A CFO’s Guide to Predictable SaaS Revenue

In the world of SaaS finance, not all recurring revenue is created equal. While Monthly Recurring Revenue (MRR) provides a snapshot of your current revenue, Contracted Monthly Recurring Revenue (CMRR) offers a clearer picture of your future financial commitments.

CMRR represents the portion of your revenue that is contractually guaranteed, excluding any variable or non-recurring components. This metric is crucial for accurate forecasting, budgeting, and strategic planning.

Understanding CMRR

CMRR focuses solely on the revenue that is locked in through contracts. It excludes variable fees, one-time charges, and any revenue not guaranteed by a contract. For example, if a customer pays a fixed monthly fee for your service and additional usage-based charges, only the fixed fee is included in CMRR.

This distinction ensures that your revenue projections are based on reliable, predictable income, providing a solid foundation for financial decisions.

Why CMRR Matters

For finance teams, CMRR is more than just a metric—it’s a tool for strategic planning. By focusing on contractually guaranteed revenue, you can:

• Enhance Forecast Accuracy: Base your financial models on revenue that is certain, reducing the risk of overestimating income.
  
  
• Improve Cash Flow Management: Understand your guaranteed income streams, aiding in budgeting and resource allocation.
  
  
• Inform Strategic Decisions: Use reliable revenue data to make informed decisions about investments, hiring, and growth initiatives.
  
  

Calculating CMRR

To calculate CMRR, sum all the fixed, contractually guaranteed monthly fees from your active subscriptions. Exclude any variable charges, such as usage-based fees or one-time payments.

Example:

• Customer A: Pays $100/month for a subscription, plus $0.10 per transaction.
  
  
• Customer B: Pays $200/month flat fee.
  
  

In this case:

CMRR = $100 (Customer A) + $200 (Customer B) = $300.

The variable transaction fees from Customer A are excluded.

CMRR vs. Other Revenue Metrics

While MRR includes all recurring revenue, including variable components, CMRR focuses strictly on the fixed, contractually guaranteed portion. This makes CMRR a more conservative and reliable metric for forecasting.

Comparing CMRR to other metrics:

• MRR: Includes all recurring revenue, both fixed and variable.
  
  
• ARR (Annual Recurring Revenue): Annualized version of MRR.
  
  
• CMRR: Focuses solely on fixed, contractually guaranteed monthly revenue.
  
  

Automating CMRR Tracking with TrueRev

Manually tracking CMRR can be complex, especially with a growing customer base and diverse pricing models. TrueRev simplifies this process by integrating with your billing systems to automatically calculate and update your CMRR.

Our platform ensures that your financial data is accurate, up-to-date, and readily available for analysis and reporting.

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