Revenue Recognition
Revenue recognition determines when you can record revenue as earned — critical for accurate financial reporting.
When should I read this?
Read this if you need to understand how subscription revenue is recognized over time, or how to reconcile billing with accounting.
The basic principle
Revenue is recognized when it's earned, not when it's billed or collected.
Billing ≠ Revenue
Example
- Customer pays $1,200 for annual subscription on Jan 1
- Revenue recognized: $100/month over 12 months
- Not: $1,200 in January
Recognition models
Subscription revenue
Recognized ratably over the service period.
| Billing | Recognition |
|---|---|
| Monthly | Fully recognized each month |
| Annual | 1/12 recognized each month |
| Quarterly | 1/3 recognized each month |
Usage-based revenue
Recognized when usage is measured and billed.
| Model | Recognition timing |
|---|---|
| Post-paid usage | End of billing period |
| Prepaid credits | As credits are consumed |
One-time charges
Recognized immediately when service is delivered.
Deferred revenue
Money received but not yet earned is deferred revenue (a liability).
Annual payment: $1,200 on Jan 1
Jan 31: $100 recognized, $1,100 deferred
Feb 28: $200 recognized, $1,000 deferred
...
Floatless revenue reports
Floatless provides:
| Report | Description |
|---|---|
| Cash received | Money collected |
| Revenue recognized | Revenue earned |
| Deferred revenue | Unearned balance |
| MRR/ARR | Recurring revenue metrics |
Important considerations
- Audit requirements — ASC 606 / IFRS 15 compliance
- Multi-element arrangements — complex bundled deals
- Variable consideration — usage and discounts
[!NOTE] Floatless provides operational metrics and reports. For formal financial statements, export data to your accounting system.