> ## Documentation Index
> Fetch the complete documentation index at: https://docs.sequencehq.com/llms.txt
> Use this file to discover all available pages before exploring further.

# Settings

> Configure how Sequence recognizes revenue across your business

Revenue recognition settings are on the **Account / Revenue recognition** page. They control posting dates, allocation, credit note treatment, and Xero account mapping.

![Revenue recognition settings](https://mintcdn.com/sequence/qVgF2HrjGVdyGCi9/images/product/revrec/revrec-settings.png?fit=max\&auto=format\&n=qVgF2HrjGVdyGCi9\&q=85\&s=49ee3d2c5ea0b7b4a66484750e75cb08)

## Account period locking

Once a month has been closed in your general ledger, no further revenue should post into it. Account period locking enforces this on the Sequence side, so a late invoice or credit note cannot quietly write into a closed month.

> [!NOTE]
>
> The lock applies at journal creation, not at charge generation. Invoices and credit notes can still be issued for dates inside a locked period; they simply post their revenue against the next open period.

### Lock date method

Two options control how the lock date is determined:

| Method | Behavior |
| - | - |
| **Accounting date (invoice date)** | Sequence uses each invoice's accounting (invoice) date as its effective lock floor. Revenue recognized before that date is held back and posted at the earliest open date. |
| **Custom lock date** | You set a single date for the whole account. Any revenue that would otherwise post before this date is realigned to the earliest open date. |

### Service periods that span the lock

A service period that begins before the lock and ends after it is not rejected. Sequence allocates revenue for the locked portion to the first open day, then continues recognizing day-by-day from that point.

For example, with a lock date of **31 Dec 2025**, an invoice covering **1 Dec 2025 to 31 Mar 2026** will:

* Catch up the December recognition in a single entry on **1 Jan 2026**.
* Recognize January, February, and March normally.

Journal narratives explicitly call out when an entry has been shifted to respect the lock, so the audit trail stays transparent.

### Credit notes against locked periods

Credit note reversals follow the same principle. Anything that would unwind into a locked period is held until the lock end date and catches up on the first open day.

## Allocation strategy

The allocation strategy controls how straight-line revenue is spread across the service period. All three strategies recognize the same total and give every full month an equal amount; they differ only in how the part-months at the start and end of the period are prorated.

| Strategy | How it works |
| - | - |
| **Prorate first & last with daily rate, even months** *(default)* | The first and last part-months are paid at the contract's overall daily rate (total ÷ days); the remaining revenue is split evenly across the full months. The last full month absorbs any rounding remainder. |
| **Even months, prorate first, balance last** | Every full month recognizes an equal amount. The first part-month is prorated to its days, and the final month carries whatever balance remains. |
| **Even months, prorate first & last** | Every full month recognizes an equal amount, and both part-months are prorated in proportion to their days, so equal-length part-months always recognize equal revenue. |

See [Allocation methods](https://docs.sequencehq.com/revenue-recognition/recognition-methods.md#allocation-methods) for worked breakdowns showing how each strategy splits the same contract.

> [!TIP]
>
> The setting is exposed on the revenue recognition settings API as `allocationPartialProrationStrategy`, with values `PRORATE_DAILY` (Prorate first & last with daily rate), `BALANCE_EVEN_MONTHLY` (Even months, balance last), or `PRORATE_MONTHLY` (Even months, prorate first & last). Changes apply to new recognition schedules; existing schedules continue under the strategy they were created with.

## Credit note revenue impact

Credit notes have two distinct effects on previously recognized revenue. The appropriate treatment depends on whether you prefer an immediate adjustment to recognized revenue or a prospective reallocation over the remaining performance period.

> [tab] Cancellation (default)
>
> The credit note cancels future obligations. Sequence reverses revenue in this order:
>
> 1. Delete any future-dated recognition journals that have not posted yet.
> 2. Reverse remaining deferred revenue.
> 3. Reverse any already-recognized revenue if the credit exceeds the remaining deferred balance.
>
> **What you'll see in reports**: the original invoice stops recognizing further revenue. Recognized + deferred no longer equals net billed, because the cancellation removes future obligations without redistributing the already-recognized portion.
>
> Cancellation mode keeps each invoice and its credit note paired. Use it when the credit note represents a true cancellation (e.g., a refund for unused service).

> [tab] Adjustment
>
> The credit note spreads its reversal proportionally across the credit note's service period. The original invoice continues recognizing as scheduled.
>
> **What you'll see in reports**: recognized + deferred ≈ net billed at any point in time. The original invoice and the credit note move daily in opposite directions, netting to the correct figure in aggregate.
>
> Use adjustment mode when a credit represents a partial reduction in scope (e.g., a renegotiation, a usage true-down) and the reallocation matches how the business reads its revenue trajectory.
>
> On the first day of the credit note service period, the deferred balance is reduced by the credit's net amount. From that day forward, the credit note posts daily mirror-image entries (debit recognized / credit deferred) against the original invoice's continuing recognition.

The setting is exposed on the API as `creditNoteRevenueImpact`, with values `CANCELLATION` or `ADJUSTMENT`. See [Credit notes](https://docs.sequencehq.com/revenue-recognition/credit-notes.md) for worked examples.

> [!WARNING]
>
> The two modes produce materially different journals. Switching the setting partway through a financial period will create inconsistencies between historical and new credit notes. Confirm and agree the change internally before switching the setting.

## Recognition triggers

Sequence creates recognition journals when an invoice or credit note reaches a state that signals delivery has begun:

* **Issued**: the document is finalized and posted, with an accounting (invoice) date assigned.
* **Marked as sent**: the document is marked sent without re-issuing (e.g., a previously issued invoice manually marked sent after export). Recognition runs on this transition for both invoices and credit notes, so a document marked sent outside the standard flow still recognizes.

Any subsequent edit that regenerates a credit note's line items will preserve the recognition method already chosen, so a straight-line credit note stays straight-line rather than flipping to point-in-time mid-life.

## Xero account mappings

If your account has the Xero connector enabled, the settings page also shows the accounts and journal options for posting recognition journals to Xero.

![Xero ledger account mappings](https://mintcdn.com/sequence/qVgF2HrjGVdyGCi9/images/product/revrec/revrec-settings.png?fit=max\&auto=format\&n=qVgF2HrjGVdyGCi9\&q=85\&s=49ee3d2c5ea0b7b4a66484750e75cb08)

### Journal posting

**Journal mode** controls the state journals arrive in when you push them to Xero.

* **Draft** (default): journals are created unposted, for review in Xero before they affect the general ledger.
* **Posted**: journals are created in their final state and affect the general ledger straight away.

### Ledger accounts

Map the Xero ledger accounts each journal entry should hit:

* **Deferred revenue accounts**: hold billed but not yet earned revenue (the liability side).
* **Recognized revenue accounts**: hold earned revenue (the income side).
* **Unbilled revenue accounts**: hold earned but not yet invoiced revenue (used for billing in arrears).
* **Clearing account**: a single temporary holding account that connects Xero's automatic invoice journals to Sequence's recognition journals.

Each journal entry takes its Xero account code from the per-product mapping for that ledger account, managed on the product itself. Deferred, recognized, and unbilled accounts can be overridden per product; the clearing account is a single shared account for the whole workspace.

See [Xero connector](https://docs.sequencehq.com/connectors/xero.md#posting-revenue-recognition-journals-to-xero) for the full setup, including the clearing account, allocation and recognition journals, and currency handling.


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