The $100M Revenue Mistake Everyone Missed

For FP&A, the most dangerous revenue number may be the one that looks credible enough not to question.

A $100 million acquisition was just three weeks from closing. The target had been audited, the opinion had come back clean, and the deal looked compelling. Then Devon Coombs, CPA, spent a weekend digging through the contracts and came back with a very different conclusion: the revenue story did not match the contractual rights and cash flows underneath it.

In this episode of FP&A Today, Devon explains why FP&A cannot automatically treat invoicing as revenue, how principal-versus-agent decisions can make the same transaction appear as either $100 or $3 of reported revenue, and why worsening cash flow can reveal problems that a strong top line hides. The conversation also looks ahead to AI and consumption-based pricing, where minimum commitments, usage, overages, invoicing cadence, and contract structure can make forecasting and revenue recognition substantially more complex.

The bigger lesson for FP&A is simple: understanding revenue means understanding the contracts and economics behind the number, not just the number itself.

Key Moments

Revenue and cash flow need to tell a coherent story. Rising revenue and income should trigger questions when operating cash outflows continue to deteriorate.

An invoice is not automatically revenue. Recognition depends on contractual rights, performance obligations, and when those obligations are actually satisfied.

Gross versus net revenue can dramatically change the top line. The same $100 transaction could result in $100 or $3 of reported revenue depending on the company's role in the transaction.

Good diligence starts before management explains the numbers. Devon describes looking at the financials first, forming an independent view, and then going directly to the underlying contracts.

Contracts are an FP&A input, not only an accounting or legal document. Pricing, billing, and commercial terms can materially affect forecasts and the economics FP&A is trying to model.

Standardization reduces revenue risk. Clearer offerings, pricing structures, contracts, and RevRec processes make it easier to scale without discovering problems during a transaction.

AI and consumption pricing are changing the forecasting problem. Minimum commitments, overages, usage, breakage, and billing cadence can produce very different revenue patterns.