Cash collected, revenue and contracted value are three different numbers
A closer at one of our clients filed the outcome form for a sale. The sale was real, the buyer had paid, and the form said so. The cash total on the dashboard left it out.
The cause was a join. The dashboard attached every sale to a booked call, and this sale had never been a booked call. The closer had been told to leave the call date blank for sales like that, and the closer did. The dashboard had nothing to attach the row to, so it dropped it. We found the gap by adding up the forms by hand and comparing the sum with the page.
Every row in that total was true, and the total was still wrong. That is one way a money number goes wrong, and it is why this post is about names before it is about arithmetic.
What a wrong money number costs
Money numbers decide where the next ad budget goes, what a closer is paid and whether the owner thinks the month was good. If a report says "revenue" and means what buyers signed for, ad return reads higher than the bank account agrees with. If commission is paid on signed deals, a closer is rewarded for a payment that may never clear. If a refund is missing from the total, the owner plans a month around money that went back to the buyer.
Each of these starts with one word doing the work of three.
The three numbers
Contracted value is what the buyer agreed to pay in total. It is dated the day the deal closed. It is a promise, and it is the right number for judging how well a call went.
Cash collected is money that arrived. We count it as one row per payment, dated by the day that payment was made, and credit it to the closer of the sale it belongs to. An installment paid in October on a September sale is October's cash. Dating cash by the day of the sale looks tidy, but it rewrites last month every time an installment lands. Dating it by payment day means a month you have already reported does not move.
Revenue has two honest meanings. The IRS describes both in Publication 538: under the cash method you generally report income in the year you receive it, and under the accrual method in the year you earn it, whenever the payment arrives. A twelve-week program paid in full on day one is cash on day one and earned across twelve weeks. Both are correct, and they give different months. We do not put the word on a client's dashboard unless the rule is written next to it. Which rule your books use is a question for your accountant.
What pulls the three numbers apart
Payment plans. A plan is contracted today and collected over months. Who carries the plan matters. Stripe's page on Klarna says the seller receives the entire order amount minus fees up front and that Klarna takes the loss if the customer does not repay. That is a vendor describing its own product, but it shows the point: the same three-payment plan is one cash event through a lender and three through your own schedule.
Payments that fail. A payment that is due is not cash. A closer's form says what the closer expects to have collected, and in our CRM that figure is a claim. A claim is shown differently from a payment someone has matched to a statement, and it never goes into a revenue total, so nobody mistakes a closer's word for money in the bank.
Refunds and disputes. Stripe's refund page says its processing fees from the original payment are not returned. Its disputes page says a chargeback reverses the payment and that Stripe then debits your balance for the payment amount and the dispute fee. A refunded sale therefore costs a little more than the sale. The example below leaves fees out to keep the arithmetic readable.
Deposits. A deposit is cash and it is not a sale. We model it this way: the deposit call counts as a show and never as a deal, its cash counts on the day it was paid, and the expected full price goes in as the contract value. When the balance arrives the sale is filed as won with only the remaining cash, so the deposit is never counted twice.
A worked example
This is a made-up example. It names no client, and every amount is in one currency.
Five buyers each sign for 12,000 in month 1, so 60,000 is contracted. Two pay in full. Three take a three-payment plan of 4,000 each month. In month 2 one plan buyer's card fails. In month 3 that payment is retried and clears, the other two plan buyers make their last payment, and one of the buyers who paid in full is refunded.
| Month 1 | Month 2 | Month 3 | Three months | |
|---|---|---|---|---|
| Contracted (signed that month) | 60,000 | 0 | 0 | 60,000 |
| Cash collected | 36,000 | 8,000 | 12,000 | 56,000 |
| Refunded | 0 | 0 | 12,000 | 12,000 |
| Cash kept (collected minus refunded) | 36,000 | 8,000 | 0 | 44,000 |
Read the last column. The report that says "revenue 60,000" is 16,000 higher than the cash the business kept, and 4,000 of that gap is still owed by the buyer whose card failed. The other 12,000 went back to a buyer who left.
Add an ad bill, also made up, of 20,000 for these five sales. Against contracted value the return reads 3.0. Against cash kept so far it reads 2.2. The two figures answer different questions, so the owner should be told which one is on the page.
Now the dating rule. If cash is dated by the day of the sale, all 56,000 lands in month 1, and month 1 grows from 36,000 to 56,000 after it was reported. If cash is dated by payment day, month 1 stays at 36,000 for good, month 2 reads 8,000, and the refund shows up in month 3 where it happened.
What to do this week
- Write one line for each of the three numbers and print it under every report that uses them.
- Decide which date cash counts on, and write it down. We use the payment day.
- Add up last month's payments in your processor and compare the sum with the cash figure on your report. List every difference.
- Find the sales that never went through a booked call, such as a renewal or a sale made by message, and check that they reach the cash total.
- Give deposits, failed payments and refunds their own rows instead of folding them into one figure.
If you want to see which of these you can answer today, the Revenue Blind-Spot Score takes about a minute. The last hand-off in the trace of a sale, from call to payment, is where contract value gets counted as cash.
The dropped sale was found by comparing a total with its rows. The model now counts a sale with no call attached, and the cash card in our client app opens the payments behind it. A number that cannot name its rows is a claim.