Deferred revenue

Cash or invoiced amounts received for products or services not yet delivered, recorded as a liability until earned.

Example

A customer paying 120,000 upfront for a year creates deferred revenue that is recognised at 10,000 a month.

Upfront billing helps cash flow but the revenue is still earned over time.

Bookings — The value of contracts signed with customers in a period, whether or not the product has been delivered or revenue recognised yet.
Accrual accounting — The convention under which revenue is recorded when it is earned and costs when they are incurred, regardless of when money actually changed hands.

Not every number called revenue is the same kind of money — Financial diligence starts by separating recurring revenue from one-off fees, bookings from recognised revenue, and invoiced amounts from cash collected. (11 min)
A growing company can run out of cash while its revenue rises — How customers pay and how quickly they pay changes cash needs. Diligence checks billing terms, receivables and working capital, not only revenue and profit. (10 min)