Deferred revenue

Cash collected for services not yet delivered.

Definition

Deferred revenue is a liability representing customer payments received in advance of delivery. It converts to recognised revenue as the obligation is fulfilled.

Why it matters

It is cash in the bank that is not yet yours. Treating deferred revenue as available profit is one of the most common causes of cash surprises in subscription businesses.

Related terms

• accrual accounting
• cash flow
• recurring revenue