Many business owners still believe revenue is recognised when the customer orders, pays or collects. But accounting does not follow the cash or the excitement of a new order. It follows performance. Revenue is only recognised when you have delivered what you promised and the customer has gained control of it. This simple idea, performance before payment, is the key to getting revenue recognition right and avoiding the common mistakes that distort profits.

When money hits your bank account before you’ve done the work, it can feel like income, but accounting tells a different story. Income received in advance is a promise, not profit. Whether it’s prepaid rent, school fees, or a subscription, this money belongs on your balance sheet as a liability until you’ve earned it. Understanding this simple concept helps businesses stay honest, accurate, and financially sound.