Accounting Annual Recurring Revenue Calculator
Calculate ending annual recurring revenue, net new ARR, growth rate, and revenue retention from recurring revenue movements.
Overview
This Accounting Annual Recurring Revenue Calculator estimates ending ARR from beginning ARR and the recurring revenue changes recorded during a period. Enter new customer ARR, expansion ARR, contraction ARR, and churned ARR to review growth and retention metrics.
How it works
The calculator starts with beginning ARR, then adds new customer ARR and expansion ARR. It subtracts contraction ARR and churned ARR to calculate net new ARR and ending ARR. ARR growth compares net new ARR with beginning ARR. Gross revenue retention measures how much opening ARR remains after contractions and churn, while net revenue retention also includes expansions from existing customers. New customer ARR is excluded from both retention measures.
How to use this calculator
- 1Enter the annual recurring revenue at the start of the reporting period.
- 2Add ARR from newly acquired customers.
- 3Enter expansion ARR from existing customers.
- 4Record ARR lost through downgrades and customer churn.
- 5Review ending ARR, net new ARR, growth, and retention results.
Example Calculation
Beginning ARR
$1,000,000
New customer ARR
$250,000
Expansion ARR
$100,000
Contraction ARR
$40,000
Churned ARR
$60,000
Ending ARR
$1,250,000
Beginning with $1,000,000 in ARR, the business adds $250,000 of new ARR and has net new ARR of $250,000 after expansion, contraction, and churn. Ending ARR is $1,250,000, growth is 25.0%, and net revenue retention is 100.0%.
Frequently asked questions
What is annual recurring revenue (ARR)?
ARR is the annualized value of predictable recurring subscription or contract revenue. It generally excludes one-time charges and non-recurring services.
How is ending ARR calculated?
Ending ARR equals beginning ARR plus new customer ARR and expansion ARR, minus contraction ARR and churned ARR.
What is the difference between churn and contraction ARR?
Churned ARR is lost when a customer cancels or fails to renew. Contraction ARR is lost when an existing customer remains but spends less through a downgrade or reduced commitment.
What is net new ARR?
Net new ARR is the change in recurring revenue during the period: new ARR plus expansion ARR, less contraction ARR and churned ARR.
What is net revenue retention (NRR)?
NRR shows how opening ARR from existing customers changed after expansions, contractions, and churn. It excludes ARR from newly acquired customers.
Can net revenue retention be above 100%?
Yes. NRR exceeds 100% when expansion ARR from existing customers is greater than ARR lost through contractions and churn.
Should one-time implementation fees be included in ARR?
Usually no. ARR is intended to measure contracted, recurring revenue, so one-time fees are commonly tracked separately.
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Assumptions and warnings
Assumptions
- All amounts represent annualized recurring revenue for the same reporting period and currency.
- New customer ARR is kept separate from expansion ARR generated by existing customers.
- Contraction ARR and churned ARR are recorded as positive amounts before being deducted.
- The calculation excludes one-time setup fees, professional services, usage that is not contracted recurring revenue, taxes, and foreign-exchange movements.
- Results are management estimates and depend on consistent revenue-recognition and ARR classification policies.
Warnings
- This calculator provides an estimate for internal reporting and is not accounting, audit, or financial advice.
- Apply your organization's revenue-recognition policy consistently when classifying ARR movements.