenue Recognition feature: This core functionality of NetSuite was leveraged to manage revenue across the platform.
• Charge Items: These were implemented as discount items for parent items requiring revenue recognition in separate GL accounts.
• Revenue arrangement: This feature was used to generate distinct revenue elements for the discount item, ensuring accurate GL representation.

Results

The Impact            

• After implementing the new process, revenue is now recognized in two distinct accounts: one for the gross amount and another for the discount amount. This separation enhances clarity in financial reporting.
• Additionally, different revenue elements will be created for both the original item and the discount item. This allows for precise tracking of revenue impacts associated with each component.
• By streamlining the revenue recognition process, the client gains a clearer perspective on their overall revenue impacts, facilitating better financial analysis and decision-making. This improved visibility supports more effective management of their revenue streams.