Volume discount (also known as a quantity discount) occurs when the price of the items bought is lowered when increased quantities are purchased. In other words, it means that people who make bulk purchases instead of buying single items will receive a larger discount.

Subscription management refers to customer lifecycle operations like managing trials, assigning credits, issuing refunds and making mid-cycle subscription changes. While recurring billing is automated, subscription management involves billing actions that cannot always be scheduled.

Recurring revenue models, such as subscription services or membership programs, can provide stable revenue streams for businesses. By offering value to customers on a regular basis, companies can build long-term relationships and ensure consistent cash flow.

Retaining your old pricing plan for existing customers, while new plans are applied to all new customers.

Freemium model is an acquisition strategy used to attract users to a product/service by providing basic features for free, and advanced features for a premium.

An acquisition model where a product/service is offered to customers for a limited period of time, for free, so that they can learn about the product and discover value before actually paying for it.

The point in a customer’s journey where the account information and payment details are collected, the transaction is processed, and the product/service is purchased.

Offering a discount is defined as slashing the price of a product to give customers something they can’t refuse. Running promotional discounts/coupons is a viable customer acquisition strategy for SaaS businesses looking to get more leads and profits.

When the customer leaves a checkout page unattended for 30 minutes, or when they close the webpage and not return to it within 30 minutes, it is counted as an Abandoned Cart.

Recurring payments, also known as subscription payments, are charged automatically to a customer's credit card or bank account at periodic intervals.

Also called metered billing or pay-as-you-go pricing, this allows customers to only pay for what they've used in each billing cycle.

The process of ensuring subscriptions to your product or service are billed accurately and on time for each customer, accounting for global taxes, proration, payment failures, etc.

Adjusting a customer's bill amount to reflect any plan changes made in the middle of a billing cycle.

The number of ways in which merchants can collect payments from their customers, for example, credit cards, digital wallets, direct debit, offline payment, etc.

Friendly Fraud or Chargeback Fraud occurs when a consumer purchases a product/service online using a credit card and later claims a chargeback for the same instead of raising a refund from the merchant.

Dunning is the process of handling failed and declined credit card payments to recover lost revenue.

A document that's used to return an invoice amount as credits made to a customer account or as cash. Also called credit memos.

The operation of generating a single invoice against multiple purchases made by a specific customer over a specific period of time.

Calendar billing equips a business to change the billing date of its user’s subscription cycle. It helps businesses provide flexibility to its users to obtain unique billing dates which will better align with the user’s financial cycles.

Account hierarchy is a way of structuring a complex organisation into a simple parent-child relationship, generally used to break down locations, departments, or any other function of the company.

A SaaS income statement, also known as a Profit and Loss (P&L) statement, is an essential financial document. It meticulously details your company's revenue and expenditures over a specific period, whether monthly, quarterly, or annually, offering a clear picture of financial performance.

Revenue backlog is the value of contracted revenue or bookings that have not yet been recognized.

An AR aging report contains a list of your customers' unpaid invoices since the time the sales invoice was issued along with their duration. In other words, the accounts receivable report lists the amount due from your customers.

Deferred revenue is commonly known as unearned revenue. When a company receives advance payment from a customer before the product/service has been delivered, it is considered deferred revenue. Unlike accounts receivable, which is considered an asset, deferred revenue is listed as a current liability on the balance sheet.

Accrued revenue is revenue that is recognized but is not yet realized. In other words, it is the revenue earned/recognized by a business for which the invoice is yet to be billed to the customer. It is also known as unbilled revenue.

Purchase Order (PO) is an official order form submitted by a customer to a business, committing to pay for the product/service that it is to be delivered in the future.

Value Added Tax (or VAT) is a consumption tax that’s added on top of a product, whenever the value is added on each stage of the production, until the point of sale.

Sales tax is a consumption tax imposed on the buyer during the point of sale of a product/service, collected by the seller, and paid to the government.

Order to Cash also known as O2C or OTC is the business process that covers the entirety of the order processing system right from receiving the order to up until the point the payment is made and an entry is logged in your accounting books.

The Revenue Recognition Principle dictates when and how revenue is recognized in financial statements. It requires revenue to be recorded when earned, not just when payment is received. This principle ensures accurate reporting of a company's financial performance in line with accounting standards.

The ability to port customer credit card information from one payment gateway to another.

'PCI' stands for Payment Card Industry and 'DSS' stands Data Security Standard which is a set of security requirements for companies involved in the payment process of accepting, transferring or even storing card information.

The General Data Protection Regulation (GDPR) which came into effect in May 2018 gave European citizens the power to control their personal information that businesses store and handle, without tradeoffs.

The Second Payment Services Directive is a European regulation that will require online card payments to go through Strong Customer Authentication (SCA) from September 14th, 2019.

CAC payback period is the time it takes for your company to recover the cost of acquiring a customer.

The LTV CAC ratio is an essential metric used to assess the long-term value of customers compared to the cost of acquiring them. A ratio above 3 indicates healthy profitability, while below 1 suggests potential issues with customer retention or acquisition costs.

Customer acquisition cost (CAC) is the money spent on converting a prospect into a customer or obtaining a new customer entirely.

SaaS Gross Margin refers to the amount of revenue a software as a service (SaaS) company generates after subtracting the direct expenses associated with creating and providing its services. It is is expressed as a percentage of the total revenue.

Understanding Bookings is essential for understanding the health and the sales process of any business. Predominantly, Bookings and Revenues are misunderstood and oft times used interchangeably - even though they imply two different things.

Current ratio, also called the working capital ratio, is a liquidity ratio used to measure a business’ ability to meet its short-term liabilities. It compares the firm’s current assets to its current liabilities.

The SaaS Quick Ratio measures the growth efficiency of SaaS companies.

Operating expenses (OpEx) refer to the costs incurred in the day-to-day running of the business. These include rent, utilities, salaries, and other necessary expenses. Managing and managing these costs is essential to maintaining financial stability and profitability.

Customer attrition, also called customer churn, is the rate at which your business loses customers over a given period. Some amount of customer attrition is inevitable, but a significant attrition rate can impact your business’s bottom line since it’s a direct loss of revenue.

Net Dollar Retention (NDR) - aka Net Revenue Retention (NRR) - rate measures the changes in recurring revenue caused due to fluctuations within the revenue from the existing customer base.

Renewal rate measures the percentage of customers who renew their contracts at the end of their subscription period.

Customer Retention is the ability of an organization to retain its existing customers. A high retention rate shows how valuable your product or service is to your customers.

In SaaS, churn is the rate at which customers cancel their subscriptions. It’s usually measured as a percentage.

Subscription churn is the number of subscribers/customers that stop paying for your product/service in a given period of time. Churn can be seen from different angles, and businesses can have their own way of calculating it based on what is relevant for their organization.

Churn rate fundamentally represents the percentage of customers who cease using a service or product within a specific period. It serves as a critical indicator of customer dissatisfaction, revealing potential competitive weaknesses or external factors influencing your business. This key metric helps businesses identify areas needing improvement to maintain customer loyalty and market position.

Net MRR Churn Rate is the net percentage of total MRR lost from existing subscriptions/customers during a period.

Gross MRR Churn rate is the percentage reduction in monthly recurring revenue from existing subscriptions because of factors such as subscriptions being moved from paid plans to lower or free plans, cancellations, add-ons, and other services removed from subscriptions.

Involuntary churn occurs when a customer’s payment attempt fails, leading to subscription cancellation.

Revenue churn is a measure of the recurring revenue lost by a SaaS business through subscription cancellations and downgrades.

Negative churn is a specific state of the net churn of a subscription business when its able to add more in expansion revenue than its losing as churned mrr.

Customer churn represents the opportunity for a company to enhance its customer experience and retention strategies. By understanding the rate at which customers leave, businesses can proactively address their needs, fostering stronger relationships and long-term loyalty.

Total Contract Value (TCV) is the total amount of revenue you receive from a given customer.

Revenue run rate is one of the simplest metrics you can use to forecast your company’s future cash flow.

ACV or Annual Contract Value is a revenue metric that describes the amount of revenue you receive from a given customer each year. ARR or Annual Recurring Revenue is also a revenue metric that describes the amount of revenue you can expect to receive from your existing clients in a given year.

Annual Recurring Revenue (ARR) is a critical metric for businesses operating on a subscription model. It not only forecasts revenue but also acts as a gauge for the business's health and the effectiveness of strategic decisions. Regular assessment of ARR is pivotal for steering the company towards sustainable growth and operational excellence.

The sales forecasting process essentially means estimating and predicting the future revenue of your SaaS product.

Upgrade MRR is the monthly recurring revenue generated when subscriptions are moved from existing plans to higher plans.

Reactivation MRR is the monthly revenue earned from previously churned or canceled subscriptions that are reactivated during the month.

New MRR is the additional monthly recurring revenue earned from new subscriptions acquired during a given month.

Net MRR Growth rate is the net increase or decrease in monthly recurring revenue from one month to the next.

Monthly Recurring Revenue, or MRR, is the lifeblood of subscription businesses. It's a measure of your predictable revenue stream, calculated on a monthly basis, from all active subscriptions. Unlike one-time sales, MRR offers a clear lens through which you can view your financial stability and plan confidently.

Expansion Monthly Recurring Revenue (Expansion MRR) is the additional monthly recurring revenue generated in the current month compared to the previous month, excluding the MRR contributed by new customers/new MRR.

Downgrade MRR is the reduction in monthly recurring revenue caused by existing subscribers paying less than they did the previous month.

Contraction monthly recurring revenue (MRR) is a performance metric that refers to the total reduction in MRR due to downgrades and subscription cancellations (or churn) compared to the previous month.

The Average Revenue Per User (ARPU) is a key metric used to measure the financial performance of a business. It is calculated by dividing total revenue by the number of users. Monitoring ARPU can help you assess your pricing strategies and profitability.

Entitlement management is a process that controls and monitors customer access to products or services in subscription-based businesses.

The pay-as-you-go (PAYG) pricing model means that users pay based on how much they consume. For example, a cloud storage service provider could charge based on the amount of storage used, while many phone carriers bill based on minutes used.

Value-based pricing , also known as value-added pricing or value pricing, is a method of setting prices based on your customers and how they perceive the value of your product.

Tiered pricing as a model (also known as price tiering) is used to sell your products within a particular price range. Once you fill up a tier you move to the next tier and you will be billed according to the number of purchases you make in those respective tiers. Tiered pricing differs as a model and strategy. Often both these terms are confused with one another.

Competitor-based pricing serves as a common method for testing product pricing, especially for newcomers in the market. Conducting thorough research on competitors' offerings and pricing is crucial to developing your own pricing strategy.