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Unearned Revenue: What it is and What it Means for Subscription Businesses

Stax

The concept of unearned revenue can easily trip up SaaS companies that offer subscription services and products on a recurring basis. Unlike when selling ordinary products, you cannot recognize the revenue earned from a subscription all at once. So, what differentiates ‘earned’ versus ‘unearned revenue’?

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Understanding Subscription Revenue

Baremetrics

Subscription revenue can be defined most simply as a model which generates income from customers through recurring fees that are paid at regular intervals. These can be weekly, monthly, or annual payments. Before we get into the more complicated stuff, let’s consider the difference between earning revenue and collecting revenue.

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What Is Working Capital?

Baremetrics

Accounts Receivable: This particular journal is only used under the accrual accounting system and not the cash accounting system. Accounts receivable includes the revenue that your company has recognized but not yet collected. For a SaaS business, the deferred revenue category is particularly important.

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What Is Unearned Revenue and How to Account for It

Baremetrics

You can often find yourself receiving money long before you provide agreed upon services or, conversely, providing services and then waiting for payment. This puts you in the position of having “unearned revenue”. Sign up for the Baremetrics free trial , and start monitoring your subscription revenue accurately and easily.

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Are You Counting Payments as Renewals?

Kellblog

Enterprise SaaS has drifted to a model where many, if not most, companies do multi-year contracts on annual payment terms. Buyers typically perform a thorough evaluation process before purchasing and are quite sure that the software will meet their needs when they deploy. How did we get here?

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SaaS Balance Sheet Examples

Baremetrics

Speaking of your users, it is important to understand how much revenue they are generating with the best possible estimates of your MRR and ARR. It is also important to track the contracts to minimize churn and prevent dunning. Sign up for the Baremetrics free trial and start managing your subscription business right.

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What Is Accrual Accounting?

Baremetrics

In cash accounting, you record all revenue and expenses when the cash enters and exits your checking account, respectively. This system is often preferred by smaller companies because it requires less expertise to implement. The company might have to pay taxes on revenue earned but not yet received. Table of Contents.