Deferred revenue

Deferred revenue, also called unearned revenue, is cash you hold for work you still owe. Under accrual accounting you can't count it as revenue the day it arrives. You recognize it bit by bit as you deliver. Where subscription brands meet it: - Prepaid subscriptions. A customer pays once for 6 or 12 deliveries. Each shipment turns part of that payment into revenue. - Annual memberships and digital access, recognized month by month across the year. - Gift subscriptions and gift cards paid now and redeemed later. Why it's a liability. If you can't deliver, the customer may be owed a refund. That's also why a big prepaid sale on Black Friday adds cash in November, but most of the revenue lands across the following months. It's the opposite of accrued revenue, which is earned but not yet paid. Watch cash and revenue separately. Prepaid plans are great for cash flow, but spending deferred revenue as if it were profit can leave you short when the deliveries come due. How Chargezen handles it: Chargezen prepaid plans charge once for several deliveries and then ship each order on schedule, so you can see how many prepaid orders are still to ship. Your accounting system decides how the revenue is recognized. This is general information, not accounting advice.