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Simplify Adyen revenue recognition v2 for your payment processing software. This guide provides clear steps for ASC 606 compliance and accurate reporting. Read it now.
As your company grows, the manual workflows that got you here can quickly become the very things holding you back. This is especially true for your financial operations. While Adyen is built to handle a massive scale of transactions, your accounting processes might not be. If your team is still manually downloading reports and using VLOOKUPs to reconcile Adyen data for revenue recognition, you're creating a bottleneck that slows down your month-end close and prevents strategic analysis. To truly scale, you need an accounting workflow that matches your payment processor's power. Here, we will evaluate the payment processing software company adyen on revenue recognition v2 and outline a path to move beyond manual tasks.
Subscription revenue accounting can be complex. Typically it involves several systems when using Adyen as a payment processor. This guide aims to streamline the process of accounting for revenue recognition and the order to cash cycle per ASC 606/GAAP.
Adyen maintains all of the necessary data to record the cash portion of the order to cash cycle. Extracting these reports is the first step in the accounting process. See below for a summary of accounting that can be achieved from Adyen, compared to other common Billing and Payment systems used in the Subscription/SaaS industry.
Another useful resource for users of Adyen is the Reports and Payments lifecycle charge from their website here. The attached image below is useful for understanding the various steps in the payments cycle for Adyen.
If you're in the world of ecommerce or run a business with a global footprint, you've likely heard of Adyen. At its core, Adyen is a financial technology company that provides a single, unified platform for businesses to accept payments from anywhere in the world. Think of it as the financial plumbing that works behind the scenes to ensure transactions are smooth, secure, and successful, whether a customer is buying online, in-app, or in a physical store. It’s designed to simplify the often-tangled web of global commerce by connecting businesses directly to major card networks and local payment methods, eliminating the need for multiple third-party providers. This all-in-one approach is what makes it a powerful tool for companies looking to scale their operations and provide a consistent payment experience for their customers across different markets and channels.
Adyen was founded in 2006 in Amsterdam by a team of payment industry veterans, including current CEO Pieter van der Does and Arnout Schuijff. They saw that the existing payment landscape was fragmented, relying on a patchwork of outdated systems that weren't built for the fast-paced, global nature of modern business. Their goal was to build a new platform from the ground up that could handle the entire payment flow—from processing to risk management—in one place. This vision of a single, streamlined solution has guided the company's growth, helping it become a major player in the financial technology space with its headquarters still based in the Netherlands.
Adyen is primarily built for medium to large-sized businesses, especially those with international operations or ambitions to expand globally. Its platform is particularly well-suited for companies that manage high transaction volumes across multiple countries and sales channels, such as major online retailers, subscription services, and hospitality chains. Because Adyen supports a vast array of local payment methods, it allows businesses to offer familiar and trusted payment options to customers in different regions, which can significantly improve conversion rates. If your business needs a robust, scalable payment infrastructure that can grow with you and simplify the complexities of cross-border commerce, Adyen is designed to meet those demands.
The scale of Adyen's operations is impressive and speaks to its position as a leader in the payments industry. The company has demonstrated significant financial growth, processing massive volumes of transactions for some of the world's biggest brands. For instance, in a recent fiscal year, Adyen reported revenues nearing €2 billion, with a substantial net profit. These figures highlight not just the company's success but also the trust that thousands of businesses place in its platform to handle their financial transactions securely and efficiently. This financial strength provides stability and reassurance for companies that rely on Adyen for their core payment infrastructure.
A major turning point that solidified Adyen's market position was its partnership with eBay. In 2018, the ecommerce giant announced it would be moving its payment processing over to Adyen, replacing its long-standing relationship with PayPal. By 2021, Adyen was managing the majority of payments on eBay's platform, a move that showcased its ability to handle immense transaction volumes for a global marketplace. This high-profile partnership, along with collaborations with other major companies like Uber, Spotify, and Microsoft, has cemented Adyen's reputation as a top-tier payment provider capable of serving the needs of the largest and most complex enterprises in the world.
Adyen offers more than just basic payment processing; it provides a comprehensive suite of tools designed to manage the entire payment lifecycle. The platform is built on a modern infrastructure that combines gateway, risk management, and acquiring services into a single system. This integration gives businesses a holistic view of their payment data, allowing for deeper insights and better decision-making. From optimizing authorization rates to simplifying global compliance, Adyen's features are geared toward helping businesses increase revenue, reduce operational costs, and create seamless customer experiences. The platform's unified nature means you can manage online, mobile, and in-store payments all from one place, giving you a complete picture of your sales performance across all channels.
At its heart, Adyen excels at payment processing. The platform helps businesses accept a wide range of payment methods, from standard credit and debit cards to digital wallets and local payment options specific to certain countries. This is crucial for global businesses aiming to provide a localized checkout experience. Adyen also offers point-of-sale (POS) solutions for in-person transactions, ensuring a consistent and integrated payment process whether a customer is shopping online or in a physical store. By unifying these channels, businesses can implement strategies like "buy online, return in-store" and gain a single view of their customers' purchasing behavior, which is invaluable for marketing and inventory management.
For businesses with recurring revenue models, Adyen provides robust tools for managing subscription billing. The platform can automate recurring payments, handle failed transactions with smart dunning strategies, and allow customers to manage their own subscription details. Alongside this, Adyen has built-in fraud prevention powered by machine learning. This system, called RevenueProtect, analyzes data across Adyen's entire network to identify and block fraudulent transactions in real-time without frustrating legitimate customers. This is especially important for subscription businesses, where preventing fraud from the first payment can save significant revenue and operational headaches down the line.
One of Adyen's more advanced features is Uplift, a tool designed for payment optimization. Uplift uses A/B testing to help businesses experiment with different payment settings and see what works best to increase authorization rates. For example, you could test how routing transactions through different acquiring banks or tweaking risk settings affects your approval numbers. By using data-driven insights instead of guesswork, businesses can make small changes that lead to significant increases in revenue. This focus on continuous optimization is a key differentiator, turning payments from a simple cost center into a strategic tool for growth.
Beyond accepting payments, Adyen also allows businesses to issue their own physical and virtual payment cards. This service, known as Adyen Issuing, opens up a range of possibilities. For example, a marketplace could issue cards to its sellers for quick payouts, or a company could provide employees with corporate cards for managing expenses. Because the issuing service is part of the same unified platform, businesses can track and manage funds seamlessly, moving money from their processed payments directly onto their issued cards. This creates a closed-loop financial ecosystem that offers greater control, speed, and efficiency.
Choosing a payment processor is a major decision, and while Adyen is a powerful platform, it's important to weigh its strengths and potential drawbacks. The right choice depends on your business's specific needs, scale, and technical resources. Adyen's all-in-one model is a huge advantage for many, as it simplifies global operations and provides rich data insights. However, this comprehensive approach might be more than what a smaller, domestic-only business requires. Evaluating both sides will help you determine if Adyen's robust feature set and pricing structure align with your company's goals and operational capacity. Let's look at some of the key advantages and considerations to keep in mind.
Adyen's biggest strength is its unified, all-in-one platform. By combining gateway, acquiring, and processing services, it eliminates the need to work with multiple vendors, which simplifies reconciliation and reduces operational complexity. This single integration provides access to global markets and a vast array of local payment methods, making it ideal for international expansion. The platform's data-rich environment is another major plus, offering deep insights into transaction performance and customer behavior. Features like built-in fraud prevention and payment optimization tools are designed to protect and grow revenue, turning the payment process into a strategic asset for the business.
While powerful, Adyen may not be the perfect fit for every business. Its services are primarily geared toward medium to large enterprises, and its pricing structure may be less competitive for smaller businesses with lower transaction volumes. The platform's comprehensive nature can also mean a more complex implementation process compared to simpler payment gateways. Businesses without dedicated technical resources might find the initial setup challenging. Furthermore, while the unified platform is a strength, it also means you are fully invested in one ecosystem, which could be a consideration for companies that prefer a multi-vendor strategy for redundancy.
When your business processes a transaction through a platform like Adyen, the work isn't over once the payment is approved. For your finance team, that's just the beginning of a critical accounting process known as revenue recognition. This isn't just about tracking money in the bank; it's a formal set of rules that dictates precisely when and how you can record revenue in your financial statements. Getting this right is fundamental to accurate financial reporting and is governed by specific accounting standards. For subscription businesses, this process is especially complex because revenue is often earned over time, not all at once when the customer pays.
In simple terms, revenue recognition is the accounting principle that determines the specific conditions under which a business can count income as revenue. The core idea is that you should only record revenue when you have actually earned it by delivering a product or service to a customer, regardless of when you receive the cash. For example, if a customer pays for a one-year software subscription upfront, you can't recognize that entire payment as revenue in the first month. Instead, you must recognize one-twelfth of it each month for the duration of the year as you provide the service. This principle ensures a company's financial performance is represented accurately over time.
To standardize how businesses handle this process, accounting bodies introduced the ASC 606 standard. The goal of ASC 606 is to create a single, comprehensive framework for revenue recognition that applies across all industries. It outlines a five-step model that companies must follow: 1) identify the contract with the customer, 2) identify the performance obligations in the contract, 3) determine the transaction price, 4) allocate the price to the performance obligations, and 5) recognize revenue when (or as) the entity satisfies a performance obligation. Following these steps ensures that revenue is recorded consistently, making financial statements more reliable and comparable for investors and stakeholders.
Accurate revenue recognition is not just about compliance; it's crucial for the health and strategic direction of your business. Internally, it provides a true picture of your company's performance, which informs everything from sales commissions and employee bonuses to budget planning. Externally, investors and lenders rely on your financial statements to make critical decisions about buying stock or extending credit. Inaccurate reporting can lead to failed audits, financial penalties, and a loss of trust. For high-volume businesses using Adyen, manually applying ASC 606 rules to thousands of transactions is nearly impossible, which is why many turn to automated solutions to ensure accuracy and achieve compliance without the manual effort.
To compile all necessary data for accurate accounting, up to 4 reports need to be downloaded from Adyen (note they can be manually or automatically ran):
Key Data Limitations to note:
When you're handling subscription revenue with Adyen, getting your reports just right is a game-changer. Adyen provides several key reports you can tailor to your accounting needs for accurate revenue recognition. The Payment Accounting Report tracks the payment lifecycle, which is essential for cash in transit and fee accounting. For a more granular view, the Settlement Details Report breaks down every transaction in a payout batch, while the Dispute Report is crucial for monitoring disputes. While these reports are powerful, you still need to connect the dots. To stay compliant with ASC 606, you must link payments, settlements, and original invoices. Doing this manually becomes a huge time sink as data volume grows—we often see this process become unsustainable around the $10-$15 million ARR mark. This is where having the right integrations to automate your data workflows becomes a necessity for accurate, scalable financial operations.
Key Note - Adyen is a payment processing system, as such Revenue, Deferred Revenue, and AR entries will typically be driven by a different system.
Journal Entries:
The key record types on this report:
Journal Entries:
Steps:
To get the most accurate data for your reconciliation, I recommend using the "Interactive payment accounting report." This report gives you the flexibility to choose specific settings that align with your accounting periods. Before you run it, make sure your settings are dialed in correctly. First, set the Time Zone to Central European Time (CET). This simple step ensures that the data in your report lines up perfectly with your Adyen invoices, preventing any frustrating mismatches. For your monthly invoice checks, select a precise date range: start from the first day of the month at 00:00:00 and end on the first day of the next month at 00:00:00. This captures all transactions within the calendar month, giving you a clean and complete dataset to work with.
When you open the payment accounting report, you'll see a lot of columns, but you only need to focus on a few to get a clear picture of your fees. These columns break down the costs tied to each transaction. Look for Commission (SC), which is the general fee, and Markup (SC), the fee from the processing bank. You'll also see Scheme Fees (SC), which are charges from card networks like Visa, and Interchange (SC), the fees from the customer's card-issuing bank. Finally, the Processing Fee (FC) is Adyen’s specific charge. For an even more granular view, the ICSF Details column provides a full breakdown. Manually tracking these individual fees across thousands of transactions is time-consuming, which is why many businesses use automated solutions to get a clear, real-time picture of transaction costs.
The "Record Type" column in your report tells you the status of each transaction in its lifecycle. Understanding these statuses is key to accurate accounting. For example, Authorised means the payment was approved, while Settled confirms that Adyen has received the funds. You'll also see entries like Refunded, for money returned to a customer, and Chargeback, which indicates a customer dispute. PaidOut confirms that funds have been sent to your bank account. Other statuses like Refused or Error help you identify and troubleshoot failed transactions. Each of these record types corresponds to a specific accounting event, and keeping track of them is essential for maintaining an accurate order-to-cash cycle.
The key record types on this report:
Journal Entries:
Steps:
Journal Entries:
Steps:
The key dispute record types for this accounting are:
Journal Entries:
Steps:
Journal Entries:
Steps:
Adyen allows for the concept of a second chargeback, which allows for an extremely long dispute cycle. To perform correct dispute accounting, accountants need to monitor several months back of transactions for dispute accounting.
Balance Platform Accounting
Adyen does allow for the concept of balance accounts to provide embedded payments as a service within a website or application. While most activity is off-balance sheet in nature, this will generate additional immediate revenue on the fees charged to balance accounts and additional Adyen fees related specifically to the operation of the balance accounts.
To compile all necessary data for accurate accounting, up to 3 reports need to be downloaded from Adyen (note they can be manually or automatically ran):
The key record types on this report:
Journal Entries:
Steps:
The key record types on this report:
Journal Entries:
Steps:
Choosing a payment processor is a major decision that impacts your cash flow, fees, and accounting processes. Adyen is a powerful platform, but it's essential to understand its cost structure and how it stacks up against other players in the market. This knowledge helps you forecast expenses accurately and ensures your financial data is clean from the start. When you have a clear picture of your transaction costs, tasks like revenue recognition and financial reporting become much more straightforward, preventing headaches during your month-end close. Let's look at how Adyen's pricing works and who its main competitors are.
Adyen uses an interchange-plus pricing model, which is known for its transparency. This structure breaks down your costs into two main parts: a fixed processing fee set by Adyen and a variable payment method fee. The payment method fee includes the interchange fee, which goes to the customer's bank, and the card scheme fee, which goes to companies like Visa or Mastercard. Unlike flat-rate models where all these costs are bundled into a single percentage, interchange-plus shows you exactly what you're paying for each component. This level of detail can be incredibly valuable for high-volume businesses looking to optimize costs and perform detailed financial analysis.
While Adyen is a top choice for global enterprises and subscription-based businesses, it's not the only option. Competitors like Stripe and Square are also major players, but they often serve different segments of the market. For instance, Square is very popular among small businesses and brick-and-mortar retailers, while Stripe is a favorite for startups and online businesses. Adyen sets itself apart with its extensive global reach and strong multi-currency support, making it ideal for companies planning international expansion. The right choice depends on your business model, sales volume, and growth plans. No matter which platform you use, ensuring its data can be easily integrated with your accounting systems is critical for maintaining financial accuracy.
Accurately accounting for your order to cash accounting from Adyen requires a comprehensive approach to data extraction and journal entries and is highly manual. By following this guide, finance teams can ensure compliance with ASC 606/GAAP and achieve detailed margin analysis.
Hubifi can significantly simplify this process by automating the data gathering, data cleaning, reconciliation, and eliminating the need for all the manual file creation entirely - automatically generating your journal entries and enrichment needed to analyze the data. Contact us to learn more about automating this process, or schedule a demo with your Adyen data to get started today.
This white paper is designed to serve as a practical guide for accounting professionals navigating subscription revenue accounting.
Why is revenue recognition with Adyen so complex for subscription models? The main challenge comes from the ASC 606 standard, which requires you to recognize revenue as you earn it, not just when you get paid. Adyen is excellent at telling you when cash comes in, but it doesn't know the terms of your customer contracts. For a subscription, a single payment might cover service for a whole year. Your accounting needs to spread that revenue out over 12 months, and Adyen's payment data alone can't do that for you.
Adyen provides lots of reports. Why can't I just use them for all my accounting? While Adyen's reports are detailed, they only show one side of the story: the cash and payment processing side. They track settlements, fees, and disputes perfectly. However, they don't contain the original invoice data or the specific performance obligations from your contracts. To be compliant, you have to manually connect Adyen's payment records to your billing system's invoice records, which is where the time-consuming VLOOKUPs and reconciliation work comes in.
My business isn't a global enterprise. Is Adyen still the right choice? Adyen is definitely built to handle scale, which is why it's a favorite for large, international companies. If you're a smaller business with primarily domestic sales and lower transaction volumes, you might find its feature set is more than you need. Competitors like Stripe or Square are often a better fit for startups and small businesses. The key is to choose a processor that aligns with your current size and future growth ambitions.
What's the biggest mistake to avoid when reconciling Adyen data manually? A common pitfall is not properly tracking disputes and chargebacks over time. A chargeback can be initiated, lost, won, and even re-disputed months after the original transaction. If you only look at the current month's data, you'll miss these reversals and offsets from previous periods. This requires you to constantly pull and review reports from several past months to ensure your revenue and cash entries are reversed and reinstated correctly.
This manual process seems overwhelming. When is the right time to automate it? There isn't a magic number, but we typically see companies hit a breaking point when they reach about $10-$15 million in annual recurring revenue. At that stage, the sheer volume of transactions makes manual reconciliation too slow and prone to error. If your finance team is spending days instead of hours on the month-end close and can't provide strategic analysis because they're stuck in spreadsheets, it's a clear sign that it's time to automate.
Accounting Automation | Product | Technical Accounting | Accounting Systems Nerd
A technology and automation focused CPA helping finance leaders bring their processes into the 21st century.If you're interested in talking finance systems - https://calendly.com/cody-hubifi Feel free to set up some time on my calendar. I like talking about this stuff too much