Revenue Accrual Mode

When new orders are placed, their total cost is initially recorded as deferred revenue in Nautical's ledgerized accounting system. To ensure compliance with GAAP accounting standards, like ASC 606, revenue is recognized as earned when conditions are met, typically upon order fulfillment. When revenue is earned, it's split between the marketplace operator and sellers, factoring in elements like net sales, commissions, and fees.

The Revenue Accrual Mode is a key setting in your Nautical marketplace that defines how and when an order's revenue is recognized, setting the criteria for shifting revenue from deferred to earned status.

caution

The choice of accrual mode is locked in and cannot be changed once your marketplace starts transactions. Selecting the appropriate mode is crucial as it impacts how you manage seller payouts.

A Nautical Support representative will set this setting when initially configuring your environment. You cannot change this setting directly. There are two accrual modes: accrue on fulfillment or when the order is placed.

Accrue on fulfillment

Revenue is earned per order line item as items in the order are fulfilled. This method supports partial payouts for orders that are only partially fulfilled. This standard operating mode, compliant with ASC 606, ensures revenue is recorded only upon fulfilling goods or services.

note

Shipping and order fees accrue upon the first order fulfillment.

Accrue on order placement

Revenue is earned as soon as a buyer places an order, ensuring quick access to funds for sellers. This model can be helpful for marketplaces that provide advance payments to sellers, such as businesses where vendors need upfront funds to procure materials for made-to-order items.