Tech & digital · SaaS · Updated 21 Oct 2026
Direct answer: subscription revenue belongs in the period the service is delivered, not the month the invoice is raised or the cash arrives. An annual plan paid upfront is spread across twelve months, with the unearned part held as deferred income. Runway is cash divided by net monthly burn, but a useful forecast goes week by week and models renewals, churn, payroll and tax.
A customer who pays £12,000 upfront for a year has given you £12,000 of cash today but only £1,000 of revenue this month. The other £11,000 is a liability: you owe a year of service. If your accounts book all £12,000 as revenue in month one, profit looks great in that month and terrible for the next eleven, and your tax, your investor updates and your pricing decisions are all working from the wrong picture.
For accounting periods beginning on or after 1 January 2026, the revenue section of FRS 102 (Section 23) was rewritten around a five-step model based on IFRS 15. Instead of the old risks-and-rewards test, revenue is recognised as control of goods or services passes to the customer, either over time or at a point in time. For most SaaS businesses the headline effect is familiar (subscriptions recognised over the contract), but set-up fees, implementation work, bundled services and multi-year deals now need a more structured review.
The simple version is cash in the bank divided by average monthly net burn. It's a useful headline but it hides the timing that actually causes problems: annual renewals landing in one month, quarterly VAT and corporation tax payments, payroll growing as you hire, and churn that only shows up when renewals fail. A rolling 13-week cash forecast, updated monthly from your actual billing and bank data, shows the weeks where cash gets tight and lets you test a hire, a price change or a funding round before you commit.
Sources: FRC: amendments to FRS 102 (periodic review 2024), Forvis Mazars: FRS 102 Section 23 revenue changes, BDO: FRS 102 amendments to revenue accounting.
This guide is general information, correct at the date shown, and not advice for your specific situation. Rules change, so check the current position before acting.
Over the period the service is provided. An annual subscription billed upfront is spread evenly across the twelve months (unless the service is delivered unevenly), with the unearned balance shown as deferred income on the balance sheet.
If your company reports under FRS 102, yes for accounting periods beginning on or after 1 January 2026. Straightforward subscriptions may not change much, but set-up fees, implementation, bundles and multi-year contracts should be reviewed against the new five-step model.
The headline figure is cash in the bank divided by average monthly net burn (cash out minus cash in). For decisions, use a rolling weekly forecast that includes renewals, churn, payroll growth and tax payments, because runway is usually shortened by timing, not by the average.
MRR is a management metric: the recurring revenue you've contracted, normalised to a month. Revenue in the accounts follows accounting rules and includes non-recurring items. The two should reconcile, and differences usually point to billing or deferred income errors.
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