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Softrax

SOFTRAX Subscription Fees

Objective

This document details how subscription fees are calculated for SOFTRAX customers. In the case of customers that deploy only SOFTRAX Enterprise billing products, Revenue Under Management is defined simply as the amount of revenue billed in a given quarter as measured within the system and based on the spot rate as of the date of billing.

The determination of Revenue Under Management is more complex when SOFTRAX Revenue Manager is deployed, either alone, or in conjunction with either SOFTRAX Enterprise or as part of the SOFTRAX RMS (Revenue Management System) covering Order Management, Multi-form billing, Contract Renewal Management and Revenue Recognition. The purpose of this document is to clarify how this measurement is derived for cases where SOFTRAX Revenue Manager is included in a customer’s subscription fees.

SOFTRAX provides its solutions on a subscription basis consisting of a Value Fee and possibly
a Platform Fee (depending on a customer’s contract) per the following:

➢ The Platform Fee, if applicable, is a fixed fee determined based on the functionality and modules deployed.
➢ The Value Fee is determined by multiplying the Value Factor indicated in a customer’s Purchase Detail Sheet (referred to as “PDS”), or Quote, by the Revenue Under Management amount as reported by the SOFTRAX technology translated into US dollars based upon the spot rate as of the date of billing.  The Value Factor is determined based on the SOFTRAX functionality and modules deployed by a customer.

In instances where multiple SOFTRAX products are deployed, such as SOFTRAX Enterprise for billing and SOFTRAX Revenue Manager for revenue recognition, or where the SOFTRAX RMS system is deployed, Revenue Under Management may be defined as the greater of the revenue billed in a given quarter within SOFTRAX Enterprise or the revenue managed by SOFTRAX Revenue Manager as defined in the remainder of this document.  This applies in cases where a single value factor is specified for the suite of products (for example, if the RMS is procured as a single unit).

However, in instances where there is a significant discrepancy between the amount of revenue flowing through the billing applications vs, the revenue recognition applications, each may have its own value factor specified.  This option is allowed to provide the customer with flexibility, for example, to handle cases where a SOFTRAX customer bills only a portion of its revenue through the SOFTRAX billing applications yet runs all its revenue through the application for the purpose of recognition.

For SOFTRAX Revenue Manager, “Revenue Under Management” is defined as follows.  In all cases, Positive and Negative Revenue Items count equally in the revenue under management calculations.  For example, a Rev Item with a -$1,000 Functional Amount (typically due to a credit) will be calculated, using its absolute value, the same way as a Rev Item with a $1,000 Functional Amount.

Determining Contribution for Unrecognized Revenue Dated Earlier than the Measured Term

  • For all line items and revenue recognition types, the algorithm determines whether there are any in-flight Rev Items with revenue forecasts that have unrecognized amounts for dates earlier than the start date of the measured quarter. The unrecognized amounts specific to those in-flight Rev Items are included in the Revenue Under Management amount.

Determining Contribution of Revenue Dated within the Measured Term

  • The algorithm then selects any Rev Items with revenue forecast dates that overlap the dates of the measured quarter. It determines the number of days of recognition between the earlier of the Rev Item’s “Revenue Start Date” and “Transaction Date” through the Rev Item’s “Revenue End Date.” This date range represents the Rev Item’s “term” for the purposes of determining a Revenue Under Management amount.
  • The algorithm then divides the total functional amount of revenue associated with the line item by the number of days in the “term” to determine a revenue per day value. A Revenue Item’s Functional Amount is its value in its assigned company’s base currency.
  • The revenue per day value is multiplied by the number of days in the “term” that overlap with days in the quarter under measurement.
    • If no end date is specified for a Rev Item, its revenue is included in the algorithm on the date or dates of recognition.
  • This result is added to the unrecognized amounts dated earlier than the start date of the measured quarter as described in the first bullet above. This result equals the total Revenue Under Management amount for the measured quarter.

When processing multiple books of accounting

The Revenue Manager application is capable of processing in multiple books of accounting. These independent books can be considered as individual revenue policies applied against the incoming revenue and cost transactions. Typical reasons for using multiple books of accounting include processing against a 605 as well as a 606 policy, processing against a unique revenue policy in a region of the world (such as Latin America) or processing a book for the purpose of FP&A activities. In these cases, the revenue under management calculation is discounted as follows:

  • The Accounting Book that has the most revenue managed in the measured term will be priced at 100% of the Value Fee calculation’s resulting amount.• Any additional Account Books that have revenue managed in the measured term will be priced at 50% of the Value Fee calculation’s resulting amounts.

Revenue Under Management – Value Fee Examples

  • Example #1: Rev Item with a 12-month forecast that is included in the measured revenue under management quarter for two accounting books: STD and RPT.

o Rev Item Code: RI-Code1

Rev Item Functional Amount: $60,000
Revenue Start Date: 10/1/22, Revenue End Date: 9/30/23

  • Rev Item Forecast Total Days: 365

Revenue Under Management Measured Quarter Dates: 10/1/19 through 12/31/19

  • Revenue Under Management Measured Quarter Total Days: 92

Revenue Under Management Calculation:

  • Step 1: The algorithm identifies whether the Rev Item’s forecast has unrecognized amounts dated earlier than the start date of the measured quarter.

o In this example there are no unrecognized amounts for dates prior to the start date of the measured quarter.

  • Step 2: The algorithm identifies the total days in the Rev Item’s Forecast: 365
  • Step 3: The algorithm then identifies the total days in the measured quarter: 92
  • Step 4: Divide the Rev Item’s Functional Amount ($60,000) by the Rev Item Forecast Total Days (365) = 164.383562 which is the Per Day Rate.
  • Step 5: Multiply the Per Day Rate by the number of days in the term that overlap with days in the measured quarter.

o In this example, the Per Day Rate (164.383562) is multiplied by 92 (the number of days in the Rev Item’s term that overlap with the measured quarter) to equal $15,123.29.

  • Step 6: Calculate the Value Fee for the “STD” Accounting Book (assume this Accounting Book processed the most revenue in the quarter):

o The $15,123.29 value is multiplied by the value factor (0.000375) equaling $5.67.
o The $5.67 amount will then be multiplied by 1.00 to determine the Rev Item’s Value Fee for the “STD” Accounting Book in the measured quarter.
o The Value Fee for this Revenue Item in Accounting Book “STD” is $5.67 for this measured quarter.

  • Step 7: Calculate the Value Fee for the secondary Accounting Book “RPT” (assume this Accounting Book processed less revenue in the quarter than “STD”):

o The $15,123.29 value is multiplied by the value factor (0.000375) equaling $5.67.
o The $5.67 amount will then be multiplied by 0.5 to determine the Rev Item’s Value Fee for the “RPT” Accounting Book in the measured quarter.
o The Value Fee for this Revenue Item in Accounting Book “STD” is $2.84 for this measured quarter.

  • Example #2: Rev Item with a 2-month forecast that is included in the measured revenue under management quarter for two accounting books: STD and RPT.

o Rev Item Code: RI-Code2

Rev Item Functional Amount: $120,000
Revenue Start Date: 10/1/22, Revenue End Date: 11/30/22

  • Rev Item Forecast Total Days: 61Revenue Management Quarter Range: 10/1/22 through 12/31/22
  • Revenue Under Management Quarter Total Days: 92

Revenue Under Management Calculation:

  • Step 1: The algorithm identifies whether the Rev Item’s forecast has unrecognized amounts dated earlier than the start date of the measured quarter.

o In this example there are no unrecognized amounts for dates prior to the start date of the measured quarter.

  • Step 2: The algorithm identifies the total days in the Rev Item’s Forecast: 61
  • Step 3: The algorithm then identifies the total days in the measured quarter: 92
  • Step 4: Divide the Rev Item’s Functional Amount ($120,000) by the Rev Item Forecast Total Days (61) = 1,967.21 which is the Per Day Rate.
  • Step 5: Multiply the Per Day Rate by the number of days in the term that overlap days in the measured quarter.

o In this example, the Per Day Rate (1,967.21) is multiplied by 61 (the number of days in the Rev Item’s term that overlap with the measured quarter) to equal $120,000.

  • Step 6: Calculate the Value Fee for the “STD” Accounting Book (assume this Accounting Book processed the most revenue in the quarter):

o The $120,000 value is multiplied by the value factor (0.000375) equaling $45.00.
o The $45.00 amount will then be multiplied by 1.00 to determine the Rev Item’s Value Fee for the “STD” Accounting Book in the measured quarter.
o The Value Fee for this Revenue Item in Accounting Book “STD” is $45.00 for this measured quarter.

  • Step 7: Calculate the Value Fee for the secondary Accounting Book “RPT” (assume this Accounting Book processed less revenue in the quarter than “STD”):

o The $120,000 value is multiplied by the value factor (0.000375) equaling $45.00.
o The $45.00 amount will then be multiplied by 0.5 to determine the Rev Item’s Value Fee for the “RPT” Accounting Book in the measured quarter.
o The Value Fee for this Revenue Item in Accounting Book “STD” is $22.50 for this measured quarter.

  • Example #3: Rev Item with a 6-month forecast where it has unrecognized amounts prior to the measured quarter and forecasted amounts dated within the measured quarter for one accounting book: STD

o Rev Item Code: RI-Code3

Rev Item Functional Amount: $24,000
Revenue Start Date: 7/1/22, Revenue End Date: 12/31/22

  • Rev Item Forecast Total Days: 184

Revenue Under Management Measured Quarter Dates: 10/1/22 through 12/31/22

  • Revenue Under Management Measured Quarter Total Days: 92

Revenue Under Management Calculation:

  • Step 1: The algorithm identifies whether the Rev Item’s forecast has unrecognized amounts dated earlier than the start date of the measured quarter.

o In this example there are unrecognized amounts for dates prior to the start date of the measured quarter totaling $12,000 for July – September 2022.

  • Step 2: The algorithm identifies the total days in the Rev Item’s Forecast: 184
  • Step 3: The algorithm then identifies the total days in the measured quarter: 92
  • Step 4: Divide the Rev Item’s Functional Amount ($24,000) by the Rev Item Forecast Total Days (184) = 130.434783 which is the Per Day Rate.
  •  Step 5: Multiply the Per Day Rate by the number of days in the term that overlap with days in the measured quarter.

o In this example, the Per Day Rate (130.434783) is multiplied by 92 (the number of days in the Rev Item’s term that overlap with the measured quarter) to equal $12,000.

  • Step 6: The $12,000 value calculated for the measured quarter, plus the unrecognized amount of $12,000 dated earlier than the start date of the measured quarter, totaling $24,000 is then multiplied by the value factor (0.000375) equaling $9.00. This $9.00 amount represents the Rev Item’s Value Fee in Accounting Book “STD” for the measured quarter.

SOFTRAX Subscription Fee Example

Company estimates $500 million in revenue under management within SOFTRAX Revenue Manager for year 1 processed in two accounting books: “STD” and “RPT” ($250 million per accounting book). The company’s revenues then grow in year 2 where more revenue is processed in accounting book “STD” than accounting book “RPT”. Assume the contract calls for a value factor equal to 0.000375.

  1. Year 1

1.1. First year term: 1/1/22 – 12/31/22
1.2. First year subscription fees invoiced in-total on 1/1/22: $170,625

1.2.1. Platform Fee: $30,000
1.2.2. Value Fee: $140,625

1.2.2.1. First year revenue under management in the application: $250,000,000
1.2.2.2. Value Factor: 0.000375
1.2.2.3. Year 1 Value Fee:

1.2.2.3.1. Accounting Book “STD”: $250,000,000 * 0.000375 * 1.00 = $93,750
1.2.2.3.2. Accounting Book “RPT”: $250,000,000 * 0.000375 * 0.5 = $46,875

  1. Year 2

2.1. Second year term: 1/1/23 – 12/31/23
2.2. Second year subscription fees invoiced monthly in arrears as follows:

2.2.1. Month #1

2.2.1.1. Invoice Date: 1/31/23
2.2.1.2. Invoice Amount: $16,562.50 calculated as follows:

2.2.1.2.1. Platform Fee: $2,500

2.2.1.2.1.1. This is calculated by taking the annual Platform Fee of $30,000 and dividing it by 12 (months)

2.2.1.2.2. Value Fee: $14,062.50

2.2.1.2.2.1. This is calculated by measuring how much revenue was managed in the month per accounting book.

2.2.1.2.2.1.1. Accounting Book “STD”: In this example, assume that $25,500,000 in revenue was managed in the month for Accounting Book “STD”. The Value Fee amount will be calculated as follows: $25,500,000 * .000375 * 1.00 = $9,562.50.
2.2.1.2.2.1.2. Accounting Book “RPT: In this example, assume that $24,000,000 in revenue was managed in the month for Accounting Book “RPT. The Value amount will be calculated as follows: $24,000,000 * .000375 * 0.50 = $4,500.

2.2.2. Month #2

2.2.2.1. Invoice Date: 2/28/23
2.2.2.2. Invoice Amount: $18,812.50 calculated as follows:

2.2.2.2.1. Platform Fee: $2,500

2.2.2.2.1.1. This is calculated by taking the annual Platform Fee of $30,000 and dividing it by 12 (months)

2.2.2.2.2. Value Fee: $16,312.50

2.2.2.2.2.1. This is calculated by measuring how much revenue was managed in the month per accounting book.

2.2.2.2.2.1.1. Accounting Book “STD”: In this example, assume that $30,000,000 in revenue was managed in the month for Accounting Book “STD”. The Value Fee amount will be calculated as follows: $30,000,000 * .000375 * 1.00 = $11,250.
2.2.2.2.2.1.2. Accounting Book “RPT: In this example, assume that $27,000,000 in revenue was managed in the month for Accounting Book “RPT. The Value amount will be calculated as follows: $27,000,000 * .000375 * 0.50 = $5,062.50.

2.2.3. Month #3

2.2.3.1. Invoice Date: 3/31/23
2.2.3.2. Invoice Amount: $19,937.50 calculated as follows:

2.2.3.2.1. Platform Fee: $2,500

2.2.3.2.1.1. This is calculated by taking the annual Platform Fee of $30,000 and dividing it by 12 (months)

2.2.3.2.2. Value Fee: $17,437.50

2.2.3.2.2.1. This is calculated by measuring how much revenue was managed in the month per accounting book.

2.2.3.2.2.1.1. Accounting Book “STD”: In this example, assume that $32,000,000 in revenue was managed in the month for Accounting Book “STD”. The Value Fee amount will be calculated as follows: $32,000,000 * .000375 * 1.00 = $12,000.
2.2.3.2.2.1.2. Accounting Book “RPT: In this example, assume that $29,000,000 in revenue was managed in the month for Accounting Book “RPT. The Value amount will be calculated as follows: $29,000,000 * .000375 * 0.50 = $5,437.50.

2.2.4. Month #4

2.2.4.1. Invoice Date: 4/30/23
2.2.4.2. Invoice Amount: $21,250 calculated as follows:

2.2.4.2.1. Platform Fee: $2,500

2.2.4.2.1.1. This is calculated by taking the annual Platform Fee of $30,000 and dividing it by 12 (months)

2.2.4.2.2. Value Fee: $18,750

2.2.4.2.2.1. This is calculated by measuring how much revenue was managed in the month per accounting book.

2.2.4.2.2.1.1. Accounting Book “STD”: In this example, assume that $35,000,000 in revenue was managed in the month for Accounting Book “STD”. The Value Fee amount will be calculated as follows: $35,000,000 * .000375 * 1.00 = $13,125.
2.2.4.2.2.1.2. Accounting Book “RPT: In this example, assume that $30,000,000 in revenue was managed in the month for Accounting Book “RPT. The Value amount will be calculated as follows: $30,000,000 * .000375 * 0.50 = $5,625.

2.2.5. All months going forward would adhere to the monthly pricing model listed in this example set.

Key Considerations and Assumptions

  1. All Revenue Under Management amounts will be calculated in USD currency. If a Rev Item’s Functional Amount is in a currency other than USD, its amount will be translated into US Dollars based upon the spot rate as of the date of billing.
  2. Reports used to identify Revenue Under Management amounts for a measured quarter will supply output by Revenue Item Code, Company, Accounting Book, and Functional Amount.