When to Count Your Revenue

Now, a question that I get asked all the time is, when should I count my revenue? When does revenue actually count as revenue? Now, I don’t want to get into a bunch of accounting methods, and how it all works. But there are some general practises that I want to make sure that you keep in mind. And please make sure you keep this in mind. This is a very important rule. Revenue is typically counted when you invoice a customer. Now, depending on the type of business that you have, sometimes you invoice the customer and actually create a sale and collect the cash all at the same time. So that’s your revenue, that’s pretty easy.

But a lot of businesses actually have it spread out. You actually sell the customer at one point, and you have invoiced anybody, and then three months later, you invoice the customer, because you’ve done the work. So, that’s the time you count revenue. And then it takes another 30, 60, or 90 days for the customer to pay. That’s actually cash. So the revenue is counted right in the middle there. You can’t count it when you book it. And a booking is essentially when you make the sale. When you make the sale, but you actually have to still deliver the product or service that you’re doing, then you can’t count that as revenue.

So, the fact that you sell it or get a signed contract doesn’t automatically go into revenue. But if you invoice it, then it does go into revenue. Let me give you an example real quick. Let’s say I signed a big deal. It’s $100,000. But I’m going to deliver it over the next six months. And I can actually invoice the customer every month for the next six months. So your revenue is actually divided by six. It’s actually invoiced every month. You get [? account ?] 1/6 of that revenue or that contract that you have. That’s how we account for revenue. That’s how we calculate revenue. And I know people get tripped up with this all the time.

So a lot of times you will say, hey, when I get the cash is when I count it. No, actually you count revenue beforehand, because you’re pretty much guarantee to get that cash, unless you have a huge bad debt issue, which then– that’s a different problem that we can tackle.