IFRS 15 Revenue: when can you actually record a sale?

The money is in your bank account. The customer is happy. So the sale is done, right?

Not necessarily — at least not in your accounts. IFRS 15, Revenue from Contracts with Customers, decides when a business can record revenue, and the answer is sometimes later than you'd expect.

The one-sentence version

You record revenue when (or as) you transfer the promised goods or services to the customer — not when you get paid, and not when you send the invoice.

The five steps

IFRS 15 works through five steps. For most small businesses, they go through them without realising:

1. Identify the contract. There has to be a real agreement — written, verbal, or implied — that both sides have approved, with payment terms and commercial substance.
2. Identify the performance obligations. What exactly did you promise? If you sold software and a year of support, that's two promises, not one.
3. Determine the transaction price. What you'll actually be paid, including variable bits like discounts, rebates, or refunds you expect to give.
4. Allocate the price. Split the price across the promises from step 2, based on their standalone selling prices.
5. Recognise revenue when you deliver. Record revenue only when each promise is fulfilled — either at a point in time or over time, depending on the contract.

Why cash ≠ revenue

This is where small businesses get tripped up. Consider a few everyday situations:

• Advance payment: A client pays you $12,000 in January for a year's maintenance contract. You received cash, but you've only earned one month's worth of revenue. The rest sits on the balance sheet as a contract liability (unearned revenue) until you perform the work.
• Payment on delivery: You ship goods with payment terms of 30 days. You delivered the goods, so the revenue is yours now — recorded with a receivable, even though no cash has arrived.
• Bundled deals: You sell a machine for $50,000 including installation and a one-year warranty. Step 2 asks whether the installation and warranty are separate promises. If they are, you can't book the full $50,000 on delivery — part of it belongs to the future services.

Over time vs. at a point in time

Most retail sales recognise revenue at a point in time — when the goods change hands. But if the customer receives the benefit as you perform (consulting, subscription services, custom manufacturing), revenue is recognised over time, typically in proportion to progress.

Get this wrong and your monthly profit swings wildly — big months when cash arrives, dead months when you're actually doing the work.

The practical takeaway

You don't need a standards committee in your head. The core discipline is simple: record revenue when you've delivered, not when you've been paid. If you can look at any invoice and say "have we done what we promised?", you're most of the way there.

That said, bundled contracts and advance payments are genuinely tricky, and they're exactly where a spreadsheet starts lying to you. Revenue rules are one more thing your accounting system should enforce for you — promised vs. delivered, matched up month by month, without a manual ritual at year-end.

Revenue recognition, contract liabilities, and deferred income are all on Point's roadmap — the goal is honest books that follow the standard without needing an accounting degree to operate them. Join the waitlist to follow the build.