Subscription Billings vs. ARR
Are these technically the same? Or is it only when subscription billings are 1yr contracts? For example:
- $30k SaaS contract, 3 year period.
- $10k ARR, $30k subscription billings
Is this wrong?
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Only the revenue that's recognized in a specific year, and is recurring/true subscription, should be counted as ARR. So if it's a $30k 3 year contract, assuming it's evenly spread out each year, would be a $10k ARR figure. The $30k figure would be typically shown as TCV bookings (total contract value), which can also be annualized as ACV bookings. The key is segmenting out 1) when each part of a contract is recognized (what year/quarter is it recognized as revenue) and 2) what part of the contract is truly recurring, rather than one-off like implementation fees.
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