Revenue refers to the total amount of income (before expense deductions) produced by your company’s sale of goods and services. For SaaS companies, revenue is often recognized when the software or service has been delivered to the customer.
- You have a customer that’s on a month-to-month contract (cancelable at the end of each month) that pays $1,000 per month. Your revenue for that customer in any given month is $1,000.
- You have a customer that’s on an annual contract (cancelable at the end of their 12-month contract) that pays $12,000 per year. Despite the annual contract, your revenue for that customer in a full month is $1,000. In each month over the course of the annual contract (partial months aside), you’ll recognize $1,000 per month.
Note: In the annual contract example, any revenue that is “waiting” to be recognized goes into deferred revenue.