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Software as a service (SaaS) companies often track their current and future income in three ways: bookings, billings, and revenue.
Bookings are the total value of a signed contract — you “book” a client when they sign a contract and agree to pay you. However, unless the client pays upfront, you haven’t received the money yet.
Billings are the money that you’ve invoiced for and will be paid soon. For example, if a client has a one-year contract and agrees to pay $250 every quarter, you might book $1,000 when the contract is signed and the billings will show $250 every three months, each time you invoice them.
However, to comply with generally accepted accounting principles (GAAP), you can’t recognize the revenue until you earn the money by delivering the products or services.
If you charge for the upcoming quarter’s services, you might add the money to billings at the start of the quarter. However, you might recognize $83.33 in accrued revenue ($250 divided by three) at the end of each month. The remainder of the quarter’s value may be categorized as deferred revenue — you’ve sent a bill and collected the money, but haven’t delivered the service yet.
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