This post is part of a 5 part series titled SaaS Guide to Invoicing in QuickBooks Online.
Deferred revenue in a nutshell
Deferred revenue is an important topic for a SaaS subscription company. While it’s not the most exciting, it’s important because you’ll want to make sure you are reporting your company’s revenue correctly.
The concept of deferred revenue (or revenue recognition) can be simplified by saying that when you bring on a new customer, revenue must be recognized as your earn it. For example, you you sell a $12,000 subscription for 12 months of access to your SaaS product, you can’t recognize all $12,000 as revenue when the contract is signed. It must be recognized as you earn it, or 1/12th each month.
Deferred revenue is revenue you are deferring until a later date. Then you can recognize that revenue over time as you earn it, decreasing deferred revenue and increasing actual revenue.
Deferred revenue in QuickBooks
QuickBooks does not manage deferred revenue natively. People will typically create elaborate spreadsheets to track deferred revenue and make manual adjustments to the GL each month.
ProRata to the rescue
ProRata is a QuickBooks Online app that integrates directly with your accounting software to automate and manage deferred revenue. ProRata also has additional reporting capabilities for Revenue, Deferred Revenue, MRR, ARR and SaaS reports and metrics.
For more information use the form to the right!