Buzzwords are creeping into operational accounting: GPT, LLMs, AI… but what are they actually doing? Are we talking about some far-off future or something you can start using right now to make your day-to-day easier? Most accounting software solutions have been embedding AI-like features to boost their marketing, but let’s be honest—much of it is still pretty underwhelming.

While the idea of having an AI-powered assistant handle your working papers, automate reconciliations, and generate detailed reports sounds ideal, we’re not quite there yet. However, there are practical ways you can start incorporating AI into your daily workflow, especially in everyone’s favorite tool—Excel.

This week (i know i’m 2 days late delivering this!), we’re diving into how you can use GPT to build a Deferred Revenue Waterfall and prepare journal entries—practical tools you can start using right now.

Let’s Get Started:

Dr: Efficiency
Cr: (Time spent in Excel)

Step 1: It’s Obvious: Sign up for Chat GPT (or Claude)

No affiliation, but you can sign up here

We use the paid version ($20/month) but it may not be necessary depending on the task.

Once you’re in Chat GPT, make sure to select in the top right (GPT-o1) - This is Open AI’s highest model that includes “reasoning” - this is important because it essentially tasks the AI model to ‘think’ before it responds, reducing the frequency of errors. I tested this specific prompt on the legacy model and it took multiple tries whereas with o1, the prompt resulted in a very simple and concise response + a clean formula to use.

Step 2: The Use Case/Deferred Revenue Example

This is going to be a simplified version of deferred revenue, but I want to showcase how you can leverage GPT and Excel to formulate a working paper that is scalable with your team. I’m also taking into consideration not sharing sensitive data (contract data) with the LLM. I’m just going to be describing the problem and how I’d like it to appear in excel, with as much detail as I can.

The company is Lemynz Inc. Lemynz operates a lemonade stand, but also makes millions selling Lemonade management software. These are sold in the form of term or perpetual licenses and depending on the product, maintenance/support will be sold separately. Ignoring the intricacies of 606 and how we define our perfomance obligations/skus/SSP’s, we’ve created a list of 15 contracts that Lemynz Inc has signed with customers, and we’ve been tasked to create a deferred revenue schedule by our auditors. This needs to be created for the period ended December 31, 2024. Lemynz has booked all contract revenue upfront, when the contract was created with no deferral entries created (tsk tsk).

The Task:

1. Create a waterfall schedule, that is scalable in excel. (We can’t afford Software to help)

2. Propose a deferred Revenue entry as of 12.31.24

The Sample Data

Before we jump in, here is the dataset we’re going to use for the purpose of this demo:

The data consists of 15 contracts, a simple distinction if the SKU/Product offering is to be recognized ratably (overtime) or as of a Point-in-time (PIT). We’ve also calculated the daily rate which is the SKU price / # of days in the SKU term.

Link to Sample Data

Step 3: The initial prompt (Written in one shot):

Here is the prompt that I used (no edits were made):

I need you to act as my revenue accounting expert, but also an excel wizard. I need you to help me build out a deferred revenue waterfall for our month-end close process. The goal is to be able to calculate the monthly revenue recognition using the following inputs: Contract Start Date, End date, Type of Revenue, daily revenue amount. I'd like this to be 1 single formula, that we can copy for every new contract that requires going forward. Column F is the contract start Date, Column G is the contract end date, Column H is the product price, column J is the number of days that the product is to be recognized over, column E is the type of revenue, and column K is the daily revenue amount - Column K will help determine the exact amount to be recognized in each given month. Column L is where the revenue months start, starting with Jan 31, 2024 (1/31/24). Each subsequent month will have the last day of that corresponding month as the header. The first sample role will be row 2. Can you help write me a formula that will calculate the correct amount of revenue for each row, starting in cell L2? 

Our job wouldn’t be complete without asking GPT to re-write the prompt for us to be able to use / customize in the future:

Here was the prompt:

That was perfect. Now, imagine you need to explain this clearly to a novice Chat GPT user that needs help with excel - what would be the cleanest prompt you could write to help recreate this formula? 

Prompt in text format:

I need assistance creating an Excel formula to calculate monthly revenue recognition for contracts, accounting for partial months. Here’s the setup of my spreadsheet:

Columns:

• Column E: Type of Revenue

• Column F: Contract Start Date

• Column G: Contract End Date

• Column H: Product Price

• Column J: Number of Days for Revenue Recognition

• Column K: Daily Revenue Amount (helps determine the exact amount to recognize each month)

• Columns L onward: Monthly periods with headers as the last day of each month (starting from January 31, 2024, in cell L1)

I need a single formula that I can enter into cell L2 and then copy across to other months and down to other rows (contracts). The formula should:

• Calculate the number of days in each month during which the contract is active.

• Multiply the active days by the daily revenue amount from Column K.

• Accurately handle contracts that start or end in the middle of a month.

• Be adaptable when copied across months and contracts without modification.

Could you help me create this formula and explain how it works?

Here is the formula to be copied at your leisure:

=MAX(0, (MIN($G2, L$1) - MAX($F2, EOMONTH(L$1, -1)+1) + 1)) * $K2

Step 4: Apply the Formula to the spreadsheet

Le't’s put the formula in action. Check out this quick video highlighting the application.

https://www.tella.tv/video/deferred-revenue-formula-example-1-g7pg 

Step 5: Let’s create a Journal Entry:

Im going to save you the trouble of showing you the initial prompt, and share the re-created prompt by GPT to help make this process easier:

Here is the prompt in plain text:

Prompt:

I need assistance creating an Excel formula using the SUMIF function to sum total revenue up to a specific date. Here’s the setup of my workbook:

Workbook Tabs:

• “Waterfall” Tab:

• Row 1 (from cell L1 onward): Contains month-end dates (e.g., 1/31/2024, 2/29/2024, etc.).

• Rows 2 to 25: Contain revenue amounts for individual contracts.

• Row 26: A “TOTAL” row that sums revenue across all contracts for each month.

“Journal Entry Prep” Tab:

• Cell A3: Contains the cutoff date up to which I want to sum the total revenue (e.g., 12/31/2024).

My goal is to write a formula in the “Journal Entry Prep” tab that sums all total revenue amounts from the “Waterfall” tab up to and including the date specified in cell A3. Specifically, I need to:

• Use the SUMIF function.

• Sum the values in 'Waterfall'!$L$26:$ZZ$26 (the “TOTAL” row).

• Include only those columns where the date in 'Waterfall'!$L$1:$ZZ$1 (the header row with dates) is less than or equal to the date in cell A3.

Could you help me create this formula and explain how it works?

The formula: =Waterfall!BF26-SUMIF(Waterfall!$L$1:$ZZ$1, "<=" & $A$3, Waterfall!$L$26:$ZZ$26)

Minor Update: This formula calculates the entire waterfall total for the 2024 period. This is the amount that should’ve been recognized - the remainder would be the deferral - the template has been updated to reflect this.

The Output/Formula:

A quick demo of how it looks:

https://www.tella.tv/video/journal-entry-prep-g399

Access the complete file here:

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Internships

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Wellness Corner

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Cr: (PTO - it's unlimited anyways...)

Travel

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Mental Health

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Accounting Tech

Dr: Another SaaS tool
Cr: Old SaaS tool

Check out Forecastr for a new way to build out your pesky models.

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Audit Friendly Resources:

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Accounting TL:DR’s

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Cr: (Time)

• The PwC Layoffs

• Top Small Firms to work for in 2024