Revenue Management: #5 Revenue Recognition in SaaS
If you're building or running a SaaS business, you've probably encountered this. You get paid upfront for a subscription and a one-time onboarding fee, but you end up with confusion about when to consider it revenue. Can I book all of it now? Should I spread it out? What if the customer upgrades or downgrades midway?
How do SaaS companies manage revenue recognition and stay compliant?
Revenue Recognition Scenarios in SaaS
In the world of SaaS, a business's billing of its customers has a direct impact on how and when it recognizes revenue. While the five-step model stays the same, the application varies significantly depending on the contract structure, billing frequency, and delivery pattern. Below are the common real-world scenarios that define these differences.
Annual Contract Paid Upfront
Most SaaS companies bill customers annually or quarterly in advance. However, accounting standards do not permit revenue to be recognized when cash is received. Instead, the revenue must be recognized over time, as the service is delivered.
For example, a $12,000 annual contract with $1000 onboarding. $1000 will be recognized immediately during billing, and $11,000 is spread across 12 months.
Monthly Billing
Customers pay monthly for access. There is typically no deferred revenue, and revenue is recognized in the same month the service is delivered.
Example: $500 per month subscription recognized monthly as it is earned.
Bundled Pricing
A typical SaaS contract might include platform access, onboarding, training and support as a part of the contract that gets billing as a bundle. According to ASC 606 and IFRS 15, these are separate performance obligations. The business must allocate revenue to each and recognize it based on how and when each is fulfilled.
Example: A $10,000 contract includes $2000 for setup, $6000 for software access, and $2000 for support. Revenue is recognized based on the timeline of each deliverable.
Amendments & Discounts
Customers often switch plans mid-cycle, receive promotional pricing, or get billed based on the actual usage. These changes introduce variable consideration and require contract modification, revenue reallocation, and recalculations for the remaining service term.
Example: A new allocation and recognition schedule must be set up if a customer moves from a $1000/month plan to a $1500/month plan mid-year.
Usage Based or Tiered Pricing
Some businesses charge based on consumption. For instance, API usage, user access, data storage, etc., they charge the customer again as and when the upper cap is met. This means revenue cannot be recognized until the service is used. Businesses must track usage data and apply the prorated or usage-based revenue rule to stay compliant.
Example: $0.10 per API call. If a customer makes 10,000 calls in March, $1000 is recognized in that month.
These scenarios illustrate the diverse billing models in SaaS and their direct impact on revenue recognition timing. Businesses that manage multiple pricing plans, onboarding services, or usage billing must ensure their recognition strategy aligns with the service delivery. This is where automation becomes critical.
Scenario:You sign an annual contract worth $1,20,000 with a client. The client pays the full amount upfront. The contract includes $20,000 onboarding and $1,00,000 for uninterrupted access to the software for 12 months.
Zoho Billing for SaaS Revenue Recognition
Zoho Billing simplifies SaaS revenue recognition by allowing the finance team to define a recognition rule based on the product or service offered.
For this kind of business, the Revenue recognition rule should be set in the following way:
There are two deliverables here: one is Onboarding, and the other is software access.
| For onboarding | For Software Access |
Recognition Frequency | Once | Monthly |
Recognition Method | One-Time (Daily) | Evenly Distributed |
Recognition Time | Period Start | Period End |
Although the full payment is collected in advance, you cannot recognize the entire $1,20,000 as revenue immediately. Only the onboarding revenue of $20,000 is recognized in the first month. The remaining $1,00,000 must be recognized evenly over 12 months at $8,333 monthly.
Reports in Zoho Billing
If you look at the reports in Zoho Billing after three months of service rendering, you will see,
i) Recognized Revenue Report
Onboarding is complete three months into the contract, and three out of 12 months of application access have been delivered.
Component | Recognized Revenue | Description |
Onboarding | $20,000 | Fully recognized in Month 1 |
Software Access | $25,000 | $8333/month for 3 months out of ($1,00,000) |
Total Recognized | $45,000 | Recognized at the end of 3 months |
ii) Deferred Revenue Report
After three months, the company will have nine months of software access remaining.
Component | Deferred Amount |
Software Access | $75,000 (9 months x $8333) |
Total Deferred | $75000 |
iii) Revenue Waterfall Report
Months | Onboarding | Software Access | Total |
Month 1 | $20,000 | $8,333 | $28,333 |
Month 2 | ----- | $8,333 | $8,333 |
Month 3 | ----- | $8,333 | $8,333 |
Month 4 (upcoming) | ----- | $8,333 | $8,333 |
Month 5 (upcoming) | ----- | $8,333 | $8,333 |
Month 6 (upcoming) | ----- | $8,333 | $8,333 |
Month 7 (upcoming) | ----- | $8,333 | $8,333 |
Month 8 (upcoming) | ----- | $8,333 | $8,333 |
Month 9 (upcoming) | ----- | $8,333 | $8,333 |
Month 10 (upcoming) | ----- | $8,333 | $8,333 |
Month 11 (upcoming) | ----- | $8,333 | $8,333 |
Month 12 (upcoming) | ----- | $8,333 | $8,333 |
Best Practices for SaaS Revenue Recognition
- Disaggregate Contract Elements: Break down your subscriptions, onboarding, support, and other one-off deliverables as separate individual obligations.
- Use Automated Rules: Configure a Recognition Rule based on the billing method and avoid tracking them manually.
- Handle Modifications: Plan changes and upgrades should trigger reallocation of revenue.
- Monitor Revenue Waterfall: Visual schedules ensure predictable reporting and forecasting.
Topic Participants
Hari Hara Sudhan. S
Sticky Posts
Community Learning Series | Digest #5 — September 2020
Dear customers, We're happy to bring you the September edition of our #CommunityDigest! Keep track of your subscription KPIs right from your smartphone: Last month, we enhanced our Android mobile app to help our customers get daily updates on their business health. We got to know from a lot of customers that this has made their job much more easier because they no longer have to keep a reminder to manually check on the previous day's revenue or activations. If you have not downloaded it yet, here'sCommunity Learning Series | Digest #4 - August 2020
Dear customers, We hope you're staying safe and healthy. I'm happy to bring you the fourth edition of our #CommunityDigest with some brand-new updates from us. 1. Daily Business Updates (for Android users) The Zoho Subscriptions Android app has got a cool new update: You can now get a push notification to your smartphone that lets you know how many activations and cancellations have taken place, and what's the net revenue for the previous day. The best part is, you can tell the app when exactly youCommunity Learning Series | Digest #3 - July 2020
Dear customers, We hope you're staying safe and healthy. We're glad to bring you the July edition of our #CommunityDigest. New community members can view our previous newsletters here. This time, we have two major updates and three interesting topics for you: 1. Zoho Subscriptions Developer Community Since the inception of Zoho Subscriptions, our team believed that the recurring billing platform we provide should be able to offer an extensive API library that empowers businesses to automate mostIntroducing: Community Learning Series | Digest #1 - May 2020
Dear customers, We hope you are staying safe and healthy. Helping businesses manage their customer subscriptions more efficiently has always been, and always will be, our goal at Zoho Subscriptions. We strongly believe this is possible if we grow together as a community and share what we know with each other. To nurture this shared learning experience, here is our brand-new Community Learning Series! Welcome to the first edition of our digest! Each edition of our community digest includes guides
Recent Topics
How to update Acuity appointment fields from Zoho Flow?
Hi, I need help with Zoho Flow → Acuity Scheduling integration. What I’m doing Appointment created in Acuity Zoho Flow creates a Zoho Calendar event I want to send the Zoho Calendar Event UID back into Acuity (into a custom form field) This is so thatWhen will Zoho Learn be able to support SCORM files on the mobile app?
When I click the SCORM content, I just get a message saying it's not possible yet. Yet implies that it will be coming soon. All I'm asking for is a realistic timeline so I know whether or not to invest my time in using it. If it will be soon, then I willNo horizontal scroll bar in reports
Hi support team, I created a pivot table report which contains many columns (in my application about 15). The problem is that there is no bottom scroll bar to display colums that does not fit within the browser page. I saw that it was possible to resize colums, but colums sizes are not saved within the session. So could you add scroll bar, and eventually make colums sizes stored in the user session ? Best regards,Zoho Map integration tasks have changed - you need to "Locate all instances of Zoho Map integration tasks in your Deluge scripts by searching for the v1 marker... before 16 January 2026"
Details of an issue specific to Zoho CRM + Deluge Functions (originally posted in this forum) can be found here: https://help.zoho.com/portal/en/community/topic/zoho-map-integration-tasks-have-changed-you-need-to-locate-all-instances-of-zoho-map-integration-tasks-in-your-deluge-scripts-by-searching-for-the-v1-markerfilter broke my data
I uploaded a file recently from Sheets and it has top 2 rows frozen, with table headers in second row and each one is filterable. somehow my first 2 columns became unfiltered and no matter what I do I cannot reapply the filter?? also didn't realize theyRequest to remove domain "greentechcoatings.vn" from previous Zoho account
Hello Zoho Support, I would like to register the domain "greentechcoatings.vn" in my new Zoho Mail account, but I receive the message "This domain is already associated with another account". Please remove the domain from any previous/unknown accountTrigger actions in third-party apps using Zoho Flow
Greetings, I hope you're all doing well. We're excited to share an enhancement to Bigin's workflow capabilities. Zoho Flow Actions are now available in Bigin, enabling you to automate tasks across third-party applications directly from your workflow andEnroll, Script, Win: Hackathon 2025!
Hello CRM Developers! Are you ready to create some magic with Client Script, Widgets and Functions in Zoho CRM? Let’s make Hackathon 2025 an unforgettable adventure! The Zoho Developer Community Hackathon 2025 is here, and it’s your time to shine! REGISTERZoho Help Desk - Not receiving emails
Hello… I am on your trial version of help desk… and I am having trouble getting emails from Zoho Help Desk to my MS Outlook Exchange Server… So when a customer sends ticket request I am not getting an email with a notification? I have read your articlesAlmost all Flows are being queued
A few days ago I saw one of my Flows status was Queued. This was the first time this had ever happened. Now, almost every Flow that triggers is Queued for at least a few minutes. If I re-trigger the Flow (which causes separate problems) they sometimesEmployment Contract / HRMS Documents - Zoho People
How do I create customized HR documents for disbursal from Zoho People ? Example, say offer letters ? appointment letters ? Memos ? We want to be able to preset these in one or ther other form and issue them to employees who are in Zoho People.Live webinar: Craft and deliver impactful slides with Show’s desktop apps
If you love the comfort of working on your desktop and want a setup that keeps you focused and uninterrupted, this session is made for you. We’re excited to invite you to our upcoming live webinar: "Craft and deliver impactful slides with Show's desktopEnhancements to Bigin's forms
Greetings, I hope all of you are doing well. We're happy to announce a few recent enhancements we've made to Bigin's forms. We'll go over each one in detail. Merge field support in auto-filled forms The auto-fill option in Bigin's forms lets you predefineTable dimensions
I try changing the dimensions of the table on my computer but it doesn't change. Do I have to be a premium member or does it only work on the app?Direct link to Record Summary
Hi everyone, In one of my reports, I have built a Record Summary template to display the details of one record. I would like to be able to link directly to this Record Summary once I submit a new record, without having to go to the list of records first and click on View. Is there a possibility to do so ? Should I use the URL by passing some parameters ? Thank you very much for your help ! GuillaumeAPI Support for Creating Invoices with Batch-Tracked Items
Hi Zoho Community, I am working on an integration where we create invoices in ERPNext and push them to Zoho Books. I need to send batch-tracked items (batch numbers) when creating invoices. I could not find any reference in the Zoho Books API documentation.Amendment effective date
Hi everyone, I noticed that the amendment effective date mentionned in my amendment is not right. Indeed, when a contract is amended several times, it states the previous amendment and their effective date. However, the effective date stated is alwaysSTOCK history in zohosheets
is it possible to get historical stock value using stock function in zoho sheets? i could not see from and to period in the helper document.Auto sync Photo storage
Hello I am new to Zoho Workdrive and was wondering if the is a way of automatically syncing photos on my Android phone to my workdrive as want to move away from Google? ThanksAgent password reset
Hi Zoho support, I would like to ask if there is a way the admin can reset a password of an agent? RegardsCan receive but not send messages in Zoho Mail
Hello! I was able to configure my email client successfully in that I can receive messages just fine. However, when I send messages out, they seem to go out fine (I don't receive any errors or anything), but the recipient does NOT receive those messages.Mail is sent twice!
Been using Zoho for a while now. Installed Zoho for someone else and some weird things are happening. Mails are being sent twice. He is using Thunderbird as an email client. I already read about email being duplicated in the sent folder. But in my caseCan't login IMAP suddenly
Since this evening I'm getting the error: You are yet to enable IMAP for your account. Please contact your administrator... IMAP always been enabled in my account and was workign fine for the past 7 years. Already tried turning IMAP off and on again.Sending of username did not succeed: Mail server pop.zoho.com responded: User already specified
I am having issues receiving emails from Zoho in Thunderbird. I am getting the above error. The first error tells me Authentication failed, and prompts me to enter in my password. Then I get the above error. I can receive emails when I log in online toBug tracking
Hi, does anyone know how to track errors during picking or packing? This way I can keep track and see how to improve and prevent errors in this area.Exact match in name when searching workdrive
Hello, I am wondering how to search workdrive files/folders with an exact match in the name. For example, when I search across folder with the url param search[name]=someName, I get multiple results such as "someName", "someNameAndMore", or "someNameFlow - Fetch info from drop down in another module
I am running into a road block which I thought would be a simple task. My goal - The account is assigned to a "route" which can be selected from a drop down menu and adds a tag to the account accordingly (easy enough). Now when I create a task for thisMigration of corporate mail environment from Yandex 360 to Zoho mail
I have to migrate a corporate mail environment with an existing domain from Yandex 360 to Zoho mail. It is vital to migrate all users with all the data. I have read the article on this topic using MacMister Email Backup Software just now and have someI'm unable to send mail pthrough Zoho SMTP programmatically
This has been working for years, but today it's been offline all day long. I see nothing anywhere on your site about this. I'm not the only one experiencing this. Downdetector has a spike of reports todayCan no longer send email via Django site
This was working fine as of 11/7/25. Now I am unable to send user verification emails from a Django site on a AWS lightsail sever. When a user attempts to register the following error occurs. I have also attempted to send a test email via the shell andunable to send email but able to receive email
my email address is info@securityforceservices.caCustom Field for Subscription
Hi, I can't find a way to add a custom field (to contain a license key generated from our software) against a subscription? Is the only place to add this information in the Invoice module (as custom field for invoice)? When a customer views his subscription via the customer portal, there appears no way to display a license key for them? The invoice is not the natural place to store a license key for a particular subscription, so where else can this be stored and displayed?Login to server failing
When trying to retrieve my mail, I am getting this error message -- Login to server pop.zoho.com with username (my email address) failed. It gives me the option to retry, enter password, or cancel. Then I get this message -- Sending of username did notConfiguration failed: 200 response not received for POST request.
Hello, I am trying to set up a webhook to connect with an Salesforce but I receive the following error from Zoho: Configuration failed: 200 response not received for POST request I have tried testing it on webhook.site as well and receive the same errorZoho Migration Assistant not working
Hello, I am trying to use you Migration assistant to migrate emails from Rediff to Zoho. I am stuck in the first step. After downloading the migration tool, I copied the link to verify user credentials, however, after pasting the link in the browser,Paid Support Plans with Automated Billing
We (like many others, I'm sure) are designing or have paid support plans. Our design involves a given number of support hours in each plan. Here are my questions: 1) Are there any plans to add time-based plans in the Zoho Desk Support Plans feature? TheScheduled Reports - Do not send empty report
Hello, We are intensively using reports in the CRM, especially for sales managers. When data is empty, they still receive an email. Can you add an option to avoid sending the report when data is empty?Contacts Missing — PeopleSync/Zoho Mail
English: In our company we use ManageEngine Mobile Device Manager (MDM), Free edition, to manage corporate mobile devices. Our usage policy does not allow personal Google accounts on these devices; therefore, Google account sync is blocked through MDM.Best way to integrate Zoho with mobile app for managing customer requests with real-time notifications?
Hello, I'm building a solution for a travel company where customers submit requests through a website, and the sales team manages these requests through a mobile app. The Requirement: Customers fill a form on the website (name, email, number of children,Kaizen #57 - Mass Update API in Zoho CRM
Hello everyone! Welcome back to yet another post in the Kaizen series. This week, we will discuss the Mass Update API in Zoho CRM. In this post, we will cover the following: 1. Introduction 2. Mass Update Records API 3. Schedule Update and Get StatusNext Page