> I force my companies to clearly show prepaid revenue on their balance sheet and treat it as debt. Any discounts provided to win the pre-payment also have to b

> I force my companies to clearly show prepaid revenue on their balance sheet and treat it as debt. Any discounts provided to win the pre-payment also have to be recorded as a financing cost - not a “sales discount” or buried in lower ARR “Unearned revenue” is a common account on any company’s balance sheet and is standard best practice. You sign a 12 month deal, and it immediately hits your books as a liability because the revenue isn’t “earned” until your company provides the service, so each month 1/12 of the contract moves from the “unearned” revenue account to an income account. But the 2nd idea of treating sales discounts as a financing charge sounds like some questionable financial engineering to me. If your sales guy offers a “10% end of quarter discount if you sign in the next week” you shouldn’t be booking that discounted 10% as financing income because, simply, that’s money you’ll never receive. I’ve never heard of “non-discounted revenue” as a serious SaaS metric. Sure it will inflate your revenue (as will booking discounts as revenue) but those practices won’t pass the sniff test when any outside VC or auditor looks at your books. But 100% agree with the first part of your comment: from an accounting perspective, prepaid contracts are typically booked as a liability or debt on your balance sheet, and gradually moved over into your Income/Earned Revenue account in 1/12 increments (or equivalent) over the upcoming year.