CTO CORE

Revenue

Revenue is what you've earned from customers by delivering your product in the period. Accountants call it recognized revenue. It's the top line of the income statement and everything else in CORE starts here.

Here's the part that trips people up. You recognize revenue as you deliver. Not when you send the invoice, and not when the money shows up.

Say a customer signs a 120,000annualcontractonJanuary1standyouinvoiceallofitupfront.That′s120,000 annual contract on January 1st and you invoice all of it upfront. That's 10,000 of revenue in January. The other 110,000sitsonthebalancesheetasdeferredrevenueandmovesover110,000 sits on the balance sheet as deferred revenue and moves over 10,000 a month as you earn it. More on this in Bookings, Billings, Revenue and Cash.

What counts

  • what customers pay for your core product: subscriptions, usage charges, licenses and professional services
  • not interest income or one-time gains. Those sit further down, below operating income.

Every margin in CORE divides by revenue. Gross margin, operating margin, net margin. All of them.

Revenue isn't cash

Depending on billing terms and how fast customers pay, you can collect a lot more or a lot less cash than you recognize in a quarter. If someone asks you about cash, open the cash flow statement.