Cash vs recurring revenue

This decision determines every figure in every close. It is worth understanding before you rely on a close for anything material.

Two valid answers

A customer pays $600 in January for a three month plan.

Both are correct. They answer different questions.

Basis

Answers

Use it for

Cash collected

How much money arrived this month.

Bank reconciliation, cash flow, collections.

Normalized recurring revenue

What the business earns per month, with prepaid plans spread across the months of access.

Growth, retention, valuation.

Why the choice matters

Consider a business with a steady monthly book that runs a promotion. Prepaid plans sold during the promotion are collected in full that month, for access delivered across the months that follow.

On a cash basis, that month appears exceptional. On a recurring revenue basis, it appears ordinary. Neither reading is wrong, and neither alone is sufficient.

Caution. This is the most common way operators misread their own performance. A promotion-heavy month registers as growth in cash and is close to invisible in recurring revenue. Reading only one basis is the error, not choosing the wrong one.

How Morevy recognises prepaid revenue

Morevy distinguishes between three kinds of payment:

Treatment

Scheduled billing

Recognised in the period it cleared. A payment taken automatically on a recurring schedule is an instalment, not a prepayment.

Prepaid terms

Recognised across the periods the plan covers, where the term can be established.

One-off charges

Recognised in the period they cleared.

The distinction between an instalment and a prepayment is the part that matters. A charge against a multi-month plan may be either, and treating an instalment as a prepayment recognises the same revenue twice.

Morevy resolves this from the payment's billing characteristics and the plan's stated term, shows you the term it read and where it read it from, and names the dollars behind any term it could not establish. Where a term cannot be established, it is flagged rather than assumed.

When Morevy declines to proceed

If a material share of revenue sits in plans whose term cannot be established, Morevy will not run a recurring revenue close. It identifies the plans responsible so they can be resolved.

Spreading revenue across periods that have been inferred rather than established would produce a close that reconciles arithmetically and misstates the business. Declining is the correct outcome.