SaaS billing & metrics glossary
70 plain-English definitions of the metrics, billing mechanics, pricing models and revenue accounting terms that B2B subscription businesses actually run on — with the formula, an example, and why it matters operationally.
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Metrics
20 terms
Annual recurring revenue (ARR)
The normalised value of a subscription business's recurring revenue over twelve months, excluding one-off charges such as implementation fees.
Average revenue per account (ARPA)
Recurring revenue divided by the number of active accounts — the average size of a customer relationship.
Bookings, billings and revenue
Three different numbers describing the same contract at three different moments — what was signed, what was invoiced, and what was earned....
Burn multiple
How many dollars of net cash a company burns to generate one dollar of net new ARR.
CAC payback period
The number of months of gross profit from a new customer required to repay what it cost to acquire them.
Cohort retention
Retention measured for a fixed group of customers grouped by when they started, tracked over their own lifetime rather than over calendar...
Committed annual recurring revenue (CARR)
ARR plus contracted revenue that has been signed but has not yet started billing.
Contraction revenue
Recurring revenue lost from customers who downgraded, removed seats or reduced usage commitments but did not cancel.
Customer acquisition cost (CAC)
The fully loaded sales and marketing cost of acquiring one new customer over a given period.
Customer lifetime value (LTV)
The total gross profit expected from a customer over the whole of their relationship with you.
Expansion revenue
Additional recurring revenue from existing customers — upsells, cross-sells, added seats, tier upgrades and usage growth.
Gross revenue retention (GRR)
The percentage of recurring revenue retained from an existing cohort after churn and downgrades, excluding any expansion — so it can never...
LTV:CAC ratio
The ratio of expected lifetime gross profit from a customer to the cost of acquiring them — a rough test of whether...
Logo churn
The percentage of customers — counted as accounts, not dollars — who cancel during a period.
Monthly recurring revenue (MRR)
Recurring subscription revenue normalised to a single month, regardless of how often the customer is actually invoiced.
Net revenue retention (NRR)
The percentage of recurring revenue retained from an existing cohort of customers over a period, including expansion and after churn and downgrades....
Revenue churn
The percentage of recurring revenue lost during a period through cancellations and downgrades.
Rule of 40
A benchmark stating that a SaaS company's revenue growth rate plus its profit margin should total at least 40%.
SaaS magic number
A measure of sales efficiency comparing new recurring revenue produced in a quarter against the sales and marketing spend of the prior...
SaaS quick ratio
The ratio of revenue gained to revenue lost in a period — a measure of how efficiently growth outpaces churn.
Billing
16 terms
Billing cycle
The recurring interval at which a subscription generates an invoice — monthly, quarterly, annually or on a custom period.
Billing in advance vs in arrears
Whether a customer is invoiced at the start of a service period for what they are about to receive, or at the...
Credit note
A document that reduces the amount a customer owes against a previously issued invoice — used for downgrades, corrections, refunds and goodwill...
Dunning
The automated process of recovering failed payments and overdue invoices through scheduled retries and customer communications.
Entitlement
The specific features, limits and access a customer is granted as a consequence of what they have purchased.
Invoice
The document requesting payment from a customer for a defined period or set of charges, and the legal and tax record of...
Involuntary churn
Customers lost because a payment failed rather than because they chose to leave — expired cards, insufficient funds, or unpaid invoices.
Merchant of record
The legal entity that sells to the end customer and carries responsibility for payment processing, tax collection and compliance on that sale....
Minimum commitment
A contractual floor on what a customer will spend over a period, regardless of how much they actually consume.
Overage
Charges for consumption beyond an included allowance or committed volume.
Prepaid credits
A model where customers buy a balance of credits up front and consumption draws it down until it is exhausted or expires....
Proration
Adjusting a subscription charge to reflect a change that happens partway through a billing period, so the customer pays only for what...
Tenant provisioning
Creating and configuring a customer's environment in a multi-tenant application when they sign up or change plan.
True-up
A retrospective adjustment that reconciles what a customer was billed against what they actually used or were entitled to.
Usage metering
Collecting and aggregating the consumption events that a usage-based charge is calculated from.
Usage-based billing
Charging customers according to how much they consume — API calls, seats active, data processed, messages sent — rather than a fixed...
Pricing
13 terms
Block pricing
Charging for usage in fixed-size blocks, where any consumption within a block costs the full block price.
Flat-rate pricing
Charging a single fixed recurring fee for access to the product, independent of usage or number of users.
Grandfathering
Allowing existing customers to remain on old pricing or packaging after it has been withdrawn for new customers.
Hybrid pricing
Combining more than one pricing mechanism in a single contract — typically a recurring platform fee plus usage, seats, or both.
Outcome-based pricing
Charging for results delivered — tickets resolved, leads qualified, cases closed — rather than for access, seats or consumption.
Per-seat pricing
Charging per user with access to the product, typically per month or per year.
Price book
A named set of prices for catalog items, used to price differently by region, currency, segment or partner without duplicating the catalog....
Price uplift
A contractual increase applied at renewal or on each anniversary of a multi-year contract, often tied to a fixed percentage or an...
Product catalog
The structured definition of everything you sell — products, plans, charges and rate structures — that quoting, billing and provisioning all read...
Ramp deal
A multi-year contract where the committed price or quantity increases on a defined schedule, typically stepping up each contract year.
Tiered pricing
A usage pricing structure where each band of units is charged at its own rate, so a single bill spans several rates...
Timed discount
A discount that applies only for a defined window of a subscription — the first three months, or the first year of...
Volume pricing
A usage pricing structure where the total quantity determines a single rate applied to every unit.
Sales & CPQ
10 terms
Approval workflow
Rules that route a quote for internal sign-off when it falls outside standard terms — deep discounts, non-standard payment terms, or unusual...
Auto-renewal
A contract term under which a subscription renews automatically for a further period unless the customer gives notice by a stated deadline....
CPQ (Configure, Price, Quote)
Software that assembles a valid product configuration, applies the correct pricing and discounts, and produces a quote a customer can sign.
Co-terming
Aligning the end dates of multiple subscriptions or add-ons so they renew together on a single date.
Multi-year contract
A subscription agreement covering more than one year, usually with committed pricing across the full term.
Order form
The signed commercial document that specifies what a customer is buying, at what price, on what terms — usually executed under a...
Product-led growth (PLG)
A go-to-market motion where the product itself drives acquisition, conversion and expansion, typically through free trials or a free tier with self-service...
Quote-to-cash
The end-to-end process from producing a quote through contract, subscription, invoicing, payment and revenue recognition.
Sales-led growth (SLG)
A go-to-market motion where deals are closed by a sales team through a managed process of demos, negotiation, quoting and contracting.
Self-service (customer portal)
Letting customers buy, upgrade, manage payment details and access invoices themselves, without contacting sales or support.
Revenue accounting
8 terms
ASC 606
The US GAAP standard governing revenue from contracts with customers, built around a five-step model.
Deferred revenue
A liability representing payment received for services not yet delivered, which converts to revenue as delivery occurs.
IFRS 15
The international accounting standard for revenue from contracts with customers, substantially converged with US GAAP's ASC 606.
Multi-entity operation
Running billing across several legal entities — typically one per country or region — each invoicing in its own currency with its...
Performance obligation
A distinct promise within a contract to deliver a good or service, which is recognised as revenue separately from other promises.
Revenue recognition
Recording revenue in the period it is earned by delivering the service, rather than when the customer was invoiced or paid.
Revenue waterfall
A schedule showing how contracted revenue will be recognised across future periods, contract by contract.
Standalone selling price (SSP)
The price at which a company would sell a promised good or service separately — used to allocate a contract's total price...
RevOps
3 terms
Revenue leakage
Revenue a company is contractually entitled to but never collects, lost through process gaps, billing errors and unenforced contract terms.
Revenue operations (RevOps)
The function that aligns sales, marketing, finance and customer success around a single view of revenue, and owns the systems and processes...
System of record
The authoritative source for a given category of data, which every other system defers to when they disagree.
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