Entering recurring charges (subscription) revenue streams

Subscription or recurring charges revenue streams are useful for forecasting products or services that involve customer signups, recurring billing, renewals, and cancellations. Common examples include magazine subscriptions, gym memberships, memberships, and software-as-a-service products.

If your business uses a subscription model, forecasting recurring revenue can help you understand how new customer signups, churn, pricing, and renewal frequency affect future revenue.

Upmetrics gives you two ways to set up a recurring charges revenue stream. You can describe your subscription model and let Finance AI draft the revenue groups and streams for you, or you can create them manually.

Adding a Recurring Charges Revenue Stream

Creating Recurring Charges Revenue with Finance AI

1

Go to the Finance Forecasting module, select the Forecast tab, and open the Revenue section.

You will see a guided revenue setup asking What does your business sell?

2

Describe your subscription or recurring revenue model in plain text. Include details such as the service you provide, expected customer signups, subscription price, billing frequency, setup fees, and expected churn rate.

Once you have entered the details, click Draft my revenue.

TIP: Include details such as your starting customer count, expected new signups, recurring price, renewal period, and churn rate. This helps Finance AI create a more relevant starting point.

3

Finance AI will create a suggested starting point for your revenue forecast.

Review the proposed revenue group, stream name, pricing, customer assumptions, and other details. You can click the Edit icon next to a stream to make changes before adding it.

If the suggestions look correct, keep the required streams selected and click Add these streams.

NOTE: The suggested figures are only a starting point. Review the assumptions and update them to match your actual subscription model and business expectations.

4

The selected revenue groups and streams will be added to your forecast.

From the Revenue section, you can review each stream and update its assumptions whenever required.

Creating Recurring Charges Revenue Manually

1

If you do not want Finance AI to draft your revenue streams, click I'd rather set it up myself from the revenue setup screen.

2

Enter the name of your Revenue Group, then enter at least one revenue stream inside that group.

You can click Add another stream to add more streams to the same group or Add a group to create another revenue group.

When you are ready, click Create these.

3

Upmetrics will create the revenue stream and open its Assumption window.

Under Basic Info, review the revenue stream name and select Recurring Charges as the Revenue Stream Type.

4

Customers: Enter the number of customers or new signups you expect for the subscription service.

If you expect the same number of new customers each period, choose Constant Amount and enter the applicable number.

Churn Rate: Enter the percentage of customers you expect to cancel their subscriptions during each renewal period.

For example, if you expect 5 customers to cancel out of 100 customers at the beginning of the period, the churn rate would be 5%.

NOTE: If your renewal period is monthly, the churn rate applies to monthly renewals. Churn is calculated using the customers you have at the beginning of the period before new signups are added.

If you expect the number of new customers to change over time, select Varying Amounts Over Time. Enter the expected customer signups for each applicable period.

5

Price: A recurring charges revenue stream can include both a One-time Setup Fee and a Recurring Price.

If you charge customers a setup fee or another one-time charge when they sign up, enter the applicable amount. If there is no setup fee, enter 0.

Next, enter the recurring amount you charge customers for each subscription period. You can use a constant recurring price or allow the price to vary over time.

6

Select how often customers are charged for the subscription. This is the Renewal Period, such as monthly, quarterly, every six months, or another available interval.

If applicable, enter the sales tax rate for the revenue stream. Upmetrics will use this information when calculating your forecast.

7

Refund: Enter the refund rate you expect for this revenue stream, if applicable. This allows your forecast to account for expected refunds issued to subscribers.

8

Start and End Period: Select when the recurring revenue stream should begin and, if applicable, when it should end.

Review your assumptions and click Save.

Once saved, the recurring charges revenue stream will appear under its revenue group in your forecast. You can open the stream again whenever you need to review or update customer, pricing, churn, or renewal assumptions.

Where does this entry appear in the financial statements?

Your recurring revenue streams will be used to calculate the applicable figures in the Profit & Loss and Balance Sheet reports.