Deferred revenue is money a customer has already paid for work you have not done yet: deposits, prepayments, maintenance plans paid up front.
It sits in your bank account and it is a liability, not revenue. Until the work is done, that money is still theirs.
The mirror image of retainage
Retainage is money you have earned and cannot touch. Deferred revenue is money you can touch and have not earned.
Both distort the same picture in opposite directions, and both are invisible in a bank balance.
Why it is the more dangerous of the two
Retainage makes a business look poorer than it is, which is uncomfortable and safe. Deferred revenue makes a business look richer than it is, which is comfortable and dangerous.
A healthy-looking balance that is largely customer deposits belongs to work still to be delivered. Spending it on overheads means the materials for that work have to come out of future income — and a business in that position has to keep taking deposits to fund the work the last deposits paid for.
That pattern is survivable while the phone keeps ringing and unrecoverable when it stops.
Reading it
Look at deposits held against your cash balance. The difference is closer to what is genuinely yours.
Under cash accounting the deposit shows as income in the month it arrives, which is one of the clearest cases where the cash view and the truth diverge.
The practical habit
Track deposits separately from operating cash. The businesses that come unstuck are rarely the ones that took deposits — they are the ones that stopped being able to tell the difference.