Is MRR is an alternative form of revenue recognition? - Woofresh

Is MRR is an alternative form of revenue recognition?

All QuestionsCategory: PaymentsIs MRR is an alternative form of revenue recognition?
asked 2 years ago

I am a little bit confused about MRR & revenue recognition. Is MRR is an alternative form of revenue recognition?

1 Answers
answered 2 years ago

No, MRR and revenue recognition both are different factors. You don't need to be confused. Here I'm explaining these factors briefly.

MRR –  MRR is an acronym for monthly recurring revenue, it is nothing but the amount that a company anticipates each month. For a SaaS business, MRR is the key component. MRR is calculated as an amount that represents recurring revenue.

It is necessary to track MRR because if once you fail to track it, this results in misleading your investors as well as also create unrealistic expectations and goals for your company.

You can calculate MRR by summing all the amounts which you are receiving every month.

Revenue Recognition – It is an accounting principle under GAAP (Generally Accepted Accounting Principles). The definition of revenue recognition states that a revenue is recorded when it is realized or realizable. In simple words, “your revenue is realized” means when your products or services are exchanged for cash but the amount is not yet received. So, there is an assurance that realized revenue is actually going to be received.

So, that is all my answer. I hope I've cleared your confusion.

Thanks

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0 Answers
answered 2 years ago

No, MRR and revenue recognition both are different factors. You don't need to be confused. Here I'm explaining these factors briefly.

MRR –  MRR is an acronym for monthly recurring revenue, it is nothing but the amount that a company anticipates each month. For a SaaS business, MRR is the key component. MRR is calculated as an amount that represents recurring revenue.

It is necessary to track MRR because if once you fail to track it, this results in misleading your investors as well as also create unrealistic expectations and goals for your company.

You can calculate MRR by summing all the amounts which you are receiving every month.

Revenue Recognition – It is an accounting principle under GAAP (Generally Accepted Accounting Principles). The definition of revenue recognition states that a revenue is recorded when it is realized or realizable. In simple words, “your revenue is realized” means when your products or services are exchanged for cash but the amount is not yet received. So, there is an assurance that realized revenue is actually going to be received.

So, that is all my answer. I hope I've cleared your confusion.

Thanks