Deferred revenue

Definition

Cash a business has collected for goods or services it has not delivered yet.

Why It Matters

The seller keeps the cash and you inherit the obligation to deliver, so a balance nobody accounted for is a hidden price increase paid after closing. Put it in the working-capital negotiation by name instead of trusting the peg to catch it, and ask for the schedule behind it. Prepaid annual contracts, unredeemed gift cards, and memberships sold at a discount all have to be honored by you, at a cost the seller already banked. In a business that sells a year ahead, this line can be larger than the down payment.

In numbers: A gym that sold 3,000 annual memberships at $600 collected $1.8M for a year of service it still owes; if the seller keeps that cash, the buyer delivers the workouts, which is why it belongs in the working-capital math.