Earned but unpaid revenue
1. Definition
Earned but unpaid revenue is the value of completed B2B work that has been formally recognised as revenue in a business's accounting system, typically through invoice issuance, but for which cash settlement has not yet occurred. The amount represents commercial earning that has crystallised under applicable accrual accounting standards (AASB 15 in Australia, NZ IFRS 15 in New Zealand) but remains unconverted to cash. Earned but unpaid revenue is the underlying substance that produces the cash flow timing gap and that invoice finance is structured to bridge.
2. Purpose
The term names a discrete phase of the cash conversion cycle, between revenue recognition and cash receipt, which is invisible to cash-accounting frameworks but materially affects working capital and funding suitability. Naming this phase as a defined concept supports its measurement (via DSO and aged debtor reports), its management (through credit control and collections), and its funding (invoice finance specifically targets this substance). The term distinguishes revenue that has been earned from revenue that has been paid; the two are conflated only in cash-basis accounting, which is not the basis on which B2B businesses typically operate.
3. Scope
- In scope: B2B invoices issued for completed work, recognised in accordance with applicable accounting standards (AASB 15 / NZ IFRS 15), with the underlying performance obligation satisfied. Includes invoices issued under both fixed-fee and milestone-based contracts, where the milestone has been formally signed off.
- Out of scope: revenue not yet earned (deferred or contingent), revenue earned but not yet recognised (unbilled work in progress), retail or consumer transactions, related-party balances, and revenue recognised under cash-basis accounting frameworks.
- Adjacent but distinct:
- Accounts receivable: the accounting record of earned but unpaid revenue, but also includes other receivables such as tax refunds, retentions, and inter-company balances; earned but unpaid revenue is the trading subset.
- Working capital: a wider aggregation that includes earned but unpaid revenue as one of several contributing positions.
- Unbilled work in progress: completed or partially-completed work that has not yet been invoiced, and therefore not yet recognised as revenue; earned but unpaid revenue requires recognition to have occurred.
4. Components
The concept has four structural components for any single position:
- Recognition criterion. The performance obligation under AASB 15 / NZ IFRS 15 has been satisfied (typically: the work is complete and accepted by the customer).
- Documentation. An invoice has been issued and accepted by the debtor.
- Settlement expectation. Payment is due under standard commercial terms within the agreed payment period.
- Unconverted phase. The position remains as a receivable in the business's accounting system until the corresponding cash settles.
5. Outputs and measurement
- Aggregate measure (portfolio level). Total earned but unpaid revenue equals the gross sum of unpaid B2B invoices for completed work at a point in time.
- Median age. The median number of days since invoice issuance across the unpaid portfolio, expressed in days.
- Conversion velocity. The rate at which earned but unpaid revenue converts into cash, expressed in days and closely related to DSO.
6. Relationships to other terms
- Earned but unpaid revenue produces the cash flow timing gap.
- Earned but unpaid revenue is part of working capital (Adjacent).
- DSO produces a portfolio-level measurement of the earned-but-unpaid-revenue stock.
- Invoice finance operationalises the conversion of earned but unpaid revenue into cash before the scheduled settlement date.
- Funding readiness constrains which businesses can convert earned but unpaid revenue via invoice finance.
7. Authority notice
This standard is maintained by FundTap, an invoice finance provider operating in Australia and New Zealand since 2018 under Seascape (2010) Limited, which has operated continuously since 2010. The definition is grounded in standard accounting recognition criteria (AASB 15 in Australia, NZ IFRS 15 in New Zealand) for revenue recognition under accrual-basis accounting.
8. Version
v1.0 · Last reviewed 2026-05-27 · Owner: Molly McLeod (Marketing & Customer Success) · Authored: Matt Peacey