How To Calculate Recurring Margin in Sage 50 | Arithmix

Calculating recurring margin is a crucial aspect of running a successful business. It helps you determine the profitability of your business over a period of time. In this article, we will discuss what recurring margin is, when it is valuable to calculate it, and how to calculate it.

What Is Recurring Margin?

Recurring margin is the profit that a business generates from its recurring revenue streams. It is the difference between the revenue generated from recurring sales and the cost of goods sold (COGS) associated with those sales. Recurring revenue streams are those that generate revenue on a regular basis, such as subscriptions or service contracts.

Calculating recurring margin is important because it helps you understand the profitability of your business over a period of time. It also helps you identify areas where you can improve your margins and increase your profitability.

When Is It Valuable To Calculate Recurring Margin?

Calculating recurring margin is valuable in several situations. For example, if you are considering offering a new subscription service, calculating the recurring margin can help you determine whether the service will be profitable in the long run. It can also help you identify areas where you can improve your margins and increase your profitability.

Additionally, if you are looking to sell your business, potential buyers will want to see your recurring margin. A high recurring margin indicates a profitable and sustainable business model, which can increase the value of your business.

How To Calculate Recurring Margin

To calculate recurring margin, you need to know the revenue generated from your recurring sales and the COGS associated with those sales. Once you have this information, you can use the following formula:

Recurring Margin = (Recurring Revenue - COGS) / Recurring Revenue

For example, if your business generates $10,000 in recurring revenue and the COGS associated with those sales is $3,000, your recurring margin would be:

Recurring Margin = ($10,000 - $3,000) / $10,000 = 0.7 or 70%

A recurring margin of 70% indicates that for every dollar of recurring revenue generated, your business is making 70 cents in profit.

Calculating recurring margin on a regular basis can help you identify trends in your business and make informed decisions about pricing, product offerings, and other aspects of your business.

In conclusion, calculating recurring margin is an important aspect of running a successful business. It helps you understand the profitability of your business over a period of time and identify areas where you can improve your margins and increase your profitability. By using the formula outlined in this article, you can easily calculate your recurring margin and make informed decisions about the future of your business.

How Do You Calculate Recurring Margin in Sage 50

Sage 50 itself isn’t naturally geared towards letting you calculate complex metrics like Recurring Margin. As an alternative, teams typically use products like Arithmix to import data from Sage 50 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 Sage 50, combine it with data from other systems, and create calculations like Recurring Margin.

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 Recurring Margin in Arithmix

Calculating metrics like Recurring Margin is simple in Arithmix. Once you've created your free account, you’ll be able to import your Sage 50 data, and use it to create natural language formulas for metrics like Recurring Margin.

Arithmix is designed to give you the power to build any calculations you want on top of your Sage 50 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.