Deferred revenue
Deferred revenue is money collected from customers for service not yet delivered, held as a liability on the balance sheet. When a customer pays for a year up front, the cash arrives immediately but the revenue is recognised gradually, month by month, as the service is provided.
How to read it
Deferred revenue is why cash, billings and recognised revenue differ for annual and prepaid contracts. A growing deferred revenue balance usually signals healthy prepaid demand, but it is also a future delivery obligation.
Further reading
- Deferred revenue in SaaS: how it works and where it breaks at scale.
- Revenue recognition for SaaS: the basics finance teams need to get right