Bookings do not have a standard definition in Generally Accepted Accounting Principles (GAAP). So this varies across companies. Bookings are a forward-looking metric. They indicate the value of a contract signed with a customer for a specific time period.
Revenues, on the other hand, are a GAAP-defined term. They represent inflows of assets or settlements of liabilities from an entity's central operations. This distinction is critical for financial reporting.
To understand these terms, consider an example. A cloud-based helpdesk SaaS solution called 'Help' serves customers of all sizes.
Help is offered in four different plans — Startup, Growth, Pro, and Enterprise, priced at $200, $500, $1,000, and $2,000 respectively.
Help signed up an enterprise customer 'A' recently under the Enterprise plan on January 1, 2025, with a contract in effect for two years.
Bookings:The contract between 'Help!' and Customer A, that commits a service from the provider's end, as well as a payment from the customer's end during the 24 months of engagement, is Booking. So, Booking = $48,000. It is the total value of all the contracts signed.
Revenues:When 'Help!' has rendered the service to the extent that there is a reasonable guarantee of receiving payments for the service, then that revenue can be recognized.
For instance, if the customer signed up in January 2025 and Help! billed at month-start, then by end of January 2025, the recognized revenue equals $2,000. By end of June 2025, the revenue recognized would be $12,000.
Bookings vs. Billings vs. Revenue
Bookings, billings, and revenue represent three distinct financial measurements that CFOs track at different stages of the customer lifecycle. Bookings capture contract commitments, billings reflect invoiced amounts, and revenue shows earned income after service delivery.
Bookings: The commitment
Bookings represent the total value of a contract signed with a customer. It is a forward-looking metric that signals future revenue. This number shows the financial commitment a customer has made to your business over the contract term.
Billings: The Invoice
Billings are the total amount invoiced to customers within a specific period. This metric directly impacts your accounts receivable and deferred revenue. It reflects the cash you expect to collect based on the contract's payment terms.
Revenue: The Earned Value
Revenue is the portion of the contract value that you have earned by delivering your service. This is a backward-looking metric governed by accounting standards like ASC 606. Revenue is recognized systematically as the service obligation is fulfilled over time.
Breaking Down Bookings and Its Types
Bookings are a visual representation of the money committed to flow into the business. Strong bookings indicate high product demand. They show a market's willingness to commit to a product or service. While it is recorded as an annual number, bookings can extend to more than a year or less.
In case of bookings, it is possible to collect the payments either at the beginning of the contract, in which case, it becomes a liability and is called deferred revenue, as the company is obligated to offer the services. Alternatively, the revenue can be recognized over the term of the relationship, when the revenues can be recognized.
Types of Bookings
Bookings can be classified under three types - New Bookings, Renewal Bookings, and Upgraded Bookings.
New BookingsThis portion of bookings includes new customers who have just signed up for the product or service. For instance, Customer A has been a customer of Help! Since 2014. However, if Customer A has introduced a new product and signs a new agreement with Help!, this will qualify under new bookings.
Expansion/Upgraded BookingsUpgrades and expansion from up-selling usually fall under New Bookings. So, if Customer A wants to upgrade from Growth Plan at $500 to Enterprise Plan at $2000, a new contract needs to be signed with Help!, where Customer A commits an annualized value of $24000.
Renewal BookingsThis portion of bookings includes existing customers whose contracts are up for renewal. The Renewal Bookings can be calculated either at the time of the effective renewal date or when the renewal request is received on another date as opposed to the end of the contract. Other nuanced booking types exist, which are often overlooked in standard reporting.
Annual Contract Value (ACV) BookingsIn the case of multi-year contracts, bookings that have at least one year's committed revenue is considered as ACV bookings. For instance, if Customer A signs a contract with Help! for a three years contract under the Enterprise Plan of $2000, then the ACV Bookings will be $24000.
Total Contract Value (TCV) BookingsJust like ACV Bookings, this involves multi-year contracts. To find TCV Bookings, you calculate the contract's value over its complete duration. So, if Customer A signs a contract with Help! for a three years contract under the Enterprise Plan of $2000, then the TCV Bookings will be $72000.
Non-Recurring BookingsWhile the recurring bookings are a standard practice that includes a defined set of offerings every month, quarter, or year on a recurring basis, some of the charges include non-recurring aspects such as set-up fees, training fees, discounts, etc., that don't get included under recurring bookings.
Typically, these are not included under SaaS Bookings by some businesses and investors. However, since bookings, in essence, denotes the value that you are able to predict upfront, all components which are ideally expected to pay, should be baked into bookings. These include non-recurring bookings.
What do you include in Bookings:- New Contract - Renewals - Planned Upgrades - Planned Downgrades - Non-recurring bookings such as set-up or implementation fees, one-time charges, discounts
Key Booking Components for Financial Reporting
How to Calculate SaaS Bookings
Fred Wilson in his blog says, \"When a customer commits to spend money, that is a booking\". With this in mind, we had earlier mentioned that bookings include recurring, non-recurring subscription charges along with one-time charges for professional services such as implementation, set-up, etc.
Here are practical booking calculation examples:
Customer A: 24-month contract at $2,000/month, paid semi-annually, plus $3,000 implementation fee
Customer B: 12-month contract at $1,000/month, paid in advance, plus $2,000 concierge support
Customer C: 6-month contract at $1,000/month, paid quarterly
Customer D: Month-to-month plan at $100/month
Total bookings in this scenario: $48,000. Multi-year contracts require careful ACV consideration—Next years count as renewal bookings.
You will see that we have calculated and recorded bookings for different scenarios including bookings for multi-year subscription contracts, annualized bookings, bookings within the year, recording bookings for mid-term upgrades, and one-time charges.
Industry experts note that raw booking numbers with mixed contract durations provide limited business insight. According to Chargebee's 2025 research, 51% of companies now combine subscription with usage-based models for clearer value tracking.
He goes on to add that, you should look at the following components, to make more sensible decisions
What happens with new customers:New MRR/ACVfrom new customer contracts
What happens in your existing customers:RenewalsChurned MRR/ACV Expansion bookings
The sum of all of the above:Net New MRR/ACV
Simply, Bookings don't directly impact financial reports and income statements. Encouraging sales to let prospects pay upfront is another great way to improve bookings and increase cash flow. Needless to say, that should also mean delivering an experience that justifies the payment.
The Business Impact of Bookings
Bookings provide critical insights at each stage of business growth. Many early-stage businesses that don't entirely follow accounting best practices, treat bookings as the source of truth, in terms of revenues that can potentially be generated for their business. It also helps in understanding the market demand and the product-market fit for the solution they are building.
For sales and marketing teams, bookings help in deciphering revenue flow. The teams can improve on their customer acquisition strategy by drawing insights from which prospects signed up for what plans, converting prospects into paid users, which salesperson was responsible for winning the customer, etc. Based on these inputs, you can tighten the process of customer acquisition, retention, and a possible upgrade.
Which Teams Should Track Bookings
Bookings are an indicator of sales growth - so the sales team's primary metric is bookings.
While the sales team also looks at metrics such as MRR and churn, to understand if they are targeting the right kind and quality of customers, Bookings are a strong metric for evaluating sales success because they estimate total revenue generated by sales, including non-recurring charges. This is particularly necessary as MRR does not count in revenues from non-recurring charges.
For instance, in the case of new bookings, attributes such as downgrades, or contract cancellations, etc. should be taken into consideration for evaluating compensation. Similarly, for renewal bookings, it is worth considering upgrades or downgrades during renewals to evaluate compensation. The idea is to bridge the gap in expectations raised during a sale versus expectations during continuous service delivery.
That leads us to convert the bookings into recognizing the revenue. That is, if the bookings are high and the revenues recognized are low, there is a clear gap in the sales process and product delivery.
Finance teams rely on bookings for accurate cash flow planning and investor reporting. According to Chargebee's 2025 State of Recurring Revenue and Monetization Report, 96% of companies expect to grow in 2025, making accurate booking forecasts critical.
CFOs use bookings to report committed revenue without prematurely recognizing it as Annual Recurring Revenue (ARR), ensuring compliance.
Product teams reference bookings to align development roadmaps with customer commitments and contracted feature expectations.
