MRR is a core operating and reporting metric, but you use Quickbooks. MRR may be your most important non-financial reporting metric, but there is no MRR report option in Quickbooks. So, you turn to spreadsheets to crank out MRR reports. And, with this monthly exercise come monthly headaches in producing accurate reporting.
What is MRR and why the challenges with QuickBooks?
MRR is a measure of predicable
recurring revenue components of your subscription business.
While MRR means the same for term and monthly subscription businesses, the calculation is very different.
For a term subscription business, MRR is calculated using a monthly value derived by normalizing contract transactions. For example, a $1,200 annual subscription has a MRR value of $100. This normalized value is not typically derived from actual revenue schedules that can include "noise" due to revenue recognition methods. This normalized value is a representation of the monthly value of a contract element during the life of the subscription. Unfortunately, MRR doesn't exist in QuickBooks anywhere, so you have to generate it.
In a monthly subscription business, you can use actual billed, invoiced, or paid fees to determine MRR, which means you can use actual transactions from QuickBooks or even credit card processing transactions. In either case what is important about MRR is not a single number, but rather the momentum around the components of your company's MRR:
- MRR from renewals
- MRR from new sales
- MRR from upgrades
- MRR losses
Since it is extremely difficult to segment transactions in Quickbooks into these components, it is almost impossible to generate useful MRR reports using only QuickBooks transactions.
If you have a term subscription business, Revenue Books makes it easy to generate your normalized MRR reports. And whether you are a term subscription or a monthly subscription business, Revenue Books fills the information gap, making it easy to perform MRR analysis by revenue category.