SaaS Products - Calculating Deferred Revenue when Deal is Paid Up Front

[JPadgett7]

Our company sells software licenses agreements at a monthly rate for 1, 2, and 3 year license terms. Almost all these licenses purchases are billed/paid upfront.

Ex. Customer buys a 1 year license agreement for $29/month

$49/month x 12 months = $588 that is billed and paid upfront.

For accounting purposes, we mark any unearned service revenue as deferred revenue throughout the length of the contract, and earned revenue as recognized revenue. This is calculated monthly.

Ex. after 1 month, the upfront payment of $588 is split between

$49 recognized revenue ($49 for Jan)

$539 deferred revenue ($49 in Feb+ $49 in Mar+ $49 in Apr +...)

After 2 months, the upfront payment of $588 is split between

$98 recognized revenue

$490 deferred revenue 

I'm looking for an accurate way to track this through the deal (or an associated custom object) and be able to report this data. I'd like to be able to see the total deferred revenue left on the license agreement as well as tbroken out by month.

On my first pass, I created a "license" custom object that had the monthly rate ($49) as a calculated field property. From here, I created the total recognized and deferred revenue.

The roadblock I am running into is that these fields can only show the total recognized/deferred revenue. For reporting and accounting purposes, I need to be able to look at a specific month (ex. June 2025) and see how much deferred revenue turns into recognized reveue by company/deal/license.

Is there anything I can add to the custom license object that could help calculate this out? I'd like to see a report be able to tell me 

Company | Deal Name | License | (Deferred Revenue for that month)

[DianaGomez]

Hi @JPadgett7,

Thanks for reaching out to the Community!

I’d like to invite our experts to join this conversation to see if they’ve worked on something similar or if they can provide any guidance to help you achieve your goal.🙂

Hi @Lucila-Andimol, @JuanGomez0818, @Gilempert, @LautaroDelPlato, Could you kindly share your insights or advice regarding this topic? 

Thanks for sharing 🧡

Diana