When an MSP receives payment before delivering the related service, the undelivered portion needs to remain visible. Prepaid credit may still be waiting for a future invoice, and prepaid contract bucket hours may remain unburned at month end. The Deferred Revenue report presents those balances as a monthly rollforward so finance can explain what changed.

Use it during month-end close to trace opening balances, new prepaid value, value recognized through delivery, and closing balances. It is a reporting view, not accounting advice, and it does not replace the general ledger.

What deferred revenue means for an MSP

Operational billing and revenue timing are not always the same event. Funding a contract bucket period records that the client has prepaid for future work; using the hours records delivery of that work. Similarly, a client prepayment can remain available as credit until it is applied to charges.

The report helps finance separate value already received from service already delivered.

Prepaid activity	Operational meaning	Rollforward effect
A client funds prepaid credit	Cash or value has been received for future billing	Adds to the unearned balance.
A contract bucket period is funded	Hours have been funded but not yet delivered	Adds the unburned value to the balance.
Prepaid credit is applied to delivered charges	Previously prepaid value now covers delivered service	Moves value out through recognition.
Technicians burn prepaid hours	Part of the funded service has been delivered	Moves the related value out through recognition.
A credit or balance is corrected	The amount still owed in future service changes	Appears in the activity supporting the applicable movement.

The report follows the source activity recorded in AlgaPSA. If a prepayment, credit application, or hour entry is missing or dated incorrectly, the rollforward will reflect that source record.

Read the monthly rollforward

For the selected month, the report groups activity under Credits and Prepaid hours:

Displayed component	What it tells finance
Opening	The selected month's opening balance. It is not a prior-month comparison column.
Issued	New prepaid value recorded during the selected month.
Applied	Credit applied or prepaid hours used during the selected month.
Expired	Value that expired during the selected month.
Adj.	Credit adjustments during the selected month. This column appears in the Credits group.
Closing	Value still prepaid at the end of the selected month.

The table also shows Client and Total closing. If the closing balance does not make sense, do not start by adjusting the report total. Drill into the supporting balances to find the client-level activity that produced it.

Open the report and select a month

Go to Reports > Deferred Revenue and select Open report. The page heading is Deferred revenue / prepaid liability. The month input has no visible label, and the selected month is the report's only filter. The report requires the reports:read permission.

Figure 1: The rollforward for a selected month, with per-client movement behind the total.

Start with these checks:

Confirm that Opening represents the balance at the start of the selected month.
Scan Issued for newly funded credit and prepaid hours expected during the month.
Compare Applied with credit applications and prepaid work delivered.
Review the closing balance for large, old, or unexpected items.
Review Expired and credit Adj. activity that cannot be explained from the month's billing records.

The summary cards are Total prepaid liability, Credits, Prepaid hours, and Change vs prior month. Opening remains the selected month's opening balance; it is not the prior-month comparison.

Drill into credits

Open Credit balances to review the prepaid credit contributing to the rollforward. Its columns are Issued, Description, Remaining, Expires, and QBO. QBO displays Synced or Not in QBO.

The entries are plain text. The drill-down does not link to source documents and does not show a user-facing movement-type field. Use the parent report's Issued, Applied, Expired, and Adj. columns to understand the category of activity, then inspect the relevant billing records separately when more detail is required.

A credit note and a prepayment can both affect client credit, but they represent different business events. See 14.23. Issue and Apply Credit Notes for MSP Client Billing for how AlgaPSA distinguishes value given back from money paid ahead.

Drill into unburned hours

Open Prepaid bucket hours to review funded contract bucket value that remains undelivered. Its columns are Line, Period, Included, Used, Remaining, Value, and Fee. Fee displays Not yet billed or Billed, and a carried period is marked rollover.

For each material balance, ask:

Does Included agree with the contract bucket allowance?
Do burns agree with approved work recorded during the period?
Is rollover affecting the period or remaining balance?
Does the remaining value reconcile to the unburned hours?

This drill-down reports contract bucket-usage periods, not one-time prepaid hour blocks. One-time hour-block expiration does not appear here. Non-rollover value forfeited when a bucket period ends contributes to the parent report's Expired movement.

See 14.28. Sell and Track Prepaid Hour Blocks Without a Recurring Contract for the separate one-time hour-block workflow.

Month-end close workflow

The report is most useful when finance follows the same review each month.

1. Confirm the period boundary

Make sure billing administrators have completed the relevant prepayment, credit, time, and invoice activity for the month. Late source entries can move the balance after finance has already reviewed it.

2. Confirm the selected month's opening

Treat Opening as the balance at the start of the selected month. Investigate backdated or corrected source activity if that starting point is unexpected.

3. Review issued value

Match newly issued credit and funded contract bucket hours to the billing records finance expected. An unfamiliar item may be valid, but it should have a traceable client and billing record.

4. Review applied value

Connect applied credits and burned hours to the service delivered during the month. Investigate unusual timing rather than assuming the summary is wrong.

5. Inspect the closing balance

Review old or material balances with account managers. A long-held credit or contract bucket balance may be valid, close to expiration or period end, or waiting on work that has paused.

6. Reconcile to the accounting system

Use the report's drill-down as supporting detail, then reconcile the result under your organization's accounting policy in the general ledger. 14.14. How Accounting Works in AlgaPSA: Invoices, Payments, Credits, and Your Books explains the boundary between AlgaPSA billing and the books.

Investigate a rollforward difference

Symptom	What to inspect
Opening is unexpected	Backdated entries, corrections, or a changed reporting boundary.
Issued is lower than expected	Missing or incomplete prepaid funding activity.
Applied is higher than expected	Credit applications or hour usage dated into the month.
A bucket remains in Closing after expected delivery	Missing time, service mapping, or burn activity.
A client balance is unfamiliar	The credit and unburned-hour drill-downs for that client.

Do not compare the report only to invoice revenue. Deferred activity can span several operational events, and accounting exports may follow a separate finalized-document workflow. See 14.17. Export Finalized MSP Invoices for Import into QuickBooks, Xero, and Other Accounting Systems.

Use the report with operational performance views

Deferred revenue explains undelivered prepaid value; it does not measure whether the work is profitable. Review margin separately in 14.24. Profitability Reporting: Measure Gross Margin per Client, Agreement, and Ticket. Together, the reports answer different questions: what remains to be delivered, and what the delivered work cost the MSP.

Navigation

14.30. Review Deferred Revenue and Unearned Prepaid Balances by Month