Help Center / Revenue Compliance

ARR Tracking and Reporting

What's this page about: ARR tracking in Light calculates and reports Annual Recurring Revenue automatically from your subscription contracts, covering the formula, how upgrades and churn move the number, the SaaS Metrics dashboard, and how ARR differs from revenue recognised under GAAP.

On this page

  • Understanding ARR
  • The ARR formula and how MRR is calculated
  • Tracking ARR movements: new, expansion, contraction, churn
  • Setting up ARR tracking
  • ARR reporting and dashboards
  • Multi-currency ARR reporting
  • Handling contract changes mid-period
  • ARR vs. GAAP revenue recognition
  • Forecasting with ARR
  • Best practices
  • Related articles

Understanding ARR

Annual Recurring Revenue (ARR) is the predictable revenue you can expect over the next twelve months from your active contracts. It matters most if you run a SaaS or subscription business, sell support and maintenance contracts, or deliver professional services under recurring agreements. Unlike one-time revenue, ARR gives investors, boards, and your own finance team a clean line on recurring cash flow, which is why it shows up in valuations and forecasts.

The ARR formula and how MRR is calculated

ARR = Monthly Recurring Revenue (MRR) × 12

Light builds MRR from your subscription contracts automatically. It:

  • Sums every active subscription contract in the period
  • Excludes one-time payments. Light's contract lines only support one-time or recurring billing (monthly, quarterly, half-yearly, yearly), with no separate usage-based or metered billing type
  • Normalises each contract's billing frequency (monthly, quarterly, half-yearly, or yearly) to a monthly figure
  • Drops churned contracts from MRR after their end date
  • Uses each contract line's value after discounts and before tax

For example, say you have three contracts:

  • Contract A: $1,000/month
  • Contract B: $5,000/year ($416.67/month, normalised)
  • Contract C: churned, no longer counted

Your MRR is $1,416.67, so ARR is $17,000.

Tracking ARR movements: new, expansion, contraction, churn

ARR moves as contracts are signed, renewed, or lost. Light tracks each movement separately:

  • New ARR: revenue from contracts signed this period that had no prior value.
  • Expansion ARR: additional revenue from existing customers, through upsells or added purchases.
  • Contraction ARR: revenue lost to existing customers downgrading price or quantity.
  • Churn ARR: revenue lost when a contract ends.

Net ARR growth = New ARR + Expansion ARR − Contraction ARR − Churn ARR

Splitting these out tells you whether growth is coming from new logos, from expanding existing accounts, or just from slower churn. Light also derives Net Revenue Retention (NRR) and Gross Revenue Retention (GRR) from the same movements, so you don't need to calculate these separately.

Setting up ARR tracking

ARR tracking runs automatically once your contracts are set up correctly. To make sure a contract is counted:

  1. Go to Revenue & Invoicing → Contracts.
  2. Check that the contract has a customer, entity, and currency. A contract must have a customer to count toward MRR, so this is the field to check first if a contract seems to be missing from your numbers.
  3. Confirm the contract has a billing start date (and end date, if it applies).
  4. Add contract lines for each recurring product, with a billing frequency of monthly, quarterly, half-yearly, or yearly.
  5. Publish the contract. This is the step that tells Light to aggregate its recurring lines into MRR and ARR. One-time lines are excluded automatically.

ARR reporting and dashboards

The SaaS Metrics dashboard is where all of this comes together. In the sidebar, open Planning & Reports → SaaS Metrics (/saas-metrics):

  • Metric charts and stats: current ARR and MRR, new/expansion/contraction/churned/net new MRR for the period, NRR and GRR, average revenue per account (ARPA), active customers, and revenue metrics including billed, recognised, and deferred revenue and outstanding AR.
  • Customer drilldown: breaks each period down by customer, classifying each one as new, expansion, contraction, churn, or retained.
  • AI summaries: a natural-language executive summary across whichever charts and stats you select.

You can save your own charts and arrange them into a personalised dashboard view.

Multi-currency ARR reporting

If you run entities in more than one currency, you can report ARR either per entity in local currency, or consolidated in group currency:

  1. In the sidebar, open Planning & Reports → SaaS Metrics.
  2. Select your reporting currency, local or group.
  3. Light converts each contract's MRR using the exchange rate captured at that contract's billing start date.

Because the rate is fixed at billing start, a later exchange rate change never retroactively shifts a past period's ARR or MRR.

Report in group currency for board and investor updates. Use local currency for subsidiary-level operational reporting.

Handling contract changes mid-period

Light recalculates ARR the moment a contract change is published, no manual adjustment needed.

  • Upgrades (expansion): increase the price or quantity on a contract's lines, or add new recurring lines. Light classifies the added MRR as expansion.
  • Downgrades (contraction): reduce the price or quantity on a contract's lines. Light classifies the reduction as contraction.
  • Churn: terminate the contract. Light removes its MRR from the termination date.

ARR vs. GAAP revenue recognition

ARR is a management metric, not a P&L figure. It differs from revenue recognised under IFRS 15:

  • ARR annualises the full contract value.
  • Recognised revenue is what your P&L shows under accounting rules.

For example, a customer pays $12,000 upfront for a 12-month contract:

  • ARR = $12,000
  • Month 1 recognised revenue = $1,000 (released from deferred revenue)
  • Total Year 1 recognised revenue = $12,000

Light reports both figures separately: ARR for business management, deferred revenue for financial reporting compliance.

Forecasting with ARR

ARR feeds directly into Light's budgeting and scenario planning:

  1. Use historical ARR and growth rates to build sales forecasts.
  2. Model the impact of different churn assumptions.
  3. Stress-test revenue against pricing changes.
  4. Forecast cash collections from your billing patterns.

See Budget Scenarios for the full forecasting toolset.

Best practices

  • Define "recurring" clearly. Most teams treat 12+ month terms with auto-renewal as recurring. Set that definition once and apply it consistently.
  • Keep contract data clean. Every subscription contract needs an accurate start date, end date (if applicable), and billing frequency.
  • Track by cohort. Segment ARR by acquisition channel, customer segment, or geography to see where your best customers come from.
  • Watch churn monthly. Investigate any spike in churn ARR as soon as it appears, not at quarter end.
  • Reconcile monthly. Match reported ARR against your AR aging report and contract management system.

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