Key Takeaways

• The formula divides each subscription by the months its billing interval covers, so an $18,000 annual contract adds $1,500 a month, never $18,000 at once.

• ChartMogul names booking an annual contract at full value in the signing month as the common MRR mistake.

• Baremetrics publishes "MRR = number of customers × average billed amount", which carries no term for billing interval or usage and breaks on a mixed book.

• On the book below, MRR lands at $24,200 while $48,900 gets billed.

• Ordway reports no consensus on metered revenue, with public SaaS companies split both ways in SEC filings.

How is MRR calculated?

Divide each active subscription by the months its billing interval covers, then add the results. That one rule handles monthly plans, quarterly plans, and annual prepays, and it's the version ChartMogul publishes: amount paid, divided by months in the plan interval.

Here's one month on a book that mixes every billing shape.

MRR totals $24,200 against $48,900 billed. The $24,700 gap sits in the annual prepay, the one-time fee, and the overage.

Two lines take judgment rather than arithmetic. The discount comes off, because a report claiming $2,000 describes a plan nobody is on. The committed minimum goes in and the variable overage stays out, following Ordway's predictability test: count metered revenue when it holds steady across the base, exclude it when it doesn't. That judgment belongs to consumption-based pricing.

What does not belong in MRR?

Anything a customer won't pay again next month stays out.

• One-time fees: implementation, setup, training, migration, professional services.

• Hardware, pass-through expenses, and resale lines with no subscription attached.

• Refunds and chargebacks, which correct cash rather than the run rate.

• Unpredictable metered overage, unless your policy includes it and your usage data backs it.

• Trials, pilots, and signed contracts that haven't started.

• Sales tax and VAT collected for a jurisdiction.

Confusion with GAAP revenue causes most of the rest. MRR is a run rate, not an accounting figure, and no auditor accepts it as a substitute for revenue recognized under ASC 606.

A flat MRR line hides plenty too, since heavy churn offset by upgrades reads as no change. MRR movements splits that change into named categories, and the annualized view lives in MRR vs ARR.

Related terms

Each of these picks up where the calculation stops.

• MRR vs ARR: the annualized view of the same book.

• MRR movements: the categories explaining every change between two MRR readings.

• Expansion MRR: revenue existing customers add through upgrades, seats, or higher usage.

• Contraction MRR: revenue existing customers drop while staying customers.

• Consumption-based pricing: the model behind the metered lines.

FAQ

Is MRR the same as revenue on an income statement?

No. MRR is a run rate priced off today's subscriptions, while income statement revenue follows recognition rules and reports what the company earned in the period. An annual contract splits the two apart by design.

Do discounts reduce MRR?

Yes, when the discount applies for as long as the customer stays. A $2,000 plan sold at 20% off contributes $1,600, because that's the amount arriving every month.

What happens to MRR when a customer pays quarterly?

Divide the quarterly amount by three and count that figure in every month of the quarter. A $3,600 quarterly invoice adds $1,200 of MRR, including the two months with no invoice attached.

Can a usage-based business track MRR at all?

Yes, though it takes a written policy on which metered revenue counts. Most teams split the book in two:

• Committed minimums, platform fees, and prepaid credit subscriptions go into MRR.

• Variable overage gets reported separately, or folded in on a trailing average once the pattern proves stable.