How To Calculate Net Annual Recurring Revenue in Deltek Vision | Arithmix
Learn how to accurately calculate your company's net annual recurring revenue in Deltek Vision with our step-by-step guide. Maximize your financial insights and make informed business decisions today.
Calculating net annual recurring revenue (NARR) is an essential process for any business that relies on recurring revenue streams. NARR is the amount of revenue generated by a company's recurring revenue sources, such as subscriptions or contracts, over a 12-month period, minus any discounts, refunds, or cancellations. In this article, we will discuss what NARR is, why it's valuable to calculate it, and how to calculate it.
What Is Net Annual Recurring Revenue?
Net annual recurring revenue is a metric that measures the amount of revenue a company generates from its recurring revenue streams over a 12-month period. Recurring revenue streams are sources of revenue that are predictable and consistent, such as subscriptions, maintenance contracts, or service agreements. NARR is calculated by taking the total revenue generated from these recurring sources over a 12-month period and subtracting any discounts, refunds, or cancellations.
NARR is an important metric for businesses that rely on recurring revenue streams because it provides insight into the health and growth of those revenue streams. By tracking NARR over time, businesses can identify trends and make informed decisions about pricing, customer retention, and growth strategies.
When Is It Valuable To Calculate Net Annual Recurring Revenue?
Calculating NARR is valuable for any business that relies on recurring revenue streams, but it's particularly important for businesses that offer subscription-based services or products. For these businesses, NARR is a key metric for measuring the health and growth of their customer base.
By tracking NARR, businesses can identify trends in customer retention and churn rates, which can help them make informed decisions about pricing, marketing, and customer service. For example, if a business notices a decline in NARR over time, it may indicate that customers are canceling their subscriptions or contracts at a higher rate than new customers are signing up. This could prompt the business to reevaluate its pricing or marketing strategies to improve customer retention.
Additionally, NARR can be a useful metric for investors or stakeholders who are interested in the long-term growth potential of a business. By tracking NARR over time, investors can gain insight into the predictability and stability of a company's revenue streams.
How to Calculate Net Annual Recurring Revenue
Calculating NARR is a straightforward process that involves gathering data on a company's recurring revenue streams over a 12-month period. To calculate NARR, follow these steps:
- Identify all of the company's recurring revenue sources, such as subscriptions, maintenance contracts, or service agreements.
- Determine the total revenue generated from these recurring sources over a 12-month period.
- Subtract any discounts, refunds, or cancellations from the total revenue to arrive at the net revenue.
- Divide the net revenue by the total number of customers or contracts to arrive at the average NARR per customer or contract.
For example, let's say a software company has 1,000 customers who pay $100 per month for a subscription to their software. Over a 12-month period, the company generates $1.2 million in revenue from these subscriptions. However, the company also offers a 10% discount to customers who pay annually, resulting in $120,000 in discounts. The company also experiences $50,000 in refunds and cancellations over the same period.
To calculate the NARR for this software company, we would subtract the discounts and refunds from the total revenue:
$1.2 million - $120,000 - $50,000 = $1.03 million
Next, we would divide the net revenue by the total number of customers:
$1.03 million / 1,000 = $1,030
Therefore, the average NARR per customer for this software company is $1,030.
By tracking NARR over time, this software company can identify trends in customer retention and pricing strategies, and make informed decisions about growth and expansion.
How Do You Calculate Net Annual Recurring Revenue in Deltek Vision
Deltek Vision itself isn’t naturally geared towards letting you calculate complex metrics like Net Annual Recurring Revenue. As an alternative, teams typically use products like Arithmix to import data from Deltek Vision and build out dashboards.
What is Arithmix?
Arithmix is the next generation spreadsheet - a collaborative, web-based platform for working with numbers that’s powerful yet easy to use. With Arithmix you can import data from systems like Deltek Vision, combine it with data from other systems, and create calculations like Net Annual Recurring Revenue.
In Arithmix, data is organized into Tables and referenced by name, not by cell location like a spreadsheet, simplifying calculation creation. Data and calculations can be shared with others and re-used like building blocks, vastly streamlining analysis, model building, and reporting in a highly scalable and easy to maintain platform. Data can be edited, categorized (by dimensions) and freely pivoted. Calculations are automatically copied across a dimension - eliminating copy and paste of formulas.
Arithmix is fully collaborative, giving your entire team access to your numbers and the ability to work together seamlessly.
Calculating Net Annual Recurring Revenue in Arithmix
Calculating metrics like Net Annual Recurring Revenue is simple in Arithmix. Once you've created your free account, you’ll be able to import your Deltek Vision data, and use it to create natural language formulas for metrics like Net Annual Recurring Revenue.
Arithmix is designed to give you the power to build any calculations you want on top of your Deltek Vision data, while also being easy to use and collaborate on. You can share your dashboards with users inside and outside of your organisation, making it easy to empower your whole team.Use Arithmix free