Source: https://www.revvly.ai/glossary/deferred-revenue

[Glossary](https://www.revvly.ai/glossary)

# 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.](https://www.revvly.ai/blog/deferred-revenue-in-saas)
- [Revenue recognition for SaaS: the basics finance teams need to get right](https://www.revvly.ai/blog/revenue-recognition-saas-basics)

## Related terms

- [Bookings, billings and revenue](https://www.revvly.ai/glossary/bookings-billings-revenue)
- [Annual recurring revenue (ARR)](https://www.revvly.ai/glossary/arr)

Revvly

Orchestrate the flow of revenue.

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