CMRR vs. MRR: The essential metrics for forecasting

In the landscape of recurring revenue, two metrics stand as pillars of success: Committed Monthly Recurring Revenue (CMRR) and Monthly Recurring Revenue (MRR). While these metrics both measure recurring revenue on a monthly basis, they provide different lenses into the financial health of a subscription business. 

At Fincome, our platform seamlessly integrates with your billing tools, such as Stripe, Chargebee, and others, to bring these metrics to life. We leverage both invoicing and subscription data to give you a comprehensive view of where your business is now and where it’s heading. In this article, we’ll explore how CMRR and MRR uniquely contribute to financial clarity and forecasting precision, helping subscription businesses unlock growth confidently.

Decoding MRR and CMRR: the present vs. the future

To understand the difference between MRR and CMRR, it’s important first to distinguish how each metric captures revenue at different points in time.

Monthly Recurring Revenue (MRR) 

MRR captures the present. It’s the actual, recognized monthly revenue that a business earns from invoicing for active subscriptions. Here's how to calculate it: 

Fincome’s approach to MRR draws directly from your invoicing data, accurately reflecting the revenue flowing in from each customer. But here’s where it gets exciting: our MRR can extend into the future, representing the known portion of upcoming billed revenue based on each subscription’s start date. This forward-looking MRR gives businesses a tangible preview of their expected monthly income, allowing for smoother financial planning.

Committed Monthly Recurring Revenue (CMRR)

CMRR, by contrast, reflects a forward-looking commitment. It’s based on the details within your subscription data and tells a predictive story of the revenue you are contractually set to earn - even before billing has begun. Its formula is:

Because CMRR includes the known deals and subscription details, it inherently maintains a lead over MRR. This means your CMRR often leads your MRR by a span, offering foresight into where revenue is headed based on finalized contracts. At Fincome, CMRR embodies the commitments your business has locked in, providing a crystal-clear view of future revenue from contracts that are about to activate.

Why combining MRR and CMRR unlocks strategic insights

Combining MRR and CMRR provides a comprehensive view of a SaaS company's financial health, enabling real-time tracking and future revenue forecasting.

MRR’s real-time snapshot 

Since MRR is based on active invoicing data, it’s the metric for tracking real-time financial health. It reflects only revenue that’s already recognized, giving you a transparent view of your current monthly income. Monitoring MRR allows you to:

• Observe growth or contraction trends with precision.
• Adjust retention and expansion strategies based on real-time revenue shifts.
• Track the immediate effects of pricing or subscription plan changes on revenue.

See our practical guide on MRR here.

CMRR’s forward-looking perspective

CMRR, as a predictive metric, unlocks strategic planning. By pulling from subscription data, it shows the value of future, confirmed revenue streams that will transition into active MRR. This “temps d’avance” aspect of CMRR is invaluable because:

1. It enables operational scaling based on revenue commitments, not just cash flow.
2. Sales and marketing can plan campaigns around the forecasted growth in revenue.
3. It gives investors a reliable gauge of upcoming revenue, boosting confidence in the business’s growth trajectory.

According to The SaaS CFO, CMRR is crucial because it measures the net inflow and outflow of subscriptions, offering a clear picture of a company's economic engine. This metric helps businesses understand whether their recurring revenue is moving in a positive direction, which is essential for strategic planning.

Together, these metrics create a cohesive revenue view, allowing businesses to track both current income and future potential. With Fincome, these metrics are presented side-by-side, so the journey from CMRR to MRR becomes visible, helping businesses anticipate and plan.

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How Fincome tracks MRR and CMRR from your billing tool

Our platform simplifies MRR and CMRR by directly integrating with billing tools like Stripe, Chargebee, and others. Here’s how we calculate each:

• MRR: Fincome’s MRR pulls from your invoicing data, capturing the monthly revenue billed from active subscriptions. As subscriptions continue or renew, this MRR can extend forward based on known billing cycles, giving you visibility into future monthly income without speculation.
• CMRR: CMRR uses subscription data to anticipate revenue from finalized deals, including those not yet billed. This includes any new contracts, upsells, or contracted expansions and excludes any anticipated churn or downgrades. As a predictive metric, CMRR always maintains that slight lead over MRR, setting the stage for what’s coming before it’s billed.

By sourcing these metrics directly from your billing platform, we ensure accuracy, consistency, and alignment with your real revenue pipeline. Both metrics are dynamically updated, reflecting real-time shifts in invoicing and subscription data, so you’re always on top of both immediate income and future revenue commitments.

Harnessing the power of MRR and CMRR for growth

Integrating MRR and CMRR provides your subscription-based business with a comprehensive understanding of its financial health, facilitating strategic growth initiatives.

Operational efficiency

By leveraging CMRR to forecast revenue before it's realized, companies can enhance their operational planning. This foresight enables efficient staffing and budgeting, mitigating the risks associated with over- or under-preparation. 

For instance, a study by The SaaS CFO emphasizes that quantifying investments in customer success and retention through detailed MRR schedules allows businesses to improve net revenue retention, directly impacting operational efficiency.

Source: https://www.thesaascfo.com/committed-monthly-recurring-revenue/

Sales and marketing alignment

CMRR serves as a predictive indicator for sales and marketing teams. Sales departments can assess the health of their pipelines by monitoring CMRR to understand precisely how much revenue is contractually secured for upcoming periods. 

Marketing teams can strategically time campaigns based on anticipated growth reflected in CMRR, creating a synergistic feedback loop between future revenue projections and current efforts. 

According to Rampiq, tracking metrics like CMRR enable SaaS companies to optimize their marketing strategies to attract and retain customers, ultimately driving revenue growth. 

Investor confidence

Investors and stakeholders prioritize predictable growth trajectories. CMRR offers a reliable forecast of future revenue, while MRR reflects actual revenue as it's billed. Therefore, presenting both metrics together provides a comprehensive narrative for forecasting and strategic planning, offering a balanced view of immediate performance and future potential. As noted by SOFTRAX, high and growing CMRR figures can instill confidence in investors and stakeholders, demonstrating the business's ability to generate consistent revenue.

If you want to learn more on attracting investors, read our article on VC's expectations for monthly reports here.

Common pitfalls and how to avoid them

Managing MRR and CMRR comes with challenges. Here’s how to tackle common pitfalls:

• Over-reliance on MRR: Solely focusing on MRR can lead to a false sense of security when churn or non-renewals occur. To solve this, track CMRR and churn alongside MRR to ensure accurate financial planning.
  
• Ignoring churn in CMRR projections: Overlooking churn risks can make forecasts overly optimistic. Instead, you can use segmentation and predictive models. Zendesk notably reduced churn by spotting dissatisfaction in support interactions.
  
• Rigid pricing structures: Inflexible pricing can deter customers and increase churn. Read our article to learn how to develop your pricing.

A holistic approach to revenue analytics

The role of CMRR and MRR has never been more critical in the rapidly growing subscription economy. Businesses that understand and leverage both metrics are positioned to thrive. At Fincome, we’re committed to delivering this holistic perspective, integrating seamlessly with your billing tools and enabling you to navigate the complexities of subscription growth with clarity and precision.

With MRR, you capture the present; CMRR predicts the future. Together, they offer a roadmap that turns data into growth. By providing complete transparency into revenue as it flows from commitment to cash, Fincome empowers businesses to plan with confidence, delivering clarity that leads to sustainable, predictable growth.

‍Ready to unlock the power of CMRR and MRR? Dive into Fincome’s analytics today and transform your subscription data into strategic insights.

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