> ## Documentation Index
> Fetch the complete documentation index at: https://docs.getlago.com/llms.txt
> Use this file to discover all available pages before exploring further.

# Prepare your billing data

> Get the inputs right so recognized revenue comes out right.

Revenue recognition reads your billing data and applies Lago's logic automatically. You don't configure recognition rules, but the billing inputs you already control determine what gets recognized and when. Getting them right is the whole job.

## What drives recognition

| Billing input                     | Why it matters for recognition                                                                                                                        |
| --------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------- |
| **Service period**                | This is the window Lago spreads revenue across. If the dates a plan or one-off fee covers are wrong, the daily recognition is wrong.                  |
| **Advance vs arrears**            | Billing in advance creates deferred revenue; billing in arrears creates unbilled revenue. The recognized amount is the same, but the balances differ. |
| **Billing time and interval**     | Calendar vs anniversary billing and the interval (monthly, yearly, and so on) define the period boundaries.                                           |
| **Taxes**                         | Tax must be set correctly so it's excluded from recognized revenue and booked as a liability.                                                         |
| **Minimum commitments**           | The committed amount sets the true-up that's recognized at period end.                                                                                |
| **Coupons and discounts**         | These reduce recognized revenue at invoicing, so they need to be applied to the right invoices.                                                       |
| **Recurring vs one-time metrics** | Whether a usage metric is recurring decides whether it's spread daily (like seats) or recognized at consumption.                                      |

## A short checklist

<Steps>
  <Step title="Service periods reflect reality">
    Confirm subscription periods and any one-off fee windows match the service the customer actually receives.
  </Step>

  <Step title="Advance/arrears matches how you bill">
    Check the pay-in-advance setting on plans and charges, since it determines deferred vs unbilled treatment.
  </Step>

  <Step title="Taxes are configured">
    Make sure taxes are set on customers and plans so recognized revenue stays pre-tax. See [Taxes](/guide/revenue-recognition/how-it-works/taxes).
  </Step>

  <Step title="Commitments and coupons are in place">
    Verify minimum commitments and any coupons are attached where they belong.
  </Step>

  <Step title="Timezone is correct">
    Your organization's timezone defines daily and monthly period boundaries. Confirm it's set correctly.
  </Step>
</Steps>

<Info>
  None of these are revenue-recognition settings. They're your normal billing configuration. Revenue recognition simply reads them.
</Info>

## What this means for your reports

Clean inputs mean recognized plus deferred revenue reconciles cleanly against your invoices. If a figure looks off, the cause is almost always a billing input: a wrong service period, the wrong advance/arrears setting, or a missing tax. Start there before anything else.