What is a revenue waterfall?
A revenue waterfall is a schedule that shows, contract by contract, how much revenue has been recognised to date and how much will be recognised in each future period. Laid out with periods across the top, the amounts step down like a waterfall as contracts run off. Finance teams use it to support deferred revenue balances and forecast recognised revenue.
Also calledrevenue scheduledeferred revenue waterfallrevenue roll-forward
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- Rows
- Contracts or obligations
- Columns
- Future periods
- Reconciles to
- Deferred revenue
How a revenue waterfall works
Each row is a contract or performance obligation, with its total value and recognition pattern, such as straight-line over twelve months or on delivery of milestones. Columns are months or quarters. The waterfall shows recognised revenue in past columns and scheduled revenue in future ones, and the total of future columns for invoiced amounts reconciles to deferred revenue on the balance sheet. Amounts contracted but not yet invoiced or recognised show remaining performance obligations, which public companies disclose. Adding new bookings each month shows how much of next quarter's revenue is already contracted. In spreadsheets, waterfalls become fragile as contracts are modified or cancelled; revenue software rebuilds them automatically when terms change. RightRev, Rillet and Campfire generate revenue waterfalls from contract and billing data.
Common questions
Why is a revenue waterfall useful?+
It supports the deferred revenue balance at each close, shows how much future revenue is already contracted, and makes contract changes visible in the periods they affect.
What is the difference between a revenue waterfall and a deferred revenue schedule?+
They overlap. A deferred revenue schedule covers amounts invoiced but not yet recognised; a full waterfall can also include contracted amounts not yet invoiced.
What are remaining performance obligations?+
The revenue from signed contracts that has not yet been recognised, whether invoiced or not. Under ASC 606 and IFRS 15 many companies disclose it and when they expect to recognise it.
Software that builds revenue waterfalls
Part of Accountio’s accounting technology coverage · Glossary
