When to use it
- Reporting your deferred revenue liability on the balance sheet.
- Understanding how much future revenue is already contracted and invoiced.
- Reconciling: recognized revenue plus deferred revenue should equal the pre-tax amount invoiced in advance.
Who uses it
Finance teams closing the books and anyone reporting the balance sheet.Main fields
How the numbers are calculated
Only advance-billed charges create deferred revenue. When such an invoice is issued, the full pre-tax amount starts as deferred. Each day of the service period, Lago moves one day’s worth into recognized revenue. The deferred balance is the amount not yet released. Arrears-billed charges don’t appear here; they’re unbilled revenue instead. See Subscriptions.How to read the balance
The balance shrinks over the service period and reaches zero on the last day. A growing deferred balance means you’re invoicing more in advance than you’re earning, common in a healthy annual-subscription business.Example
A $1,200 annual subscription invoiced in advance on January 1, running January 1 to December 31.Relationship to other reports
- It mirrors the Recognized Revenue report: what leaves deferred enters recognized.
- The Revenue Waterfall shows the release schedule for this balance.
- It appears as a liability in the Statements.
Limitations to keep in mind
- Deferred revenue is pre-tax.
- Only advance-billed charges create it. Arrears-billed service is unbilled revenue, not deferred.