A growing resource of terms, metrics and calculations for your growing business.
ACV measures the value of recurring revenue expected from individual accounts annually. In contrast, ARR measures the total recurring revenue from all accounts annually.
Understanding the process of activity-based budgeting to research, analyze, and identify activities for cost reduction and creating a proper business budget.
Ad hoc analysis is a business intelligence evaluation that allows you to customize reports for a specific use.
You can calculate your Adjuted EBITA by adding/subtracting interest, taxes, depreciation, and other adjustments to your standard EBITDA.
Amortization and depreciation are two primary methods to calculate the asset's value over time. Differences occur between the calculation methods and their presentation.
ACV is the average annual contract value of a customer's subscription. It is the total revenue generated from a customer's contract within a year.
Annual Recurring Revenue is the annualized form of Monthly Recurring Revenue (MRR). It helps assess the amount of contractually obligated revenue a SaaS firm generates in a year.
Your average revenue is the revenue received per unit of output sold. If you know it, you can estimate your total revenue and then look into boosting profits.
Average Revenue Per User (ARPU) is the average revenue generated from a paying customer. It is usually calculated each month to analyse the value generated by a customer.
Billings refers to the revenue that a SaaS company generates from its subscription-based business model. In the rawest sense, billings means 'cash inflow.’
BizOps are the activities that companies engage in as part of their daily business. BizOps can be a set of KPIs, a philosophy, or a number of things in between.
A company's book value of equity indicates the total value of a company's assets. It demonstrates how much you will receive if the company liquidates.
Bookings show a customer's commitment to spending money in exchange for the services rendered. Revenue is when the accounting wizards can justify recognized sales.
Bottom up forecasting creates financial projections of the business taking into account sales, revenue, expenses, and production costs, and working up to the overall financial forecast for the business.
Bottom-up budgeting is an approach in which each department projects expenses and revenues for a specific period and then passes them to senior management for approval.
Bottom-up estimation is a crucial project management technique project managers use to estimate the total cost, resources required, and duration of completing a project.
The break-even price is the price at which a product generates no profit or loss. In other words, it is the point at which income equals expenses.
Burn multiple is a capital efficiency metric that measures the amount a startup is burning to generate incremental dollars of ARR. The lower the Burn multiple, the better the operational efficiency of the SaaS startup.
CAC Payback Period is a measure of how many months it takes a company to generate enough revenue to break even on the cost of acquiring a customer.
CapEx planning is the process of budgeting for long-term capital assets and comparing them to your growth goals and objectives to help you assess what assets you should prioritize.
Capital efficiency is an umbrella term used to describe how efficiently your company uses its invested capital to generate revenue.
Capital gain is the profit gained after selling an asset at a higher price than the original cost. A dividend is an interest payment received by investors who hold shares in the company
A cash budget is a financial statement that explains an organization's cash inflow and outflow over a specific period.
The cash conversion cycle helps a company to calculate its operational efficiency and financial performance in the market.
The cash coverage ratio is a metric that measures a company's capacity to pay down its liabilities with its existing cash. It is used to assess a company's liquidity.
Cash flow after tax (CFAT). Your business's cash flow is simply after deducting all cash expenses and tax from the company's before-tax cash flow.
Cash position shows how stable the business is to deal with any financial crisis, and for paying its bills, know what is a good cash position with us.
The cash ratio, also known as the cash-asset ratio, is a measure of liquidity or a company's ability to meet short-term debts. It's also known as the cash conversion cycle.
Cash runway is the amount of time a business can last without getting an influx of capital. Knowing how to calculate your company's runway could help you from running out of money.
Churn Rate is the rate customers drop off their subscription plan over a defined period. It is often expressed as a percentage of the acquired customers.
A closing ratio shows the total sales leads that convert to sales. If a salesperson sends ten quotes in a month, and 5 of these result in sales, the closing ratio is 50%.
Cohort modeling is a statistical technique used to analyze data from a population divided into related groups or cohorts with similar characteristics.
CMRR is a metric used to calculate the sum of your company's monthly recurring revenue, including new subscriptions and upgrades minus churn and downgrades.
A consolidated balance sheet presents the financial situation of the parent company and its subsidiaries on a single sheet without differentiating the companies.
Continuous planning is a dynamic approach involving strategic financial planning across all aspects of a business to drive informed, timely decisions. It utilizes technology to provide real-time information that facilitates rapid planning cycles, allowing finance professionals to become proactive in responding to events.
Cost per lead, is the amount you pay to get a lead/ prospect. A lead is anyone who interacts with a brand with the prospect of turning into a paying customer.
Covariance statistically measures how two random variables change in comparison to each other. Variance refers to how much a data set deviates from its expected value.
Customer Acquisition Cost (CAC) is the average estimated amount of money that a firm must spend to acquire a paying customer.
DAU is the total number of users that engage with a website or application in some way or another on any given day. It's used to judge success with their target audience.
The debt-to-capital ratio evaluates how much debt a company has compared to its overall capital.
Dunning refers to businesses reaching out to customers who owe them money to try to collect payments from them.
Your EBITDA margin tells you whether the money being spent on operating costs is being used efficiently so that you can turn it into a profit.
EBITDA and revenue are both valuable metrics. EBITDA is a company's operating income, and revenue is a company's total income before deducting any expenses.
Cash pooling is a centralized cash management system that a company or a group of companies use to 'pool' cash balances together to optimize their cash balances.
Extensibility helps to improve your business' flexibility, react fast to governing and market dynamics, and cater to developing customer requirements.
Accounting teams manage the "what" of the company's financial transactions, and the FP&A teams work all the "why" of those transactions.
Finance outsourcing is a cost-saving strategy that allows a business to benefit from specialized finance and accounting services without overspending.
Financial consolidation is the process by which companies combine their financial data from several different businesses, entities, subsidiaries, or investments.
Startup financial planning is the process of outlining your business. When you prepare a financial plan, you project expenses and revenues and outline your annual growth strategies.
Fixed asset turnover is an efficiency ratio that indicates your company's well or under-performance in generating sales.
A flash report provides a snapshot of a company's key performance indicators. It helps senior management to assess financial health and identify irregularities
Flexible budgets are budgets or financial plans that are prone to adjustment depending on changes in cost or revenue during an accounting period, which accounts for unpredictability.
Financial forecasting is when you make predictions and assumptions about a particular scenario. Financial projection presents one or more hypothetical future scenarios that may or may not happen.
A fast-growing company employs a fractional CFO to help with complex financial undertakings since they possess the necessary qualifications and experience to navigate essential financial processes.
General and administrative (G&A) expenses are a subset of overhead costs from day-to-day operations of a business, while they are not directly related to the production of goods and services.
General and Administrative expenses as a percentage of revenue is the proportion of revenue spent on G&A expenditures over a certain period.
Gross revenue retention is the repeat revenue earned from current customers in a specific period. does not consider revenue from cross-sells/upsells or downgrades.
Cash flow indicates the business's liquidity and shows how much cash is coming in and out. Gross revenue shows how much the firm is selling.
Net present value (NPV) is used to calculate the present value of future cash flows. It evaluates the value of a project, a business, or an asset.
Outsourced CFOs are financial experts who work as strategic financial consultants for businesses on a part-time or contracted basis.
The historical cost principle is a conservative accounting principle that stipulates that the recording of asset values on a company's balance sheet must be the same as the original cost at the date of purchase.
Knowing how to analyze your P&L will help you understand your income streams, how and where you're spending your money, and what you can do to improve financial performance.
The IRR is a discount rate used to assess an investment's profitability. ROl is a key performance indicator for individual investors to evaluate the potential return on businesses.
An incremental budget is created by starting with the budget for the current period or actual performance and then adjusting it incrementally.
An incremental cash flow refers to the additional cash flow that a company generates from a new project or initiative. It can be used to expand the business, or pay down debt.
Incremental sales refer to the difference between actual sales a business makes during a specific marketing campaign and what it would have made without it.
Every business needs a proper understanding of its inflows and outflows to enhance its liquidity and operational efficiency. While cash flows cannot be avoided, the proportion of inflows in the mix should be higher for healthy finances.
Integrated planning ensures your organization achieves its target outcome using operational, financial, and capital resources allocation to maximize profit.
The interest coverage ratio refers to the length of time, either a number of quarters or years, for which a company's current earnings can cover its interest payments.
Interest revenue is an entity's interest from the money it lent or the investments made. Interest revenue earned is recorded in the income statement.
CFO dashboards are a digital display tool that holds all the financial information in one place and keeps everything visible. Including cash flow, revenue, costs, etc.
LTV/CAC ratio determines how much your customer lifetime value is compared to your customer acquisition cost. The standard and ideal LTV to CAC ratio is 3:1.
Lifetime Value of a Customer is a measure of how much revenue a company is estimated to make from a customer over their relationship.
Marginal profit is the profit earned by selling an additional unit. To maximize profits, a firm should continue to increase production until its marginal profit is zero.
Marketing penetration can be a goal, a measure, or a strategy, depending on where you stand in your business or marketing process.
The marketing efficiency ratio (MER) is an essential tool that clearly indicates a marketing campaign's effectiveness.
Monthly Recurring Revenue (MRR) is your company’s monthly average recurring revenue. This metric covers subscriptions charges, service agreements, and other recurring fees.
This article provides you with detailed information about net negative churn and how to achieve it
Negative retained earnings refer to a situation in which a company's accumulated losses are greater than its accumulated profits.
Net Revenue Retention (NRR) is the percentage of recurring revenue maintained from current customers during a specific period. It’s one of the most important metrics in SaaS.
Businesses use the net book value to determine whether they have enough liquid assets to pay their liabilities and carry on without taking on further debt.
Net Dollar Retention (NDR) shows the growth or shrinkage of your annual recurring revenue (ARR) or monthly recurring revenue(MRR) during a particular period.
Non-dilutive funding is a type of funding that does not involve giving away any ownership stake. It can come from government grants, angel investors, or venture capital.
A North Star metric is an instrument of evaluation for a business that assesses its success. It is usually broken down into smaller metrics to drive accountability and ownership.
Operating cash flow is a critical financial metric that measures the amount of cash generated from a business's core operations.
Net income and operating income both measure the profit of a company. Operating income focuses on the core operations, whereas net income determines overall profitability.
The simplest way to define operating revenue is the total money that a company brings in from its core business activities.
Operating working capital (OWC) is the difference between a company's current assets and current operating liabilities.
Optional product pricing refers to selling a primary product at a lower price to attract customers. And then charging a higher price for complementary accessories.
Outsourced bookkeepers will handle bank reconciliation, take care of payroll, handle accounts receivable and payable, and will prepare financial statements.
Payment reconciliation compares internal and external records of business transactions.
Pre-tax margin is one of the most popular operating efficiency financial ratios. Learn how to calculate and interpret it with examples!
Prorated charges can be defined as the adjusted invoice or bill calculated per the customer's usage.
The quote-to-cash process identifies the entire customer lifecycle. This journey starts the moment your sales reps approach a buyer to introduce your product or service.
The difference between ROI and ROA is what they measure. ROI expresses the return on investment, while ROA measures how effectively a business uses its assets.
ROCE (return on capital employed) is a profitability ratio that calculates how much profit your business will generate from the capital employed
ROI and ROE are strong indicators of your business's overall health and performance. That information can be used to build your business strategy and improve the financial performance of your small or medium sized business.
Reforecasting in accounting refers to holistically reviewing an existing budget to accommodate significant changes in the projected revenue and expenditure.
Research and Development expenses as a percentage of revenue is the proportion of revenue spent on growth-related activities over a certain period.