Understanding your loyalty, membership, and cashback liability
Loyalty programs create future value your store may owe customers. That value can come from points, store credit, cashback, unused reward balances, or paid membership benefits that have not yet been fully delivered.
This article explains what your accountant may need at month end or year end, how to estimate the value of outstanding balances, and where to find supporting reports in Rivo.
⚠️ Rivo reports balance and activity data. How your business records that data is an accounting decision. Treatment can vary by business model, program terms, materiality, and jurisdiction, so review this with your accountant.
Why loyalty balances can be a liability
When a customer earns points or credit, your store may owe that customer a future discount, product, store credit, or other reward. In plain language, that outstanding value is often treated like a liability because the customer has earned something they can use later.
For points earned through a purchase, accounting guidance such as ASC 606 in the United States and IFRS 15 internationally often treats the reward as part of the original customer transaction. A portion of the sale may be deferred until the points are redeemed, expire, or are no longer expected to be used.
Smaller brands without audited financial statements may use a simpler period-end estimate instead of a full transaction-by-transaction revenue allocation. Even then, the accountant usually needs the same core data: ending balance, activity during the period, point value, redemption history, expiration activity, and customer-level support.
What to give your accountant
At period end, prepare a five-part package:
Outstanding balance as of the period end date - Total points or credits still held by customers, plus the estimated dollar value.
Activity rollforward - Beginning balance, earned, redeemed or spent, revoked, expired, refunded, and ending balance.
Point-to-dollar rate - The conversion rate used to estimate value. For example, if a $5 reward costs 500 points, each point is worth $0.01.
Redemption and expiration history - Activity your accountant can use to estimate breakage, which means points or credits that are not expected to be redeemed.
Customer-level detail - Backup showing which customers hold balances or had activity during the period.
How to estimate the dollar value of points
Points need a conversion rate because they are not already dollars.
Use your program’s reward setup to define the rate. For example:
500 points = $5.00 reward
That means:
$5.00 ÷ 500 points = $0.01 per point
Then estimate:
Gross liability = outstanding points × point value
For example:
2,450,000 outstanding points × $0.01 = $24,500 gross liability
If your accountant applies an expected redemption rate, they may estimate:
Expected liability = gross liability × expected redemption rate
Using a 62% expected redemption rate:
$24,500 × 62% = $15,190 expected liability
Store credit and cashback are simpler because they are already in currency. If a customer has $25.00 in available credit, the gross value is $25.00 before any accounting adjustments your accountant applies.
Understanding breakage
Breakage is the portion of points, credits, gift cards, or other customer rights that are expected not to be redeemed.
A simple way to start the conversation with your accountant is:
Estimated redemption rate = redeemed value ÷ (redeemed value + expired value)
For example, if customers redeemed $62,000 of value and $38,000 expired:
$62,000 ÷ ($62,000 + $38,000) = 62% estimated redemption rate
Under revenue recognition guidance, breakage is usually not recognized all at once just because you expect some customers not to redeem. Your accountant may recognize it over time as customers redeem, or when the chance of redemption becomes remote.
Your expiration policy matters:
Programs with expiration can show when balances are scheduled to expire.
Programs without expiration may carry outstanding balances for much longer.
Programs that change expiration rules may need extra review, because customer behavior and expected breakage can change.
Store credit and cashback
Credit balances owed to customers are usually easier to value because they are already expressed in dollars. The source still matters because it can affect how your accountant records it.
Credit source | What it means | What to share |
Refund credit | Credit issued instead of returning cash to the customer | Customer, amount, original order or refund context, issue date, and use date |
Promotional credit | Credit issued as a marketing incentive | Campaign or offer, customer, issue date, expiration terms, and redemption history |
Cashback | Credit earned after a cashback offer or eligible order | Offer name, customer, order, approval status, related balance activity, and redemption history |
Loyalty store credit | Store credit earned through loyalty actions | Earning source, customer, earned amount, spent amount, expiration, and ending balance |
For cashback review, your accountant may ask for both offer activity and redemption activity. In Rivo, the Cashback Opt-Ins export can show cashback offer participation and status, while the Balance Redemptions export can show generated reward codes and whether they were used.
Unused store credit, gift cards, and similar balances may also be subject to unclaimed-property or escheatment rules in some U.S. states. Rules vary widely and change over time, so ask your accountant or legal advisor how those rules apply to your store.
Paid memberships
Paid or recurring memberships can create a separate accounting question from points or credits.
If customers pay in advance for a membership period, your accountant may need to decide whether part of that fee should be treated as deferred revenue until the service period has passed or the promised benefits have been provided.
For membership review, your accountant may ask for:
Active and historical membership enrollments
Subscription contracts
Billing attempts, including successful, failed, and pending payments
Membership-related credits, rewards, or benefits
These are available from Settings > CSV Exports when memberships are enabled for your account.
Month-end routine in Rivo
Use the same routine each period so your accountant can compare balances consistently.
1. Export Outstanding Earnings
From your Rivo dashboard, go to Analytics.
Open Loyalty.
Find the Outstanding Earnings Balance card.
Click through to Rivo Outstanding Earnings Over Time.
Set your reporting period.
Use Cumulative Balance when you need the running balance as of the period end date.
Click Export.
Use the Date export for the rollforward: earned, spent, revoked, expired, refunded, and ending balance. Use the Customer export for customer-level backup.
The report also includes filters for VIP tier, loyalty status, membership-member exclusion, and whether to use all activity or approved activity only. Confirm with your accountant which filters should be used every month, then keep that approach consistent.
2. Review upcoming expirations
From Analytics > Loyalty, open Upcoming Expirations.
Review the amount scheduled to expire in the next 7, 30, and 90 days.
Review the total scheduled to expire.
Use daily, weekly, monthly, or quarterly grouping depending on your close process.
Upcoming Expirations only shows data when expiration is enabled for your program. If your program has no expiration policy, your accountant may need to carry the outstanding balance forward until customers redeem it or until your policy changes.
3. Export supporting CSVs when needed
From Settings > CSV Exports, export any supporting files your accountant requests:
Points Logs - Detailed balance activity.
Balance Redemptions - Reward codes generated and used.
Cashback Opt-Ins - Cashback participation and approval status.
Membership Tier Enrollments - Current and historical membership participation.
Subscription Contracts - Current and historical membership subscriptions.
Subscription Billing Attempts - Successful, failed, and pending billing attempts.
Points Liability Waterfall - Monthly point cohorts and how earned points were later redeemed, expired, or deducted.
Example journal entries to discuss with your accountant
These examples are only a starting point. Your accountant may use different account names or a different method.
At period close
If the loyalty liability increased during the period:
Dr Loyalty rewards expense
Cr Loyalty points liability
When points or credits are redeemed
When a customer uses the reward:
Dr Loyalty points liability
Cr Revenue, discount, or contra-revenue account
When points or credits expire
When unused value expires and your accountant determines it can be recognized:
Dr Loyalty points liability
Cr Breakage income or other account selected by your accountant
Accounting references
If your accountant wants to review the accounting background, these resources may help:
FAQ
Does Rivo decide the accounting value of my points?
No. Rivo provides balance and activity data. Your accountant decides the accounting value, breakage estimate, and journal entries.
Should I use gross liability or expected liability?
Ask your accountant. Gross liability uses the full outstanding value. Expected liability applies an estimated redemption rate or breakage assumption.
Do store credit and cashback need a point conversion rate?
No. Store credit and cashback are already in currency. Your accountant may still adjust for redemption expectations, expiration, or legal requirements.
What if my program does not expire points or credits?
The balance may remain outstanding until customers redeem it or your accountant determines another treatment is appropriate. Ask your accountant how to handle long-running balances.
Can Rivo tell me whether unused credit must be reported as unclaimed property?
No. Unclaimed-property rules vary by state and can change. Review unused store credit, gift card, and similar balances with your accountant or legal advisor.