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Deferred revenue

Money a customer has been billed for a service the company hasn't delivered yet. It sits on the balance sheet as a liability and turns into revenue as the service is provided.

Simple example

A customer pays $120 in January for a year of service. The company can't count it all as revenue straight away. It counts $10 each month as the service is delivered, and the rest sits on the books as deferred revenue.

$120Jan: paidStill owed as service:deferred revenue shrinks$10 counted as revenue each month
Made-up numbers, for illustration only.

Related terms

BillingsRevenue plus the change in deferred revenue: roughly what was invoiced.Remaining performance obligationsRevenue already signed but not yet delivered.Annual recurring revenue (ARR)The yearly value of subscriptions a company can count on renewing.