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Expense Deferral: Expertly Hidden in Microsoft Dynamics 365 Finance and Supply Chain Management Subscription Billing

Brent Wilson

Sep 27 2023

3 min read

In Microsoft Dynamics 365 for Finance and Supply Chain Management (D365 FSCM), we have always had a challenge with Prepaid expenses and how to amortize them over several periods. We have all tried using one or more of the following functions:

Accrual schemes
Periodic journals
Voucher templates
Fixed asset module amortization

None of these have been quite right in terms of creating an expense deferral schedule in D365 FSCM and posting the expense in the future periods.

I was recently testing a Pending vendor invoice in D365 FSCM, and I noticed a cute little button within the Accounting distributions form labeled Deferrals.

accounting distributions deferrals D365 FSCM

I was intrigued. I had never noticed this button before.

It turns out this button is part of Revenue and Expense deferrals, which is part of Subscription Billing. But we don’t need Subscription Billing, right? Perhaps we need to explore it a bit more.

Expense Deferrals in D365 FSCM Subscription Billing

Once you have the Subscription Billing features enabled (which were released mid-2022), the Expense deferral functionality will be part of that.

revenue and expense deferrals

In addition to adding the Deferral button in the Pending vendor invoice accounting distributions form, it adds the same Deferral function to the AP Vendor invoice lines as well as the General journal lines forms.

adding deferral function

Within the deferrals form, you can set up the deferral schedule (or select a predefined template).

set up a deferral schedule

After posting the invoice journal, the deferral is added to the Deferral schedules in the Subscription Billing module.

subscription billing module

When you are ready to post (recognize) the expense in those future periods, you run the Recognition processing Periodic task in the Subscription Billing module.

recognition processing

That creates a General journal that users can review and post.

I’m so excited about this new functionality. I’m going to start recommending that all clients enable Subscription Billing so they can use the expense deferrals in D365 FSCM.

Process Summary:

Enable Subscription billing and the “Revenue and expense deferrals” features.
Create a Pending vendor invoice, Vendor invoice journal, or General journal.
Click the Deferrals button to create a Deferral schedule.
Post the Invoice or Journal.
Review Deferral schedules by navigating to Subscription billing > Revenue and expense deferrals > Deferral schedules > All deferral schedules.
In subsequent periods, post the deferred expense by navigating to Subscription billing > Revenue and expense deferrals > Periodic tasks > Recognition processing.

If you have specialized Revenue Recognition accounting, you should already be shifting that over to the Subscription billing module.

And coming soon:

Billing schedules and deferrals with projects (in Preview as of this writing)

Learn more about the features on Microsoft’s Learn pages:

https://learn.microsoft.com/en-us/dynamics365/finance/accounts-receivable/sb-deferrals

Have any questions about expense deferrals in D365 for Finance and Supply Chain Management? Reach out to our experts at any time!

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About the Author

Brent Wilson

Brent is a Financial Architect with a broad base of experience in ERP systems, specializing in Inventory costing, International Financial reporting, and taxes. He teaches and implements general financial business practices in relation to integrated computer systems. Brent has consulting expertise and experience in, but not limited to Finance, Accounting, Multi-Currency, Budgeting, Reporting, Consolidations, Procurement, Inventory Management, Fixed Assets, Job Cost, and Contract Billing. Brent has successfully implemented ERP systems in both public and private sectors. He is currently implementing Dynamics 365 Finance & Supply Chain and supporting AX2012 and AX2009 clients.