Bookings, billings and deferred revenue
Cash before revenue, and the balance in between.
By Surojit Chakraverti, founder of L3VLUP and an investor running a long-short healthcare and technology equities strategy.
On this subject: bookings, billings and deferred revenue.Updated 30 September 2026
What it does
Where SaaS cash and SaaS revenue part company. Bookings are contracts signed; billings are invoices raised, with the share of contracts billed annually in advance arriving up to a year before the service; revenue is ARR earned through the quarter. The difference between what has been billed and what has been earned is deferred revenue, a liability that grows with the business and is the reason operating cash can beat operating profit.
Where it lives
The same schedule in each model that carries it, with the rows to open. Open a model in the browser, go to the sheet, and click the lines.
- Assumptions, rows 26–32: Share of new and renewed contracts billed annually in advance, Cost of revenue, % of revenue (hosting, support, success), Fully loaded cost per account executive, per quarter, Marketing and sales support, % of new ARR booked…
- Bookings & Billings, row 6: Revenue: average ARR through the quarter, earned over four quarters
- Bookings & Billings, rows 9–13: Bookings: new and expansion ARR contracted, Renewals coming up for billing (a quarter of the retained book), Billed annually in advance: new, expansion and renewing contracts, Billed quarterly: the rest of the book, a quarter at a time…
- Bookings & Billings, rows 16–21: Opening deferred revenue, Plus billings, Less revenue recognised, Closing deferred revenue…
What a reviewer looks for
- Revenue recognised when billed.
- Deferred revenue allowed to go negative.
- Billings terms applied to new contracts only, not to renewals.
Learn it, then build it
Read · Guide · 11 min
SaaS Operating Models: ARR, Sales Capacity, Billings and the Metrics That Follow
Read · Guide · 13 min
How to Build a Three-Statement Model That Actually Balances
Vocabulary: Deferred Revenue, ARR (Annual Recurring Revenue).