For SaaS finance teams, ARR is more than just a number—it’s a key metric that helps forecast growth and measure the health of your recurring revenue. But calculating it accurately takes more than plugging in numbers.

What is ARR?‍

Annual Recurring Revenue (ARR) is the total predictable revenue a SaaS company earns from subscriptions over a 12-month period. It excludes one-time charges like onboarding or setup fees.

Basic Formula:‍

ARR = MRR × 12Example: If your Monthly Recurring Revenue (MRR) is $50,000, then your ARR is $600,000.

‍Watch out for these common pitfalls:

❌ Including one-time payments

❌ Misclassifying contract terms

❌Overlooking downgrades, churn, or lost customers

❌ Ignoring expansion revenue from upsells and cross-sells

Want to improve your ARR tracking?

✅ Use automation tools

✅ Monitor churn and expansion revenue

✅ Align ARR goals with your pricing and retention strategy

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Get the full breakdown, including best practices and examples, in our original guide:

👉 Read the full article on How to Calculate ARR‍