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.
- Finance teams need a revenue architecture strategy. FP&A should understand how pricing, contracts, billing, revenue recognition, and forecasting fit together as one system.
Timestamps
05:29 — Should the same transaction produce $100 of revenue or $3?
08:15 — Why invoicing does not necessarily equal revenue
12:30 — The $100M acquisition everyone wanted to move forward with
17:58 — Devon's diligence method: start with the numbers, then read the contracts
18:42 — How the buyer avoided a $100M mistake
40:40 — Why SaaS, AI, and consumption-based pricing are changing the revenue model
48:45 — Practical steps for aligning offerings, contracts, and RevRec
56:05 — The revenue architecture question every FP&A team should be asking
Earn CPE Credits
If you would like to earn CPE credit for listening to the show, visit earmarkcpe.com/fpna. Download the app, take a short quiz, and get your CPE certificate.
Further Reading/Listening
Devon Coombs — Website & Resources:
https://www.devoncoombs.com/
Connect with Devon on LinkedIn:
https://www.linkedin.com/in/devoncoombs/
The 10 Laws of Finance:
https://www.devoncoombs.com/book
