Why This Keeps Tripping Up Finance Teams
The terms seem simple until you try to operationalize them. Consider this scenario:
A customer signs a $120K annual contract with a $20K implementation fee, pays quarterly, and the contract starts on the 15th of the month.
What's the ARR? What's the MRR? What's the bookings number? The answers depend entirely on your definitions — and if different teams use different definitions, your board deck will never reconcile to your billing system.
The Definitions That Actually Matter
MRR (Monthly Recurring Revenue)
The recurring revenue normalized to a monthly period. A $12K annual contract = $1K MRR. It does not include one-time fees, implementation charges, or usage overages (unless you've defined them as recurring).
ARR (Annual Recurring Revenue)
MRR multiplied by 12. It's an annualized run-rate snapshot of your current recurring revenue — not a sum of what you've collected over the year.
Bookings
The total contract value signed in a given period. A 3-year deal worth $360K = $360K in bookings, but only $120K in ARR.
TCV (Total Contract Value)
The full value of the contract over its entire term, including one-time fees. That $120K/year deal with $20K implementation over 3 years = $380K TCV.
ACV (Annual Contract Value)
The annualized portion of a multi-year deal. A $360K contract over 3 years = $120K ACV.
Recognised Revenue
What you can actually report under GAAP/IFRS. Revenue is recognised as the service is delivered, regardless of when cash arrives. This is what your auditor cares about.
The Mistakes That Show Up in Board Decks
- Reporting bookings as ARR — A $500K multi-year deal is not $500K ARR. It inflates your run-rate and misleads investors.
- Mixing MRR and ARR inconsistently — Showing MRR on one slide and ARR on the next without clear labels creates confusion about your actual scale.
- Counting ARR before the contract starts — If the deal is signed in March but starts in April, it's not March ARR. Timing matters.
- Forgetting to subtract churn — ARR only means something if it's net of churned customers. Reporting gross additions without subtracting losses is misleading.
- Including non-recurring revenue — Implementation fees, one-time setup charges, and professional services are not recurring. Including them inflates ARR.
How to Structure the Revenue Section of Your Board Deck
Slide 1: ARR Summary
Current ARR, ARR at start of period, and net change. One number, clearly defined.
Slide 2: ARR Bridge
Starting ARR + New ARR + Expansion ARR - Churned ARR - Contraction ARR = Ending ARR. This shows where growth is coming from.
Slide 3: MRR Trend
Monthly view for the last 12 months. MRR gives you granularity that annual numbers hide — you can see seasonal patterns, the impact of specific deals, and churn spikes.
Slide 4: Bookings
Total new contracts signed in the period. Keep this separate from ARR to avoid confusion. Show TCV and ACV alongside.
Slide 5: Cohort Retention
Net Revenue Retention by quarterly cohort. This is the metric that tells investors whether your existing customers grow or shrink over time.
The Reconciliation Problem
Here's where it gets messy in practice:
- Your CRM tracks opportunity values (which might be ACV, TCV, or something else depending on how reps enter deals)
- Your billing system tracks what's actually invoiced
- Your finance team tracks recognised revenue
- Your data team has a warehouse model that calculates ARR from subscription records
These four numbers won't match. They're measuring different things at different times using different definitions. The goal isn't to make them identical — it's to reconcile them, understand the discrepancies, and document your methodology.
A Simple Test
Pull your ARR number from three places:
- Your CRM (sum of active recurring opportunity values)
- Your billing system (sum of active subscription MRR times 12)
- Your board deck or internal model
If all three match within 1%, you're in good shape. If they're within 5%, you have minor timing issues to document. If they diverge by more than 10%, you have a reconciliation problem that needs to be fixed before your next board meeting or investor conversation.
What This Looks Like When It Works
You should be able to answer these questions in under a minute:
- What's our current ARR?
- How does that reconcile to what Stripe shows?
- What's the breakdown of net new ARR this quarter (new vs. expansion vs. churn)?
- What's our ARR calculation methodology?
If answering any of these requires a data team ticket and a 48-hour turnaround, your revenue metrics infrastructure isn't ready to scale.
Eru connects your CRM, billing, and warehouse, reconciles the numbers automatically, and gives you ARR you can defend in any room.
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