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12.1 Recurring Contract Billing, Billing Schedules & Milestones
Microsoft Certified: Dynamics 365 Finance Functional Consultant Associate MB-310
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1 Chapter 1: MB-310 Exam Overview & Financial Architecture
1.1 MB-310 Exam Structure, Skills Measured & Consultant Role 1.2 Dynamics 365 Finance Architecture, Legal Entities & Global Address Book 1.3 Hands-on Lab Strategy & Preparation Framework
2 Chapter 2: Chart of Accounts & Main Accounts
2.1 Designing Chart of Accounts & Main Account Types 2.2 Main Account Categories & Ledger Account Aliases 2.3 Balance Control Accounts & Year-End Opening Account Setup 2.4 Legal Entity Overrides for Main Accounts & Dimensions
3 Chapter 3: Financial Dimensions & Account Structures
3.1 Custom & Entity-Backed Financial Dimensions 3.2 Financial Tags: Limits, Storage & Ledger Settlement Use 3.3 Account Structures, Segment Criteria & Activation 3.4 Advanced Rules & Advanced Rule Structures 3.5 Derived Dimensions & Dimension Default Templates
4 Chapter 4: Ledgers, Calendars & Currencies
4.1 Fiscal Calendars, Period Statuses & Module Access Control 4.2 Posting Layers, Multi-GAAP Reporting & the Ledger Form 4.3 Currency Exchange Types, Rate Providers & Triangulation 4.4 Accounting & Reporting Currencies (Dual-Currency Architecture) 4.5 Foreign Currency Revaluation & Revaluation Posting Profiles
5 Chapter 5: General Ledger Journals & Allocations
5.1 Journal Names & Voucher Number Sequences 5.2 Journal Control & Posting Restriction Rules 5.3 Journal Entry, the One-Voucher Rule, Validation & Posting 5.4 Reversals, Storno Corrections & Excel Integration 5.5 Ledger Allocation Rules & the Four Allocation Methods 5.6 Allocation Processing & Periodic (Recurring) Journals
6 Chapter 6: Intercompany Accounting & Settlements
6.1 Intercompany Accounting Setup & Due-To / Due-From Postings 6.2 Intercompany Journal Processing & Multi-Company Vouchers 6.3 Ledger Settlements Configuration & Processing
7 Chapter 7: Cash and Bank Management
7.1 Bank Groups, Bank Accounts & Ledger Integration 7.2 Payment Formats, Bank FX Revaluation & Shared Payment Setup 7.3 Manual vs. Advanced Bank Reconciliation & Statement Formats 7.4 Matching Rule Sets, Reconciliation Execution & Reversals 7.5 Cash Flow Forecasting Setup & Automation 7.6 Customer and Vendor Netting
8 Chapter 8: Periodic Closing & Financial Consolidations
8.1 Financial Period Close Workspace, Closing Roles & Schedules 8.2 Year-End Close Configuration & General Ledger Balance Carryforward 8.3 Consolidations Online: Legal Entity Setup, COA Mapping & Currency Translation 8.4 Import Consolidations & Intercompany Elimination Rules
9 Chapter 9: Sales Tax & Withholding Tax
9.1 Sales Tax Engine Hierarchy, Authorities & Settlement Periods 9.2 Ledger Posting Groups, Sales Tax Codes & Calculation Methods 9.3 Sales Tax Groups, Item Sales Tax Groups & Tax Exemptions 9.4 Sales Tax Adjustments and Settle and Post Sales Tax 9.5 Withholding Tax & US 1099 Vendor Reporting
10 Chapter 10: Accounts Receivable Setup & Invoicing
10.1 Customer Master, Customer Groups & Shared Customers 10.2 Customer Posting Profiles & Account Code Precedence 10.3 Free Text Invoices, Recurring Invoice Templates & AR Charges 10.4 Sales Order Invoicing, Billing Classifications & Prepayments 10.5 Customer Payment Methods, Payment Processing & Customer Bank Accounts
11 Chapter 11: Credit Management & Collections
11.1 Credit Management Architecture & Customer Credit Groups 11.2 Risk Scoring, Credit Limits, Blocking Rules & Credit Holds 11.3 Aging Definitions, Collections Workspace & Customer Pools 11.4 Collection Letter Sequences & Interest Notes 11.5 Customer Write-Offs, Bad Debt & Write-Off Reversals
12 Chapter 12: Subscription Billing & Revenue Deferrals
12.1 Recurring Contract Billing, Billing Schedules & Milestones 12.2 Deferral Principles, Deferral Defaults & Schedule Calculation Methods 12.3 Recognition Processing, Expense Deferrals & Modifying Schedules 12.4 Multiple Element Revenue Allocation (MEA / ASC 606)
13 Chapter 13: Accounts Payable & Invoice Processing
13.1 Shared Vendors, Global Address Book & Vendor Groups 13.2 Vendor Posting Profiles, AP Parameters & Vendor Bank Accounts 13.3 Invoice Matching Setup (2-Way, 3-Way), Tolerances & Exceptions 13.4 Vendor Invoicing Methods, Journals & Invoice Automation
14 Chapter 14: Vendor Payments & Expense Management
14.1 Methods of Payment & the Vendor Payment Proposal Engine 14.2 Generating Payments, Centralized Payments & Check Lifecycle 14.3 Expense Management Configuration, Categories & Policies 14.4 Expense Reports Processing, Mobile Receipts & Intercompany Expenses
15 Chapter 15: Budgeting & Budget Control
15.1 Budget Models, Budget Codes & Allocation Terms 15.2 Budget Register Entries, Workflows & Budget vs. Actual 15.3 Budget Transfer Rules & Processing Budget Transfers 15.4 Budget Control Configuration, Cycles, Rules & Budget Groups 15.5 Budget Funds Available, Over-Budget Permissions & Document Budget Check 15.6 Budget Planning Framework, Organization Hierarchies & Planning Processes 15.7 Budget Plans, Scenarios, Allocations & Generating Register Entries
16 Chapter 16: Fixed Assets Configuration & Transactions
16.1 Fixed Asset Groups, Asset Records & Group/Book Mapping 16.2 Depreciation Profiles: Methods & Conventions 16.3 Fixed Asset Books, Derived Books & Posting Profiles 16.4 Fixed Asset Acquisition Pathways 16.5 Depreciation Proposals, Multi-Company Runs & Fixed Asset Budgets 16.6 Fixed Asset Disposals: Sale, Scrap & Disposal Accounting 16.7 Fixed Asset Splits, Transfers & Reclassification 16.8 Asset Leasing (IFRS 16 / ASC 842)
12.1 Recurring Contract Billing, Billing Schedules & Milestones
Key Takeaways Explain This Topic AI
The Subscription billing module in Dynamics 365 Finance consists of three tightly unified sub-modules: Recurring contract billing (RCB) for recurring invoices and pricing structures, Revenue and expense deferrals (RED) for ASC 606 / IFRS 15 recognition schedules, and Multiple element revenue allocation (MEA) for Standalone Selling Price (SSP) allocations across bundled contracts.
Billing schedule groups define master operational defaults for billing frequency (monthly, quarterly, semiannual, annual, one-time), payment terms, invoice creation methods (Sales order vs. Free text invoice), auto-renewal rules, and pricing escalation templates.
D365 Finance supports four distinct pricing models: Standard (fixed base price per unit), Flat tier (fixed flat amount for the bracket regardless of unit quantity), Volume tier (entire quantity priced at the unit price of the highest bracket reached), and Tier / Tiered (graduated bracket pricing where units within each range are billed at that bracket's specific rate).
Milestone billing decouples invoicing from standard calendar periods, distributing total contract value across project deliverable milestones (percentage-based or fixed amounts) that trigger invoice creation only when marked as Ready to bill.
Contract lifecycle controls—including indexation/price escalations, administrative holds with reason codes, and early contract terminations with prorated credit calculation—automatically update downstream sales order generation and linked deferral schedules.
Last updated: August 2026
12.1 Recurring Contract Billing, Billing Schedules & Milestones
Quick Summary: In modern digital and service-driven business models, enterprises manage complex recurring revenue streams, software-as-a-service (SaaS) subscriptions, tiered consumption pricing, and milestone-based project billing. The Subscription billing module in Microsoft Dynamics 365 Finance ( Subscription billing > Recurring contract billing ) provides an enterprise-grade engine that automates recurring customer billing schedules, supports sophisticated pricing tiers, coordinates contract renewals and escalations, and seamlessly integrates with revenue deferrals and sales invoicing.
1. Subscription Billing Architectural Framework
Subscription billing is composed of three interconnected sub-modules designed to manage the entire quote-to-revenue lifecycle: +---------------------------------------------------------------------------------------------------------+
- | Subscription Billing Module Architecture |
- +---------------------------------------------------------------------------------------------------------+
- | |
- | +-----------------------------------+ +------------------------------------------------------+ |
- | | Recurring Contract Billing | <----> | Revenue & Expense Deferrals (RED) | |
- | | - Billing Schedule Groups | | - Straight-Line / Daily / Monthly Recognition | |
- | | - Multi-Frequency Billing | | - Unearned Balance Sheet to Earned P&L Amortization| |
- | | - 4 Dynamic Pricing Models | | - Deferred Expenses & Commission Amortization | |
- | | - Milestone Billing Allocations | +------------------------------------------------------+ |
- | | - Holds, Terminations & Credits | ^ |
- | +-----------------------------------+ | |
- | | | |
- | v v |
- | +-----------------------------------+ +------------------------------------------------------+ |
- | | Invoice Generation Engine | | Multiple Element Revenue Allocation (MEA) | |
- | | - Sales Orders / Free Text Invs | <----> | - Standalone Selling Price (SSP) Engines | |
- | | - Batch Processing Automations | | - ASC 606 / IFRS 15 Proportional Price Allocation | |
- | | - Billing Detail Transaction Log| | - Revenue Allocation Clearing Reconciliation | |
- | +-----------------------------------+ +------------------------------------------------------+ |
- +---------------------------------------------------------------------------------------------------------+
- Core Components and Capabilities
Recurring Contract Billing (RCB): Manages recurring customer billing schedules, complex consumption and tiered pricing structures, price indexation escalations, contract holds, cancellations, and periodic invoice generation.
Revenue and Expense Deferrals (RED): Automates the deferred recognition of revenue and expenses over time (straight-line, daily, or event-driven) in strict accordance with ASC 606 and IFRS 15 standards.
Multiple Element Revenue Allocation (MEA): Evaluates bundled contracts with multiple distinct deliverables (e.g., hardware, installation services, and recurring subscriptions) and reallocates the transaction price based on relative Standalone Selling Prices (SSP).
2. Billing Schedule Groups & Master Defaults
Billing schedule groups ( Subscription billing > Recurring contract billing > Setup > Billing schedule groups ) establish reusable master templates that standardize billing terms, frequency, pricing behaviors, and ledger postings across customer contracts. +---------------------------------------------------------------------------------------------------+
- | Billing Schedule Group Configuration |
- +---------------------------------------------------------------------------------------------------+
- | Field / Setting | Configuration Options / Defaults | Accounting Impact |
- | :---------------------------------- | :------------------------------------- | :---------------- |
- | **Billing Frequency** | Monthly, Quarterly, Semiannual, Annual | Default cadence |
- | **Invoice Creation Method** | Sales Order vs. Free Text Invoice | Document created |
- | **Billing Schedule Type** | Standard vs. Milestone | Timing / Trigger |
- | **Auto-Renew Contract** | Yes / No (Default Renewal Term: Months)| Renewal automation|
- | **Price Escalation Rule** | Percentage Uplift / CPI Indexation | Automated increase|
- | **Default Deferral Schedule Group** | Link to RED Deferral Template | Auto-creates RED |
- | **Payment Terms** | Net 30, Net 60, Due Immediately | Due date calc |
- +---------------------------------------------------------------------------------------------------+
Note
When creating a new customer billing schedule, selecting a Billing schedule group automatically populates the header and line defaults. However, authorized functional users can override individual line frequencies, pricing methods, or deferral flags directly on the schedule.
3. Billing Schedule Creation & Line Structure
Billing schedules ( Subscription billing > Recurring contract billing > Billing schedules > All billing schedules ) represent the core transactional contracts between an enterprise and its customers.
Billing Schedule Header Parameters
Customer Account: The bill-to and invoice customer.
Billing Schedule Group: The master template driving defaults.
Start Date & End Date: The active contract period (e.g., 2026-01-01 to 2026-12-31 ).
Billing Frequency: Master cadence for invoice generation across lines.
Number of Periods: Total billing occurrences calculated automatically from dates and frequency.
Invoice Option: Determines whether generating billing creates Sales Orders (supporting physical items, inventory reservation, and packing slips) or Free Text Invoices (service items only).
Billing Schedule Line Parameters
Each billing schedule can contain multiple line items with distinct pricing rules, start/end dates, and deferral behaviors:
Item Number: Inventory product, non-stock service item, or subscription charge item.
Start Date & End Date: Line-specific effective dates (allowing staggered add-on subscriptions).
Quantity & Unit Price: Base commercial terms.
Pricing Method: Determines how total line billing is calculated based on ordered or consumed quantities.
Revenue Deferral Toggle: When enabled, automatically generates an unearned revenue deferral schedule upon invoice posting.
Escalation Schedule: Configured percentage or CPI price increases applied upon renewal dates.
4. The Four Dynamic Pricing Models
Dynamics 365 Finance Subscription Billing provides four robust pricing models to support diverse commercial contracts: +---------------------------------------------------------------------------------------------------------+
- | Subscription Billing Pricing Models Matrix |
- +---------------------------------------------------------------------------------------------------------+
- | Pricing Model | Calculation Formula / Engine Logic | Best-Fit Commercial Use Case |
- | :------------ | :--------------------------------------------------- | :------------------------------- |
- | **Standard** | `Total = Quantity × Unit Base Price` | Fixed unit recurring subscriptions|
- | | Fixed unit rate derived from Item Master or Trade Agr.| (e.g., $50/user/month for SaaS). |
- | ------------- | ---------------------------------------------------- | --------------------------------- |
- | **Flat Tier** | `Total = Fixed Flat Amount for Applicable Bracket` | Tiered package pricing |
- | | Unit count determines tier; price is fixed flat sum. | (e.g., Up to 50 users = $500 flat)|
- | ------------- | ---------------------------------------------------- | --------------------------------- |
- | **Volume Tier**| `Total = Total Quantity × Unit Rate of Highest Tier` | Bulk volume discount contracts |
- | | Entire quantity is billed at the single lowest rate. | (e.g., 150 units all @ $8/unit). |
- | ------------- | ---------------------------------------------------- | --------------------------------- |
- | **Tiered** | `Total = Sum of (Qty in Bracket × Bracket Unit Rate)` | Graduated / progressive pricing |
- | (Graduated) | Units are billed progressively through each bracket. | (e.g., First 100 @ $10, next @ $8)|
- +---------------------------------------------------------------------------------------------------------+
- Comprehensive Pricing Comparison Example
Consider an enterprise software customer consuming 150 user licenses under a contract defined with the following tier setup:
Tier 1 (1 to 100 units): Base Rate = $10.00 / unit (or Flat Tier Amount = $1,000.00)
Tier 2 (101 to 500 units): Base Rate = $8.00 / unit (or Flat Tier Amount = $3,500.00) +---------------------------------------------------------------------------------------------------+
- | Mathematical Comparison for 150 Units Consumed |
- +---------------------------------------------------------------------------------------------------+
- | Pricing Model | Step-by-Step Mathematical Calculation | Total Line Invoice Amount |
- | :------------ | :---------------------------------------------------- | :------------------------ |
- | **Standard** | 150 units × $10.00 standard unit price | **$1,500.00** |
- | **Flat Tier** | 150 falls into Tier 2 (101-500) -> Flat Fee applies | **$3,500.00** |
- | **Volume Tier**| 150 falls into Tier 2 -> ALL 150 units @ $8.00/unit | **$1,200.00** |
- | **Tiered** | Tier 1: 100 units × $10.00 = $1,000.00 | |
- | (Graduated) | Tier 2: 50 units × $8.00 = $400.00 | **$1,400.00** |
- +---------------------------------------------------------------------------------------------------+
Important
Understanding the difference between Volume Tier (all units re-priced at the highest achieved tier rate) and Tiered / Graduated (units progressively priced across incremental brackets) is heavily tested on the MB-310 exam.
5. Milestone Billing Setup & Allocation
Milestone billing is utilized when billing triggers depend on the completion of agreed-upon deliverables or project phases rather than calendar intervals. +---------------------------------------------------------------------------------------------------+
- | Milestone Allocation Structure |
- +---------------------------------------------------------------------------------------------------+
- | Milestone ID | Description | Allocation % | Milestone Amount | Billing Status |
- | :----------- | :------------------------------ | :----------- | :--------------- | :------------- |
- | **M1** | Contract Execution & Design | 20.00% | $20,000.00 | Completed / Billed|
- | **M2** | System Prototype Delivery | 30.00% | $30,000.00 | Ready to Bill |
- | **M3** | User Acceptance Testing (UAT) | 30.00% | $30,000.00 | Incomplete |
- | **M4** | Final Go-Live & Handover | 20.00% | $20,000.00 | Incomplete |
- | **Total** | **Contract Value: $100,000.00** | **100.00%** | **$100,000.00** | |
- +---------------------------------------------------------------------------------------------------+
- Milestone Configuration Workflow
Set the Billing Schedule Type to Milestone on the schedule header or line.
Apply a predefined Milestone Template or manually define milestone lines with milestone descriptions, percentage allocations, or fixed milestone amounts.
The total contract line item amount is distributed across the milestone lines.
When a project milestone is completed, an authorized user changes its status to Ready to bill .
Running the invoice generation process generates an invoice only for the completed milestone amount.
- 6. Contract Lifecycle: Price Updates, Holds & Terminations
- Automated Price Updates & Escalations
Manual or Batch Escalation: Price increases can be scheduled using fixed percentages or indexation tables (e.g., Consumer Price Index adjustments) via Subscription billing > Recurring contract billing > Periodic tasks > Update prices .
Renewal Escalations: Automatically apply a 3-5% price uplift upon contract anniversary dates.
Administrative Holds
When a customer account enters dispute or service is suspended, users can place a Hold on the entire billing schedule header or specific lines.
A Hold Reason Code is mandatory for audit tracking.
While on hold, the invoice generation engine skips the schedule lines, preventing erroneous billing until the hold is officially removed.
Early Terminations & Credit Rules
When a customer cancels a multi-year subscription mid-term, the Terminate action is executed ( Subscription billing > Recurring contract billing > Billing schedules > Terminate ).
The user specifies the Termination Date and selects the Refund / Credit Option :
No Refund / No Credit: Leaves previously posted invoices intact.
Prorated Credit: Calculates the unused portion of prepaid billing periods, creates a credit memo / sales credit note, and reverses the unearned balance on linked revenue deferral schedules.
7. Generating Invoices from Billing Schedules
Invoice generation is executed under Subscription billing > Recurring contract billing > Periodic tasks > Generate invoice . +---------------------------------------------------------------------------------------------------------+
- | Invoice Generation Processing Engine |
- +---------------------------------------------------------------------------------------------------------+
- | Parameter | Selection / Functional Behavior |
- | :-------------------------- | :----------------------------------------------------------------------- |
- | **To Date (Cutoff Date)** | Evaluates all schedule lines where Next Billing Date <= Cutoff Date. |
- | **Include Schedules on Hold**| Set to No (ensures disputed accounts are protected from billing). |
- | **Generate Invoices By** | Customer Account, Billing Schedule, or Invoice Customer. |
- | **Posting Option** | Create Sales Orders (Open), Post Packing Slip, or Post Invoice directly. |
- +---------------------------------------------------------------------------------------------------------+
- Operational Processing Sequence
The batch engine queries active billing schedules where the Next billing date is on or before the specified To date .
For standard lines, the system creates Sales Orders or Free Text Invoices based on the line's configuration.
For milestone lines, only lines with status Ready to bill are processed.
Upon successful invoice posting, the billing schedule line's Billed through date and Next billing date fields are updated.
If Revenue Deferral is enabled, the invoice posting automatically triggers the creation of a Revenue Deferral Schedule in RED.