Close & reporting
Deferred revenue
Cash collected before it is earned, tracked separately from revenue for Saudi companies and released to the profit and loss on the schedule that matches when the work is actually delivered, kept apart from when the Fatoora invoice was issued or the VAT tax point fell.
Management report
Illustrative client · August 2026
SAR
| Line | Aug | Jul | |
|---|---|---|---|
| Revenue | 142,380 | 131,904 | +10,476 |
| Cost of sales | (51,260) | (48,115) | (3,145) |
| Gross profit | 91,120 | 83,789 | +7,331 |
| Payroll | (46,300) | (45,900) | (400) |
| SoftwareNoted | (6,480) | (5,490) | (990) |
| Rent | (8,000) | (8,000) | 0 |
| Other operating | (9,215) | (9,870) | +655 |
| Net income | 21,125 | 14,529 | +6,596 |
Reviewer's note
Software is up on last month after two seats were added mid-month. Revenue includes one milestone invoice that will not repeat next month.
Illustrative. An example of the document, not a client's figures.
Cash in the bank is not always income yet
A consulting firm collecting a full retainer upfront, or a subscription business invoicing a full year at once, sees the cash land the day the deal closes, often long before the work behind it is delivered. Booking the whole amount as revenue that same day overstates the current month and understates every month that should have carried a share of it instead.
What the schedule actually tracks
We keep a running record of what is owed by customer and by contract, release it monthly against delivery, usage or a straight-line term depending on what the contract actually calls for, and tie that record back to the general ledger balance every month rather than letting the two drift apart quietly.
Different from a deposit, and on a different clock from VAT
A refundable holding deposit and a payment against a signed contract can land in the same bank feed but need entirely different treatment, and the Fatoora tax point that triggers VAT under ZATCA's rules often falls well before the matching revenue is actually released from this schedule.
When a customer walks away early
If a contract cancels partway through, whatever is still sitting in the schedule against it comes out that same month, with a short written note explaining why, so a reviewer looking back later is not left guessing at a gap. A senior reviewer checks the schedule as part of the monthly close.
Questions
Frequently asked questions: Deferred revenue
Is the deferred revenue schedule reconciled to the general ledger?
Yes, every month, so the balance sheet figure and the schedule always agree.
What happens to the schedule when a contract renews?
The release schedule is updated to the new contract term starting from the renewal date.
Does this schedule change our VAT position?
It affects when income shows up in your management books, not automatically your VAT treatment, which follows the tax point rules ZATCA sets. We flag the two separately.
Is deferred revenue the same as a customer deposit?
They often look similar on a bank statement but are tracked differently: a deposit against future work is usually deferred revenue until that work is delivered.
How does a cancellation affect the schedule?
The remaining deferred balance for that contract is adjusted out of the schedule in the month the cancellation is confirmed, with a note explaining the change.
Who reviews the work before it reaches us?
Every deliverable under deferred revenue is reviewed by a senior reviewer before it reaches you. You keep access to the underlying file at every stage, so nothing about the work happens somewhere you cannot see it.
What is included in deferred revenue?
Deferred revenue covers deferred revenue schedule by customer and contract and monthly release calculated against delivery, usage or straight-line terms. The exact scope is agreed and set out in writing before work starts, so you know precisely what is and is not covered before the first deliverable arrives.
Related services
- Close & reportingRevenue recognition (ASC 606 / IFRS 15)Revenue recorded when it is actually earned rather than when cash lands, following the five-step model shared by ASC 606 and IFRS 15, so recurring and multi-part contracts are accounted for correctly.
- Close & reportingAccrualsExpenses and revenue recorded in the period they actually happen, even when the invoice or cash has not moved yet, so the month's numbers reflect that month's activity.
Industries
Next step
Talk to the team that would run your books
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