Subscription Billing, Deferral Schedules & Contract Liabilities in Business Central - PART 3 OF 5

Recap so far: one contract, many documents in Business Central

That is the idea the whole series stands on: Business Central lets one contract span many documents and still report as one.

With that foundation in place, Part 3 lives entirely inside that third column Subscription Billing. The cash is in on day one; the revenue isn't earned yet. This post is about the gap between the two, how Business Central defers the invoice and releases it, month by month, across the whole term.

The rule: billing drives cash, control transfer drives revenue

A subscription invoice never lands straight in the P&L.

Subscription Billing raises the invoice to a contract-liability account (Dr Accounts Receivable / Cr Contract Liability); the deferral release then moves it into revenue, month by month. Invoice and recognised revenue almost never coincide — the gap between them is the contract liability sitting on the balance sheet.

Platform access (12 months)

Standalone Selling Price= £ 96,000 for 10 Users

Recognised Over time: Under IFRS 15.B58 that makes it a right to access Cloud Axis's evolving IP, satisfied over time (IFRS 15.35), so revenue is recognised across the subscription period.

Configuration: Subscription Billing in Business Central

The BC setup walkthrough that follows puts it into practice, using the Professional tier throughout. One note before the screenshots: in this tenant the Professional platform is set up as the subscription item Growth Platform (Subscription Item) that is the line you will see in every screen below.

BC gives you two ways to defer.

1. You can attach a manual G/L deferral template to an invoice line by hand. This is fine for a one-off.

2. But CloudAxis runs hundreds of live subscriptions, so the revenue engine belongs to the subscription module.

Step 1 Set it up as a Customer Subscription Contract

In Subscription Billing you build a Customer Subscription Contract: when you post its invoices, contract deferrals are created automatically, and you release them to the general ledger to recognise revenue period by period.

The screenshot is contract CUC000009 for Marrick Consulting, and three fields do the real work. Contract Type = SAAS classifies the agreement; Create Contract Deferrals is the master switch, turned on, it tells BC to defer every eligible line on this contract instead of posting it straight to revenue; and the header Subscription Start / End (01/04/2026 → 31/03/2027) sets the term the revenue is spread across.

On the line, the Growth Platform subscription item carries Quantity 10 (users) at £800 per user per month on a 12M rhythm, i.e. £96,000 for the year. Set the switch once on the contract and every invoice it raises inherits it.

Step 2 Run Billing Proposal

Open Subscription Billing › Recurring Billing › Create Billing Proposal.

Set Billing Date to the start of the cycle (01/04/2026) and Billing to Date to its end (31/03/2027), with Billing Template = CUSTOMER. Filtering to Contract No. CUC000009 keeps the run scoped to Marrick Consulting rather than sweeping every live subscription.

BC reads each subscription line and works out what is billable up to that date from three things on the line: the Subscription Start Date, the Billing Rhythm (12M : annually in advance), and the Next Billing Date. On a brand-new contract the Next Billing Date equals the start date, so the whole annual period 01/04/2026 → 31/03/2027 falls due in a single billing.

The proposal returns a single draft line: Marrick Consulting, £96,000, quantity 10, billing 01/04/2026 → 31/03/2027, on a 12M rhythm. Note the Document No. column is still blank. A billing proposal is a staging list you review and can correct before anything posts. At this point nothing has touched the general ledger.

Step 3 Create the contract invoice

With the proposal reviewed, choose Create Documents. In the Create Billing Documents dialog, set both Document Date and Posting Date to 01/04/2026, leave Document per = Contract so every line for the contract lands on one invoice, and switch Post Document(s) on so BC creates and posts in a single step.

The result is posted sales invoice 103334. Two details matter. First, BC stamps the contract’s identity onto the document as comment lines: Contract No. CUC000009, Saas- Annual, and Billing period 01/04/26 to 31/03/27. So the invoice is always traceable back to the subscription. Second, the totals: £96,000 net, £19,200 VAT at 20%, £115,200 gross. Only the £96,000 fee is deferred; VAT is never deferred, which is why the ledger in the next step shows receivables at the gross £115,200 but the contract liability at just £96,000.

Step 4 Post the contract invoice

Posting does more than raise the invoice. From the posted invoice, Find entries lists everything the one document generated. G/L entries, the customer ledger entry, the VAT entry, and, the part that matters here, twelve Customer Subscription Contract Deferral entries: one slice for each month of the term.

Drilling into the G/L confirms the double entry, every line tagged Customer Subscription Contract CUC000009. Accounts Receivable (40400) is debited £115,200, Sales VAT (56100) credited £19,200, and Contract Liability (52100) credited £96,000. Not a penny has reached a revenue account yet. £96,000 sits on the balance sheet as deferred income, exactly where IFRS 15 wants it until the service is delivered.

Step 5 Release the deferrals each month

Run Release Subscription Contract Deferrals with the posting date at month-end and a Post Until date of the same day. BC moves that month’s slice from contract liability into revenue, for every active contract at once, not just this one.

For CUC000009, the April release posts one clean entry: Contract Liability (52100) debited £8,000, Fixed Fee Income (10101) credited £8,000, described Release Contract Deferral of April 2026.

Because the term starts on the 1st and runs a full year, every month is a clean £96,000 ÷ 12 = £8,000; no pro-rating needed. (A mid-month start is exactly where the day-count in the opening question begins to bite; here it does not, because the subscription is whole-month aligned.) Repeat the routine each month-end and the £96,000 unwinds to revenue in twelve equal steps.

Step 6 The Customer Subscription Contract Deferrals page

Opened from the contract, this page is your audit view: BC created one deferral entry per month at invoicing, and each release flips an entry from open to posted:

The list holds twelve rows for CUC000009, each showing a Deferral Base Amount of £96,000 and an Amount of £8,000. The first, dated 01/04/2026, already carries a Release Posting Date of 30/04/2026. (April slice just posted, while the other eleven stay open until their own month-end release). The page reconciles straight back to account 52100: sum the entries still open and you have the contract liability left to earn.