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TOPLINE HOTLINE: Should you report ARR before or after discounting?
Aug 22, 2024
The discussion kicks off with the debate on whether to report ARR before or after discounts, a dilemma for many companies. The hosts delve into best practices for revenue schedules in Salesforce, focusing on the invoicing cycle versus even distribution. They emphasize the importance of aligning revenue recognition with service delivery rather than just invoicing times. Additionally, they navigate the ethical challenges in revenue reporting and highlight the risks of distorting figures for appearance's sake, advocating for transparency in financial practices.
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Quick takeaways
- Reporting Annual Recurring Revenue (ARR) after discounts enhances clarity, while co-terminus contracts simplify financial reporting and accurate revenue recognition.
- Transparent and accurate financial representation is crucial for sustainable growth and avoiding complications during acquisition or funding processes.
Deep dives
Best Practices for Reporting ARR and Discounts
When managing Annual Recurring Revenue (ARR), it is crucial to understand whether to report revenue before or after discounts. Some founders opt to report ARR before discounts, while others suggest integrating discounts as a separate line item for clarity. Adopting co-terminus contracts, where upsell contracts match the start and stop dates of existing contracts, simplifies reporting and ensures accurate financial representation. Ultimately, revenue should reflect what customers actually pay, emphasizing that the invoice cycle should not dictate the recognition of recurring revenue.
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