MRR and ARR calculation
Understand how Fincome calculates MRR (Monthly Recurring Revenue) and ARR (Annual Recurring Revenue) to accurately reflect the reality of your recurring revenues. Discover the rules applied
1. Why does Fincome calculate MRR and ARR?
Fincome's mission is to centralize billing data (Stripe Billing, Chargebee, Hyperline, Sellsy, Pennylane, incoming APIs) and standardize its interpretation in order to provide real-time SaaS growth metrics: MRR, ARR, churn rate, NRR, projections, forecast scenarios, etc. A consistent calculation of MRR/ARR regardless of your PSP (payment service provider) is essential to ensure reporting coherence. Indeed, without uniform rules:
Financial reports become difficult to reconcile with operational reports
The allocation of movements (New MRR, Expansion, Churn) can be distorted
Investors struggle to compare your performance to their internal benchmarks
2. Definition and usefulness of MRR
MRR (Monthly Recurring Revenue) represents the monthly recurring revenue generated by your subscriptions. It is, in a way, the "monthly snapshot" of the company’s recurring revenue. Concretely, the MRR for a given month is the sum of all subscription amounts allocated to one month of service (amounts excluding taxes prorated over the relevant month).
MRR is calculated from invoice lines and the period of each subscription. The formula used is:
MRR is a central SaaS metric, used notably to:
Track the company’s growth trajectory month by month
Analyze the quality of the customer base by breaking down MRR evolution: new sales (New MRR), expansions (upsell), contractions (downsells) and churn, as well as the impact of exchange rate effects (FX)
MRR is not prorated: this means that the full value of a subscription is accounted for as soon as the subscription is active, even if it starts or ends in the middle of the month.
Example: A customer subscribes for €100 per month on March 15. The MRR for March will include the full subscription, even though the subscription starts only halfway through the month.
3. Methodology for calculating MRR in Fincome
Fincome calculates each month’s MRR following a rigorous process aligned with SaaS best practices. The calculation steps are as follows:
Identification of the service period: each billing line is processed according to its service start and end date (start_date and end_date). Example: an annual invoice from January 1 to December 31 covers 12 months of service.
Monthly allocation: the invoice amount is spread evenly across each month of service covered. This amounts to dividing the amount excluding taxes by the number of months in the covered period. Example: €1,200 excl. VAT over 12 months yields €100 of MRR per month.
Currency conversion (source: Open Exchange Rate): if your invoices are issued in another currency, Fincome converts the amounts into the reporting currency using the exchange rate at the start of the period (ECB rate on day 1). Example: $100 invoiced on May 15, with an EUR/USD rate of 1.10, is converted to ~€90.91 of MRR.
Exclusion of non-recurring revenue: non-recurring billing items are excluded from MRR. For example, one-off fees (setup fees, training, hardware, exceptional credits) are excluded and do not generate MRR. Example: training billed at €2,000 will be accounted for as €0 in MRR, because it is a one-shot (non-recurring) revenue.
Recognition of churn: Fincome applies a configurable churn recognition rule to determine when MRR is reduced in case of subscription cancellation. Depending on the chosen rule, the MRR loss can be recorded on the cancellation request date, on the effective cancellation date, or at the end of the current period. Example: for a subscription canceled on May 15 with an expiry on June 30, the MRR loss will be recorded either on May 15, on May 31, or on June 30, depending on the defined churn rule.
To learn more about churn recognition, you can read this article the Help Center.
4. From MRR to ARR
ARR (Annual Recurring Revenue) means Annual Recurring Revenue. It is simply the MRR expressed on an annual basis. The formula is: ARR = MRR × 12. This metric aggregates your monthly recurring revenue level into an annualized projection, useful for communicating the size of your annual recurring revenue. For example, a total MRR of €85,000 per month corresponds to an ARR of approximately €1,020,000 (85,000 × 12).
By mastering these different metrics, you will have a complete view to steer the growth of your SaaS. Fincome helps you automate these calculations and visualize them clearly to support your financial analyses, forecasts and strategic decisions.
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