Compendium Token
How Tokens Appear in Your Books (And in Ours)
Tokens applied as payment versus tokens as a discount changes what expense you record. Here is the accounting treatment on both sides, in plain terms.
A rewards program creates accounting on both sides of the relationship, and most vendors never mention it. Since a good share of our customers are accountants, glossing over it here would be a poor idea.
On your side: payment, not discount
When tokens are applied to a Compendium invoice, they appear as payment applied, not as a discount on the line item.
The difference is not cosmetic. If a $653.25 invoice were shown as a $130.65 discount, your software expense would record as $522.60 — and your year-over-year comparison would show software spend falling when the price did not change. Applying tokens as payment records the expense at $653.25 and shows tokens as how they were settled. Your expense line then reflects the actual cost of the software.
Where the tokens themselves land
- Tokens you purchased are a prepayment — an asset until consumed, expensed as you spend it.
- Rebates are generally a reduction of the cost of what you bought rather than income, though the treatment depends on the arrangement.
- Referral commission you earned is income when it is credited to you, whether or not you have spent it. Being paid in tokens rather than cash changes the form, not the fact.
Specifics depend on your circumstances and your basis of accounting. We provide statements; we cannot provide advice.
On our side: three different treatments
The three buckets are not a UI convenience. They exist because each is booked differently.
Purchased tokens
When you buy tokens, we receive cash and owe you software. That is deferred revenue — a liability — not revenue. Revenue is recognized when you actually redeem. Booking prepaid tokens as revenue on sale would overstate the current period and understate every later one.
Earned commission
Commission is an expense when it accrues, not when the partner gets around to spending it. At accrual we record commission expense and a corresponding payable. When the partner redeems, the redemption discharges that payable. Waiting until redemption would let a growing unpaid obligation sit entirely off the books.
Promotional tokens
Granting promotional tokens creates no entry at all. Nothing was received and, until it is redeemed, nothing has been given. At redemption it is recorded as marketing expense against revenue recognized at full value.
That last treatment is conservative — it means we carry no liability for promotional tokens that may never be used. It also means our revenue is reported gross with the cost of the program visible as marketing spend, rather than netted away where nobody can see how much the program actually costs.
The bit that goes wrong
The failure mode worth naming: a bookkeeping integration that is wrapped so it can never break the sale. It is the right instinct — a paying customer must get what they bought even if the ledger is momentarily unavailable — but it means a broken integration is invisible. Sales fulfill perfectly and book nothing, and it surfaces at period end.
The lesson, learned the hard way and worth passing on: test that your accounting integration wrote the entry, not merely that it did not throw an exception. Those are very different assertions.
Common questions
Are tokens applied as a discount or as a payment?
As a payment. The invoice records the full price of the software, with tokens shown as the method of settlement. That keeps your recorded software expense equal to the actual price and keeps period comparisons meaningful.
Is referral commission paid in tokens taxable?
Referral commission is earned income and reportable when credited, whether it is paid in cash or tokens. Being paid in tokens changes the form, not the fact.
How are prepaid tokens treated by the vendor?
Purchased tokens are deferred revenue — a liability — until it is redeemed, at which point revenue is recognized. Recognizing it as revenue at the point of sale would overstate the current period.