> For the complete documentation index, see [llms.txt](https://docs.morevy.ai/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.morevy.ai/docs/how-the-numbers-work/cash-vs-recurring-revenue.md).

# Cash vs recurring revenue

This decision determines every figure in every close. It is worth understanding before you rely on a close for anything material.

## Two valid answers

A customer pays $600 in January for a three month plan.

|                       | January | February | March |
| --------------------- | ------- | -------- | ----- |
| **Cash collected**    | $600    |          |       |
| **Recurring revenue** | $200    | $200     | $200  |

Both are correct. They answer different questions.

| Basis                 | Answers                            | Use it for                                   |
| --------------------- | ---------------------------------- | -------------------------------------------- |
| **Cash collected**    | How much money arrived this month. | Bank reconciliation, cash flow, collections. |
| **Recurring revenue** | What the business earns per month. | Growth, retention, valuation.                |

## Why the choice matters

Consider a business with a steady monthly book that runs a promotion. Prepaid plans sold during the promotion are collected in full that month, for access delivered across the months that follow.

On a cash basis, that month appears exceptional. On a recurring revenue basis, it appears ordinary. Neither reading is wrong, and neither alone is sufficient.

{% hint style="warning" %}
This is the most common way operators misread their own performance. A promotion-heavy month registers as growth in cash and is close to invisible in recurring revenue. Reading only one basis is the error, not choosing the wrong one.
{% endhint %}

## How Morevy recognises prepaid revenue

Morevy distinguishes between three kinds of payment:

|                       | Treatment                                                                                                                      |
| --------------------- | ------------------------------------------------------------------------------------------------------------------------------ |
| **Scheduled billing** | Recognised in the period it cleared. A payment taken automatically on a recurring schedule is an instalment, not a prepayment. |
| **Prepaid terms**     | Recognised across the periods the plan covers, where the term can be established.                                              |
| **One-off charges**   | Recognised in the period they cleared.                                                                                         |

The distinction between an instalment and a prepayment is the part that matters. A charge against a multi-month plan may be either, and treating an instalment as a prepayment recognises the same revenue twice.

Morevy resolves this from the payment's billing characteristics and the plan's stated term, and reports its confidence. Where a term cannot be established with confidence, it is flagged rather than assumed.

## When Morevy declines to proceed

If a material share of revenue sits in plans whose term cannot be established, Morevy will not run a recurring revenue close. It identifies the plans responsible so they can be resolved.

Spreading revenue across periods that have been inferred rather than established would produce a close that reconciles arithmetically and misstates the business. Declining is the correct outcome.


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