How Does Stax Bill Calculate MRR?

Monthly Recurring Revenue (MRR) is a widely used performance indicator in the world of subscription billing. However, the industry supports wide variations in the definition of MRR, and also allows for a lot of leeway in how each company choose to calculate it. Stax Bill has applied best practices from across the industry to the calculation of these metrics.

MRR is not GAAP Revenue

One common misconception is that MRR is equivalent to the GAAP (Generally Accepted Accounting Principles) Revenue for the month in question. It is not an "accounting" measure; rather, it is a business measure that helps the operators of the subscription business to understand how the recurring revenue is changing month over month. This is an important distinction;  do not expect the MRR in Stax Bill to exactly equal the numbers in the Earned and Deferred Revenue reports.

"R" is for "Recurring"

This revenue number only includes recurring charges, specifically those that can be reliably predicted to recur on a monthly basis. For this reason, Stax Bill does not include one-time charges within subscriptions or one-time purchases outside of subscriptions in the MRR calculations. Similarly, recurring products with resetting quantities are not included in MRR because the quantity is reset to 0 on each recharge and therefore do not constitute a "predictable" source of recurring revenue.

"M" is for "Monthly"

And finally, remember that the "M" at the front of the acronym stands for monthly. All charges in the system will be "normalized" to the unit of one month. Changes to recurring services will change MRR as if the charge occurred for the whole month, not just a portion. For example, when considering prorated charges for quantity changes, the increase in MRR will not be prorated; it will always be calculated as if the charge happened for the entire month. 

Committed MRR

Stax Bill calculates something we refer to as "Committed" MRR. These values are being constantly updated by the changes you make to your Stax Bill environment, and you can choose which one of them to view in your Stax Bill Admin UI at any time at the account level. 

Note: The MRR calculations in Stax Bill are done separately from the "live" system, so they are current as of the previous day's data. Changes made today will impact your MRR calculations tomorrow.

Committed MRR

This is the type of MRR that Stax Bill has traditionally measured. It is based on the next charge that will occur on the specific subscription or subscription product. This MRR calculation it represents the expected MRR based on the next recharge amounts of all subscriptions' recurring service charges in your customer base.

When there are numerous multi-month or annual subscriptions. In this case, if you have a current annual subscription at $120/year ($10/month), and you set the next recharge amount to, say $240, then your MRR calculation will immediately jump to $20/month as soon as you make that price change, even though that change may not come into effect for several months. That subscription is "committed" to charging $240 the next time it charges, so your "Committed" MRR is $20, but your actual earned revenue will not change until that charge occurs.

Factors that Influence MRR

Several other factors can influence how MRR is calculated or adjusted in response to changes in your system. For example:

• Charge timing
  • Start of Period (SOP) charges or quantities set to charge immediately will have an immediate impact on Committed MRR.
  • End-of-period (EOP) charges or quantity change charges will have an immediate impact on Committed MRR. 
• Price Changes
  • Changing the price on an upcoming recharge will impact Committed MRR. This includes any scheduled price uplifts that may be in place (see Managing a Price Uplift Schedule).
• Discounts
  • Stax Bill calculates and stores both Gross and Net MRR values for Committed MRR (so, a total of 2 values). Discounts are counted in the Net MRR calculations and have the same kind of impact as changes in charges would have (e.g. the growth or contraction of MRR based on the addition or removal/expiry of discounts at any given time).

MRR Quick Reference Table

Below is a table of the various changes and events that can occur in Stax Bill and their impact on Committed MRR. The table also shows what type of MRR (New, Expansion, Contraction, and Churn) each action will produce.