Formula
Calculated billings = revenue
+ closing deferred revenue
− opening deferred revenueWorked example
Illustrative figures. One quarter.
| Line | USD |
|---|---|
| Revenue recognised in the quarter | 2,400,000 |
| Closing deferred revenue | 3,550,000 |
| Opening deferred revenue | (3,100,000) |
| Calculated billings | 2,850,000 |
Why billings and ARR diverge
Billings depend on payment terms. A customer moving from annual invoicing in advance to quarterly invoicing reduces billings in the year of the change with no change in ARR. Comparing billings growth with ARR growth isolates the effect of invoicing terms.
Contract assets
Where revenue is recognised before it is invoiced, a contract asset or an unbilled receivable arises. A complete calculation deducts the increase in both.
Billings and cash
Billings precede collections. For cash planning they are adjusted for payment terms and collection experience.
Where Revnewed fits
Revnewed does not issue invoices or hold deferred revenue balances, so it does not report billings. Invoicing stays in the billing or accounting system.
Line items carry a billing interval, monthly or annual, which shows where billings will be uneven relative to MRR.
Common misstatements
- Billings presented as revenue
- Billings include amounts not yet earned.
- Billings growth read as ARR growth
- A change in invoicing terms moves billings with no commercial change.
- Contract assets and unbilled receivables ignored
- Revenue recognised ahead of invoicing then appears as billings that did not happen.