more-arw search

Q&A Forum

How are consumer goods accruals differ from typical accruals?

In typical accrual it is debit receivable and credit revenues. Is this the same in a firm focus in consumer goods where payments sold to distributors are guaranteed regardless of quantity sold?

Answers

Topic Expert
Bob Scarborough
Title: CEO
Company: Tensoft, Inc.
(CEO, Tensoft, Inc.) |

Consumer goods sales often diverge from B2B sales in the volume and transaction size. The Go-To-Market models can diverge as well. Distribution channel sales do introduce additional potential complexities and management needs.

Go-To-Market models through distribution can delay revenue/cogs recognition until the distributor sells the goods (distributor POS transaction). This can be both about revenue timing as well as to support tracking potential returns or other distribution type transactions (stock rotation, price support, rebate programs, product incentives, etc). You mention there is no right of return for the distributors – you would need to look into the distribution agreement and terms fully to understand the impact.

It is worth mentioning that many people track distribution sales (including POS information) to understand what inventory exists in the channel and to analyze sales patterns from your distributors. Forecasting models and production models need to be adjusted for the inventory on hand in the channel even though it is not in your possession or ownership.

One final note related to consumer sales through distribution is a mention of two cycle revenue processes. Technology devices or consumer services that combine retail sales with a secondary consumer activation of the product have two cycles for revenue recognition. Activation requires deferral of revenue until an event, as well as development of exception handling rules for activations that never occur or expire over time.

1469 views
Topics

Get Free Membership

By signing up, you will receive emails from Proformative regarding Proformative programs, events, community news and activity. You can withdraw your consent at any time. Contact Us.

Business Exchange

Browse the Business Exchange to find information, resources and peer reviews to help you select the right solution for your business.

Learn more

Contribute to Community

If you’re interested in learning more about contributing to your Proformative community, we have many ways for you to get involved. Please email content@proformative.com to learn more about becoming a speaker or contributing to the blogs/Q&A Forum.