Accounting Annual Recurring Revenue Calculator FAQ
Answers to common questions about calculating ARR from MRR, revenue movements, churn, contraction, and net revenue retention.
This FAQ explains the terms, inputs, calculations, and practical boundaries of a monthly annual recurring revenue calculation. Results are estimates based on the revenue movements entered and should be aligned with the reporting definitions used by the business.
ARR and MRR basics
Core concepts used in the calculator.
What is annual recurring revenue?
Annual recurring revenue, or ARR, is an annualized measure of predictable recurring subscription or contract revenue. This calculator estimates it as ending MRR multiplied by 12.
What is monthly recurring revenue?
Monthly recurring revenue, or MRR, is the monthly run rate of recurring revenue from subscriptions or ongoing contracts.
What is the difference between MRR and ARR?
MRR expresses the recurring revenue run rate per month. ARR expresses an annualized run rate, commonly calculated as MRR multiplied by 12.
Should one-time fees be included in MRR or ARR?
Generally, no. One-time setup fees, implementation work, and other non-recurring income should be excluded when measuring recurring revenue.
Revenue movement inputs
How to classify the changes entered for a reporting month.
What counts as new MRR?
New MRR is recurring revenue from customers that were not part of the opening customer base for the month.
What counts as expansion MRR?
Expansion MRR is additional recurring revenue from existing customers, such as upgrades, added seats, or added recurring services.
What is contraction MRR?
Contraction MRR is recurring revenue lost when an existing customer remains active but reduces its plan, seats, or recurring spend.
What is churned MRR?
Churned MRR is recurring revenue lost when a customer fully cancels its subscription or contract.
How should a customer that cancels and returns be treated?
Use a consistent reporting policy. The classification may depend on timing and whether the return is treated internally as reactivation or new business.
Calculation and retention questions
How the calculator produces its main results.
How is net MRR change calculated?
Net MRR change equals new MRR plus expansion MRR, minus contraction MRR and churned MRR.
How is ending MRR calculated?
Ending MRR equals starting MRR plus net MRR change.
How is net revenue retention calculated?
Net revenue retention equals starting MRR plus expansion MRR, minus contraction MRR and churned MRR, divided by starting MRR and multiplied by 100.
Why does net revenue retention exclude new MRR?
It is designed to isolate revenue performance of the customers in the opening base. New customer revenue belongs to total MRR growth rather than retention of that base.
Can net revenue retention exceed 100%?
Yes. This happens when expansion from the opening customer base is greater than the contraction and churn within that base.
Accuracy and reporting limits
Reasons a calculator estimate may differ from internal or financial reporting.
Is annualized MRR the same as recognized revenue?
No. Annualized MRR is a run-rate estimate. Recognized revenue can differ because of billing schedules, revenue recognition, refunds, credits, and contract terms.
How can foreign exchange affect ARR?
If customers pay in different currencies, exchange-rate changes can alter reported MRR and ARR after conversion to a reporting currency.
Can ARR decrease even if there are new customers?
Yes. ARR declines when contraction and churn exceed the combined new and expansion MRR in the period.
Should this calculator be used for financial statements?
It is an educational estimate for recurring revenue analysis. Financial reporting should follow the organization's applicable accounting policies and controls.
How is ARR calculated from MRR?
This calculator multiplies ending monthly recurring revenue by 12 to estimate annual recurring revenue.
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