Background

The Revenue Module is designed to provide an intuitive and precise overview of your recurring revenue. In order to do this, there is a high degree of adaptability, most notably through the settings section in the Recurring Base, Renewal Rate, and Bookings tabs. These settings allow you to set rules for License start and end dates, overlapping or “gapping” Licenses, as well as how and whether to include forecasts and opportunities. You can also make adjustments, in the Renewal Rate tab, to the base used to track revenue development.

The Revenue Module is split into 5 tabs: Recurring Base, Renewal Rate, Bookings, Renewals, Invoices. In-module settings are available for the first three. Recurring Base shows past, current, and future (forecast) recurring revenue by month. The Renewal Rate tab can show a similar view, but visibly categorises churn, downgrades, renewals, and upgrades. Bookings shows the entire value of deals in the month of close. Values are displayed either as MRR or ARR depending on your preference in General Settings.

There are 7 settings available directly in the Recurring Base tab under the Revenue Module, 6 in the Bookings tab, and 9 in the Renewal Rate tab:

Settings available in all 3 tabs*:

Push Edge Cases

  • Forward

  • Backward

Auto Forecast

  • Assume Churn

  • Assume Renewal

  • Churn only if Auto-no

  • Churn only if Auto-no (ignore manual)

License End Date* (not included in Bookings)

  • Always include

  • Never include

  • Use best guess

Manual Forecast

  • Ignore manual forecasts

  • Use best guess

  • Use Optimistic

  • Use Pessimistic

Sensitivity (days)

  • # of days

Include Sales Opportunities

  • Yes

  • No

Sensitivity Direction

  • Both directions

  • For late renewals

  • For earlier start dates

Additional Settings in Renewal Rate tab:

Base Is

  • Total base beginning of period

  • Total value up for renewal

Treat groups as one unit

  • Yes

  • No

The Settings

Push Edge Cases

  • forward

  • backward

This is a setting allowing you to decide how to handle Licenses that start at the first day of the month. For example, you sign a one-year, fixed-term License, “License A”, which is renewed as License B.

  • License A: January 1 2022 - December 31 2022

  • License B: January 1 2023 - December 31 2023

You may want to display License A as a new sale in December, and as a renewal in January (i.e., if the customer is still subscribed at end of January, you want to display this as retained revenue in January). If so, you can set Push Edge Cases: backward.

Under Recurring Base, You will see bars for each month of License A, starting either in December 2021 until and including the month of November 2022 (Push Edge Cases backward) or starting in January 2022, extending to include December 2022 (Push Edge Cases forward).

Under the Renewal Rate tab, depending on your setting for “Base Is”, you will see:

  • For “total base beginning of period”: monthly renewal bars (and churn, downgrades, or forecasts) starting in January 2022 (backward), or starting in February 2022 (forward). Observe that data is shifted one month forward as compared to the Recurring Base. This is because the Renewal Rate tab does not display the initial month of “recurring base”, only the first month which is considered a renewal month.

  • For “value up for renewal”: License Renewed (and churned, downgraded, or forecast) either in December 2022 (backward) or January 2023 (forward).

Under Bookings, you will either see the Booking represented in the month of December 2021 (backward) or in January 2022 (forward).

When the License dates clearly span whole months, and there are no overlaps or gaps, the Push Edge Cases setting is fairly straight forward. But let’s look at an example with a gap between the Licenses:

If you signed a customer on June 15 2021, and the License has a Fixed Term of one year, set to end on June 14 2022, this License will be displayed from June 2021 regardless of edge case setting. However, if this License is not renewed until July 1 2022, Push Edge Cases will impact how the revenue is displayed over time. If you choose to Push Edge Cases forward, then Planhat will display recurring revenue for License B starting from July. There will be a gap:

  • License A: June 15 2021 - June 14 2022

  • License B: July 1 2022 - June 30 2023

License A is not an Edge Case, but License B is, since it starts on the first of the month. If instead you set Push Edge Cases backward, License B will be pushed back to June 2022:

The same is reflected in the Renewal Rate tab. With Push Edge Cases forward, License A is assumed to begin as “new biz” in June 2021, and is up for renewal in June 2022. However, the renewal of the License on July 1 is considered as starting in July because it has not been pushed back. Therefore, churn is displayed in June, new biz is considered in July, and License B starts to show as retained in August 2022.

With Push Edge Cases backward, License B is considered as starting in June 2022, the month of License A’s expiration. Therefore no churn is displayed.

This example serves to show both how Push Edge Case works, and how (possibly unwanted) gaps and spikes are displayed. While adjusting settings for Push Edge Case can sometimes have the desired effect on the representation of renewed licenses, it can in other scenarios have an adverse effect. A more precise adjustment, if you wish to address spikes and gaps, would be to set Sensitivity (days) to match or exceed the number of days between the end of License A and the start of License B. This would “stretch” License A to include the month of June 2022 in the chart.

Push Edge Cases is a setting primarily addressing whether first-of-month Licenses should be displayed in the current month, or the previous. Sensitivity will be discussed at greater depth under the corresponding header.

Auto Forecast

  • Assume Churn

  • Assume Renewal

  • Churn only if auto-no

  • Churn only if auto-no (ignore manual)

This setting interacts with settings under the Revenue tab in the Customer Profile, where you can set auto-renewal (”yes” or “no”). The first three settings: Assume Churn, Assume Renewal, and Churn only if Auto-no, will respect your Manual Forecast settings, discussed in the section below. The fourth setting will not.

  • Assume Churn does just that. Regardless of whether auto-renewal for a specific license is set to “yes” under the Customer Profile, no unconfirmed License revenue will be forecast as a striped box following the end of the current license, for your customer base. (Unless you have set a manual forecast)

  • Assume Renewal: The effect in the previous example is converse if you have auto-renewal set to “no” in the Customer Profile, but choose to “Assume Renewal” across the board in the Revenue Module. This setting assumes Renewal, regardless of specific auto-renewal settings. (Unless you have set a manual forecast)

  • Churn only if Auto-no will assume any current Licenses will churn, but only if this assumption (Auto-renewal = “no”) has been set on the Customer Profile level. (Unless you have set a manual forecast)

  • Churn only if Auto-no (ignore manual) will also assume churn, provided this is set on the Customer Profile, but it will also disregard any manual forecasts input on the Profile.

Manual Forecast

• Ignore manual forecasts • Use best guess • Use Optimistic • Use Pessimistic

This setting interacts with the manual forecasts in the the Customer Profile, where you can set a best guess, optimistic, or pessimistic renewal revenue forecast. Manual Forecasts always override the Auto Forecast settings described in the previous section, unless the setting: Churn only if Auto-no (ignore manual) is chosen.

What happens when we combine settings for Auto Forecast and Manual Forecast?

  • Auto Forecast: Assume Churn X

    • Manual Forecast: Ignore manual forecasts: Here, Churn is always assumed, regardless of the Auto-renewal setting or Manual forecasts in the Customer Profile.

    • Manual Forecast: Use best guess: Here, Planhat will assume churn if there are no manual forecasts, but will choose manual forecasts according to availability when applicable.

    • Manual Forecast: Use Optimistic: Here, Planhat will assume churn, unless there is a Manually input Optimistic Forecast on the Company Profile.

    • Manual Forecast: Use Pessimistic: Here, Planhat will assume churn, unless there is a Manually input Pessimistic Forecast on the Company Profile.

  • Auto Forecast: Assume Renewal X

    • Manual Forecast: This is the same as the above scenarios, except Renewal is assumed regardless of the Auto-renewal toggle in the Company Profile, but will always be overridden by the particular Manual Forecast setting, unless ignored.

  • Auto Forecast: Churn only if Auto-no X

    • Manual Forecast: This will display the same figures as the Assume Churn setting, but will respect the Auto-renewal setting on the Company Profile, unless the Manual Forecast setting overrides this.

  • Auto Forecast: Churn only if Auto-no (ignore manual) X

    • Manual Forecast: Ignore manual forecasts: Here, Churn is always assumed, regardless of the Auto-renewal setting or Manual forecasts in the Customer Profile. Further, if Auto-renewal is set to yes, then the License is assumed to renew according to the exact same specs as the previous license, as manual forecasts are ignored.

    • Manual Forecast: Use best guess: Here, Planhat will assume churn only if Auto-renewal is set to no. If not, Planhat uses choose manual forecasts according to availability.

    • Manual Forecast: Use Optimistic: Here, Planhat will assume churn only if Auto-renewal is set to no, otherwise Planhat will use the Optimistic Forecast on the Company Profile.

    • Manual Forecast: Use Pessimistic: Here, Planhat will assume churn only if Auto-renewal is set to no, otherwise Planhat will use the Pessimistic Forecast on the Company Profile.

Include Sales Opportunities

  • yes

  • no

This setting determines if Opportunities should be shown as forecasted revenue.

License End Date

  • Backward

  • Forward

This setting is interesting, because it gives you flexibility to decide how Planhat should interpret your License end dates when you have concurrent licenses. For example, your company may use annual contracts setting the start and end dates to the same date, one year in between - e.g. January 1 2021 - January 1 2022. If you renewed this license on January 1 2022, the end date of the previous license, then this setting can impact how your revenue is displayed. For example, if you have particular settings for Sensitivity (days) = 0, and Push Edge Cases = backward, then setting License End Date will have a lot of impact.

  • License A: January 1 2021 - January 1 2022

  • License B: January 1 2022 - January 1 2023

In this example, Licenses would overlap by one day:

However, if you have set License End Date to “best guess”, or “never include”, the first license will not extend to include January 2022. For a more detailed explanation of how Push Edge Cases, Sensitivity (days), and License End Date interact, please see this Case Study article.

Sensitivity (days)

  • # of days

This setting allows you to establish how many days Licenses can overlap, or be separate, for Planhat to display revenue continuously, rather than with spikes or gaps.

The differences between Sensitivity (or “churn tolerance”), and Pushing Edge Cases, are 1) that pushing edge cases affects only first-of-month contracts, 2) that pushing edge cases, as a rule, shifts the time-span of the License’s recurring revenue, whereas Sensitivity stretches License A to bridge a gap, and “soft-pushes”, or compresses License B to smooth a spike. Pushing Edge Cases can have an impact on how gaps and spikes manifest in the chart, but it is the Sensitivity setting that specifically targets this.

Another scenario in which Sensitivity settings play a role, regards gaps. For example, if License A runs from June 1 2021 - May 31 2022, and is renewed as License B from 14 July 2022 - 13 July 2023, Planhat will display a gap of at least a month, unless you have set Sensitivity (days) to accommodate this gap:

If, however, you set Sensitivity (days) to accommodate the gap, License A will be stretched until the start of License B, regardless of the Push Edge Case setting:

Sensitivity (direction)

  • Both directions

  • For late renewals

  • For earlier start dates

This setting allows you to determine if Sensitivity should be applied to late renewals (i.e. renewals starting several days after the previous License end date), early renewals, or both.

Base Is

  • Value up for renewal

  • Total base beginning of period

This setting determines the base used to calculate Renewal Rate, Gross Churn, and Customer Churn in the Gauges. The gauge for Renewal Rate will show (1+(upgrades - downgrades - churn)/base). Gross churn shows (churn + downgrades)/base. Customer churn shows (lost customers / number in base).

If you use “Total base beginning of period” and look at a month, the developments to existing contracts during that month will be compared to all contracts that are running at the beginning of the month, including fixed term Licenses not set to renew until subsequent months. However, taking as a base the “Value up for renewal”, any fixed term Licenses running through the month, not scheduled to renew, are not included in the base.

For example, if you have 3 customers each paying 10K per month, of which one churns, another renews, and a third is not set to renew until next month, the gauges will display the following results in the different settings:

An interesting example showcasing the difference between using total base beginning of month and value up for renewal, can be found below:

If License A runs from July 8 2021 - August 7 2022, and License B runs from July 2 2022 - July 1 2023, there is a 36 day overlap. If the Sensitivity (days) setting does not accommodate this overlap, a spike will be shown in the Recurring Base. The implications for the renewal and churn gauges in the Renewal Rate tab depend on the Base Is setting:

  • License A: July 8 2021 - August 7 2022

  • License B: July 2 2022 - July 1 2023

When the base is set to use the total for beginning of month, License B will be regarded as an upgrade, increasing revenue retention by 100%. However, when License A expires in the following month, 50% gross churn (and renewal rate) is observed, as the base is interpreted as decreasing.

However, the results differ when you have set the base to “value up for renewal”:

When the base is instead set to use the value up for renewal, License B will still be regarded as an upgrade, but this will not show, as License A is not considered as up for renewal in July, the first month of License B. In August, License A is represented as churned, like in the previous example. The difference here, is that only License A, not License B, is up for renewal in August, so the entire considered base is represented as churned. This translates to 100% gross churn, and a 0% renewal rate.

Treat groups as one unit

  • yes

  • no

When this is set to “yes”, all Licenses running for companies within a group will be considered running concurrently for the same customer. So, a churned License for one company within the group will be considered a downgrade if other companies within the group have running Licenses.

Clarifications and disambiguations

MRR on the Company Profile

The MRR field on the Company Profile refers to the MRR (USD), or other currency, field on the Company level.

Recurring Base System Metric

The Recurring Base system metric available in the Customer Intelligence Module> Trends and Analytics> Revenue> Recurring Base, refers to the same data as the MRR field, but there is a one day lag. So, you may observe that the current level for MRR differs from the Recurring Base Metric.

The Recurring Base system metric shows Time Series Data. As such, it shows the actual value that total MRR has taken through time. If you change licenses retroactively, this will not reflect in the Recurring Base Metric, because the metric looks at the value of revenue as logged at the time.

Set (guess) License Status - General Settings

This setting allows Planhat to “guess” the status of Licenses, looking at whether a new License has started after the completion of the first License. If you set this to 30 days, Planhat will assume the first License was renewed if a second License started within 30 days of the first License ending. Please note that this is updated once per 24 hours. This setting is different from Sensitivity (days) in that Sensitivity dictates how to display Licenses with gaps and overlaps in coverage, whereas Set (guess) License Status actually sets the status of Licenses. If you want to adjust how churn is displayed in the Revenue Module, Sensitivity (days) should be used.

Summary

In summary, the settings section in the Revenue Module allows modification of a lot of factors depending on how you run your business and track your revenue data. Perhaps the most important take-away is that there are some decisions you need to make for all Licenses, and there is a benefit to taking a consistent approach when importing, logging and updating your License and customer data. You can choose Push Edge Cases forward, or backward (recommended), as a rule. If you want Sensitivity (recommended) for spikes and gaps in License coverage, then the number of days you choose for your tolerance span will apply to all Licenses, as will the Sensitivity direction.

While changing and experimenting with these settings can give insight, in order for maximum utility and efficiency, you may want to maintain consistent settings, building your processes around how you have decided to track revenue and vice versa.

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