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SaaS Subscription Models

What are the different types of SaaS or subscription business models? There are two core Subscription Models applied in SaaS Subscription businesses – monthly and term. Monthly Subscription Model In the Monthly subscription model, the business or consumer is charged and pays each month, frequently via credit card of automatic e-payments. While there is typically…

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New Bookings

What is new bookings in a SaaS business? New Bookings typically refers to the portion of bookings attributed to new customers, or more specifically new contracts with new or existing customers. For example, ABC, Inc. has been a client since 2005, but a new division signed a new term agreement. The bookings associated with this…

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On-boarding

On-Boarding Definition for SaaS < Back to SaaSpedia Index What is on-boarding in a SaaS business? On-boarding is the process of taking on a new client. Typically this includes: Establishing a contract or legal arrangement between you and your client Establishing accounting, billing and financial records Providing client directions, including login information and steps forward…

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Bookings

What is new bookings in a SaaS business? New Bookings typically refers to the portion of bookings attributed to new customers, or more specifically new contracts with new or existing customers. For example, ABC, Inc. has been a client since 2005, but a new division signed a new term agreement. The bookings associated with this…

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Unbilled AR

What is Unbilled AR and how do you calculate it? Like deferred revenue, Unbilled AR (accrued revenue) is an essential element and concept of revenue recognition for subscription businesses. Unbilled AR is an Asset account on the balance sheet that represents amounts recognized as revenue for which invoices have not yet been sent. This can…

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Deferred Revenue vs. Revenue Backlog

Deferred Revenue vs. Revenue Backlog Deferred Revenue Deferred Revenue is a current liability account used in financial reporting. Deferred Revenue appears on the balance sheet and is calculated as follows: The sum of (the total of Invoices for all Contract Elements for a single Contract minus the total of Recognizable Revenue for all Contract Elements…

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Normalized Contracts

What is a normalized contract or subscription? Normalization refers to the process of making disparate contracts similar in some way so they can be measured in context to each other or to other performance metrics. Normalization is typically performed by assigning either MRR or ARR to a contract element.

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Finance for Entrepreneurs

Essential Finance Concepts for Subscription Businesses You are an entrepreneur. You are passionate, motivated, and confident. You know enough about a problem to believe you can build a successful company by solving that problem for the marketplace. Maybe better, faster or cheaper than someone else. Maybe by superior innovation, by pure muscle & force, or…

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Cash Flow Forecasting

Cash Flow Projections & Forecasting in Subscription Businesses How do you forecast cash flow in a subscription or SaaS business? To generate a cash flow forecast in a subscription business such as SaaS, you project three different sources of cash in: Cash from invoices from existing customer subscriptions Cash from invoices from future renewed subscriptions…

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