Calculating net annual recurring revenue (ARR) in Workday is a straightforward process that involves a few simple steps. Before we dive into the specifics, let's first understand what net ARR is and when it's valuable to calculate it.
Net ARR is a metric that measures the total recurring revenue a company generates from its customers over a year, minus any discounts, refunds, or cancellations. It's a critical metric for subscription-based businesses, as it provides insight into the company's revenue growth and customer retention rates.
Net ARR is calculated by multiplying the average monthly recurring revenue (MRR) by 12, then subtracting any discounts, refunds, or cancellations. For example, if a company has an average MRR of $10,000 and experiences $50,000 in discounts, refunds, and cancellations over a year, its net ARR would be $110,000 ($10,000 x 12 - $50,000).
Calculating net ARR is valuable for any subscription-based business that wants to measure its revenue growth and customer retention rates accurately. It provides insight into the company's financial health and helps identify areas for improvement.
Net ARR is particularly useful for companies that are looking to raise capital or attract investors. Investors often look at a company's net ARR to determine its growth potential and evaluate its financial health. By calculating net ARR, companies can provide investors with a clear picture of their revenue growth and customer retention rates.
Net ARR is also valuable for companies that are looking to make strategic decisions about pricing, product offerings, and customer acquisition. By understanding their net ARR, companies can determine the impact of changes in pricing, product offerings, and customer acquisition strategies on their revenue growth and customer retention rates.
In conclusion, calculating net ARR is a critical metric for subscription-based businesses that want to measure their revenue growth and customer retention rates accurately. By understanding their net ARR, companies can make informed decisions about pricing, product offerings, and customer acquisition strategies and provide investors with a clear picture of their financial health and growth potential.
Workday itself isn’t naturally geared towards letting you calculate complex metrics like Net ARR. As an alternative, teams typically use products like Arithmix to import data from Workday and build out dashboards.
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 Workday, combine it with data from other systems, and create calculations like Net ARR.
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 metrics like Net ARR is simple in Arithmix. Once you've created your free account, you’ll be able to import your Workday data, and use it to create natural language formulas for metrics like Net ARR.
Arithmix is designed to give you the power to build any calculations you want on top of your Workday 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.