It's almost always the issue
If I review one thing first in an accounting review, it's revenue recognition. It is the single most common material weakness in early-stage finance, and it's usually invisible until diligence.
Common traps
- Annual contracts billed monthly recognized on invoice date instead of ratably
- Setup or implementation fees booked all upfront
- Usage-based / overage revenue recognized before the service is delivered
- Multi-element arrangements with no standalone selling price analysis
What good looks like
A defensible recognition policy aligns revenue with delivery of value, not with cash collection or invoice date. Document the policy, apply it consistently, and make sure the booking-to-revenue bridge is something you can explain in five minutes. When you can, auditors and acquirers can too.