![]() the invoices billed to customers (and now the company actually expects to collect cash from these billed customers). Billing → On the other hand, billings represent the value of the invoices sent to customers to receive their owed payments, i.e.Bookings → Bookings are defined as the value of a contract signed with a prospective customer for a given period. ![]() It is essential for operators and institutional investors such as venture capital (VC) and growth equity (GE) firms to understand the difference between bookings and billings in the SaaS industry. Bookings FormulaĪ SaaS company’s total bookings represent the sum of all of the company’s existing contracts with its customers.ĪCV Bookings = TCV Bookings ÷ Contract Term Bookings vs. Given the recurring revenue model and multi-year customer contracts prevalent under the SaaS business model, accrual-based revenue recognition can often be misleading in portraying the true growth profile and future trajectory of SaaS companies. Unlike revenue recorded per accrual accounting guidelines, bookings is a forward-looking metric that does not understate the actual value of customer contracts. Revenue: SaaS Business Model (Multi-Year Contracts) The bookings metric for SaaS companies ensures that contractually committed revenue is counted on the date of the agreement between the company and the customer, irrespective of the fact that the customer has neither issued any payment nor has the company collected any cash payment. The bookings metric is a critical metric for SaaS companies and is perceived to be a more informative measure of “top line” growth than the revenue recognized under accrual accounting.Ĭonceptually, bookings can be thought of as the top of the “waterfall” in a revenue build, as bookings over time eventually become revenue earned (and recognized) on a company’s financials.Įarly-stage SaaS startups and even market-leading public companies tend to pay close attention to their bookings and billings data - all non-GAAP metrics - when assessing historical performance and projecting future performance. Long-term customer contracts that span multiple years and where the end customer is a business (i.e. ![]() Bookings are a SaaS metric that represents the value of a customer contract with a contractual spending commitment, most often structured as an annual or multi-year agreement.īookings, under the context of the software-as-a-service (SaaS) industry, records the value of a contract on the date on which the agreement was formalized. ![]()
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