Overview
Deferred revenue represents cash received but not yet earned. Fincelo tracks the full deferred revenue balance per customer, per contract, and releases it straight-line over the service period.How Deferred Revenue Works in Fincelo
On Invoice
When an invoice is raised for an annual subscription paid upfront:- Cash received: ₹12,00,000
- Revenue earned (Month 1): ₹1,00,000
- Deferred revenue created: ₹11,00,000
Monthly Release
Each month, Fincelo automatically:- Calculates the monthly recognition amount (ARR ÷ 12)
- Releases that amount from deferred revenue to recognised revenue
- Updates the balance
- Posts the journal entry
On Contract End
By the last day of the contract, deferred revenue balance = ₹0. Fully released.Partial Month Proration
For contracts that start or end mid-month, Fincelo uses daily proration:Deferred Revenue Report
Reports → Deferred Revenue shows:- Opening balance per customer
- Additions (new invoices)
- Releases (recognised this period)
- Closing balance
- Expected release schedule (next 12 months)
Multi-Year Contracts
For 3-year deals paid annually:- Year 1 cash → Year 1 deferred → releases over 12 months
- Year 2 invoice raised at Year 1 end → new deferred created
- Each year treated independently
Refunds and Credit Notes
If a contract is terminated early and a refund is issued:- Deferred revenue balance is reversed
- Credit note raised for unearned amount
- Revenue recognition stops at termination date
- CFO selects View B to record this treatment