Deferred Revenue
Definition
Cash collected from customers for products or services you have not delivered yet, such as pre-orders, subscriptions paid in advance or unredeemed gift cards. It is a liability until you deliver.
Want a deeper explanation?
Deferred revenue keeps your P&L from claiming sales you have not earned yet. It also reminds you that the cash already in the bank has a product attached to it.
It matters most for pre-order launches and subscription boxes. Watch for: pre-order cash spent before the inventory is paid for, which is one of the fastest ways to get into a cash crunch.
Example
You collect $24,000 for a product launching next month. It sits in deferred revenue and moves to sales as orders ship.