To generate revenue projections or a revenue forecast, you must incorporate revenue streams from at least htree different revenue sources:
1. Revenue from Existing Contracts
Each existing contract will have a revenue schedule, which typically runs only through the end of the present term (there are plenty of exceptions). This schedule includes fees for subscription services and other items the accountants determine must be recognized over time. In addition to the scheduled revenues, you need to include any variable, transaction, or usage fees. Typically, these are calculated, recognized, and often billed in arrears.
2. Revenue from Renewal Contracts
To project revenues, you must project renewals. For all contracts expiring within your projection period, you must create projections. For the projections, you must create a revenue schedule. Projections are typically created using a simple renewal rate or churn number. A more sophisticated approach is to use different renewal rates for different segments. The most accurate approach, if your business supports it, is to project individual contracts. Obviously, this is only possible if you have either a limited number of contracts and sufficient customer interaction to gauge customer health, or you have an algorithmic-based approach based on actual usage information pulled from your application.
3. Revenue from New Contracts
These are revenues from new sales, again with subscriptions, variable fees, recognition schedules, etc.
Revenue Forecasts & QuickBooks - The Issues
Unfortunately, you can't turn to QuickBooks for any of the revenue streams needed for a revenue forecast. QuickBooks doesn't manage revenue schedules, doesn't understand "renewals," and Quickbooks doesn't readily accommodate the concept of prospective new customers. So, you turn to xls. But, spreadsheets are prone to errors and cumbersome to maintain as your business grows.
Enter Revenue Books, a web-based finance and metrics management solution for subscription businesses. Revenue Books is provides robust and comprehensive revenue reporting and analysis. Revenue Books not only generate revenue recognition schedules and accounting entires, it manages renewals and can project out revenues for existing contracts, for projected renewals, and for new contracts in the sales pipeline.
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