How do SaaS subscription companies classify a revenue backlog?
Keeping tabs on any metric requires that it be classified in the correct way. Your revenue backlog should be classified like so:
It’s not recorded
When we say “not recorded,” we mean that revenue backlogs are not classified or recorded in the same way as other metrics related to revenue, mainly because a public company doesn’t need to record a revenue backlog in a balance sheet. Revenue backlog bears no imprint on your bottom line, so the way in which you choose to keep track of it can be entirely informal.
It’s not invoiced
Revenue backlog has only internal significance for your company and signifies the value of a contract irrespective of the time frame of use. At no point during the lifecycle of a customer’s contract will you be sharing any details of revenue backlog with them, so there’s no need to include a revenue backlog in invoicing documents.
It’s not fulfilled, yet
We’ll go into more detail on the notorious backlog/deferred revenue beef in just a moment, but one thing that the two terms do have in common is that they both refer to unearned revenue—the revenue they make note of is a liability to be fulfilled at a later date upon the provision of the service/product in question.
If there is revenue in your backlog, it means that you haven’t delivered on your goods yet. All revenue backlog counts as unfulfilled.