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Managing Deferred Revenue for SaaS Companies: Best Practices for Tracking, Reporting, and Analysis

SaaS Metrics

When a customer pays for a service upfront that won’t be delivered until later in the future, the company does receive the cash. But the revenue generated from the advance payment cannot be marked as earned — at least not until the service has been rendered. This unearned revenue is called deferred.

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The Remaining Performance Obligation (RPO) SaaS Metric

OPEXEngine

This SaaS metric is defined as the sum of Deferred Revenue and Backlog. Deferred Revenue for SaaS companies is the contractual obligation to deliver the SaaS product for the period invoiced. Public companies report this metric in their filings, but the use of the RPO as a key performance indicator is sporadic.

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What Is Unearned Revenue and How to Account for It

Baremetrics

You can often find yourself receiving money long before you provide agreed upon services or, conversely, providing services and then waiting for payment. But, what are the accounting ramifications of customers paying you before you render services? This puts you in the position of having “unearned revenue”.

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What Is Working Capital?

Baremetrics

While the equations are all fairly simple, finding the data to calculate all of these metrics is not. Baremetrics makes it easy to collect and visualize all of your sales data so that you always know how much cash you have on hand, which clients have paid, and who you still owe services to. How do you calculate working capital?

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SaaS Balance Sheet Examples

Baremetrics

Speaking of your users, it is important to understand how much revenue they are generating with the best possible estimates of your MRR and ARR. Baremetrics brings you metrics, dunning, engagement tools, and customer insights. Accounts receivable includes the revenue that your company has recognized but not yet collected.

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The Mental Mapping from Annual to Monthly and Usage-Based SaaS Metrics

Kellblog

I might call this intentional MRR, much like signing up for a SaaS service on a month-to-month basis [2]. And what’s the impact on your other SaaS metrics? If ARR is a forward-looking metric [6], what do ARR-based metrics like net dollar retention (NDR) mean [7] in a world without fixed forward commitments?

Metrics 131
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Are You Counting Payments as Renewals?

Kellblog

Enterprise SaaS has drifted to a model where many, if not most, companies do multi-year contracts on annual payment terms. Buyers typically perform a thorough evaluation process before purchasing and are quite sure that the software will meet their needs when they deploy. How did we get here? Let’s consider an example.