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Hey {{first_name}} 👋, hope you had a great week! In the last issue, we discussed why tracking Pipeline Coverage Ratio matters, and now we are moving with the next topic from Revenue, ARR and MRR content.

Let’s talk about ⬇️

Most SaaS Founders and Finance Leaders think you need complex, proprietary models to understand your future revenue and long-term financial viability.

But after years of studying SaaS finance and working with high-growth companies, I can tell you nothing is further from the truth.

In reality, you ONLY need these 3 simple concepts/frameworks:

And today, I want to walk you through how each of these concepts works so you can finally accurately forecast your revenue and guide valuation.

Let's dig in:

1️⃣ Revenue Backlog: The Core Calculation

2️⃣ Revenue Backlog vs. Deferred Revenue: The Key Distinction

3️⃣ The 3 Best Practices for Management

The goal of this metric is to measure the unrecognized/unbilled revenue from signed contracts.

Context: This is a key forward-looking metric for subscription businesses, providing a signal of future momentum (unlike lagging indicators like recognized Revenue or ARR).

Why it's important: It shows investors and internal teams the full value of the contracts you have already won, indicating long-term financial viability and growth potential.

The Key Benefit: It helps you move beyond just "Bookings" and provides a clearer, un-timed value of customer agreements.

Practical Tip: Don't get stuck doing this manually! The core formula is:

I'm Aleksandar, fractional CFO at Fiscallion, where we help founders like you achieve financial clarity, streamline reporting, and build investor-ready forecasts.

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The goal of this distinction is to avoid mixing up liability with future opportunity.

Context: Both are related to future revenue, but they live in different places on the financial statement and signal different things.

Why it's important: Mixing them up leads to wildly inaccurate financial reporting and forecasting. Deferred Revenue is money you owe (a liability). Revenue Backlog is money you expect to receive (a forward indicator).

The Key Benefit: Understanding this difference gives you a more nuanced, accurate view of your business's current state and its future trajectory.

Alright, we're almost done here. But before we wrap things up, there are 3 must-do steps we need to talk about:

The goal of this set of practices is to ensure your Revenue Backlog metric is consistent, accurate, and actionable.

Best Practice #1: Stick to the Same Calculation Method

Best Practice #2: Regularly Monitor and Update

Best Practice #3: Look at Granular Details

And that's it!

Mastering Revenue Backlog moves you from looking backward at recognized revenue to looking forward at your true growth potential.

Hope you find these frameworks helpful. And if you have any other SaaS finance-related questions, please don't hesitate to hit reply & let me know. I'm here to help :)

Chat soon,

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