If you are a CFO or head the finances of a company with a recurring revenue model, knowing the indicators shown below by heart is the difference between anticipating liquidity issues or discovering them when there is no longer room for manoeuvre.<\/p>\n
Annual Recurring Revenue (ARR) measures the business committed in invoices (subscription fees, flat rates, one-off payments, etc.). Collections, on the other hand, measure what actually enters the cash flow. The gap between the two is where problems hide: overdue accounts, protracted commercial disputes, deficient invoicing processes\u2026 a list that every company knows well.<\/p>\n
A CFO who manages ARR in isolation, without cross-referencing it with collection indicators, operates with an incomplete view of the company. This stresses cash flow and can eventually damage relationships with suppliers. Maintaining coherence between both metrics is a discipline that the CFO must institutionalise.<\/strong><\/em><\/p>\n 1. Net New ARR<\/strong><\/p>\n New ARR + Expansion ARR – Churn ARR<\/em><\/p>\n The most honest indicator of real growth. A positive and increasing Net New ARR is the sign that the business model is functioning structurally.<\/p>\n 2. Churn Rate<\/strong><\/p>\n Lost ARR \/ Initial ARR *100<\/em><\/p>\n One must distinguish between the customers who leave and the revenue lost through that churn, as the loss of a high-revenue customer will have a greater impact than many small customers. If this KPI exceeds 5\u20138% per annum, it is a red flag regarding the company’s viability.<\/p>\n 3. Net Revenue Retention (NRR)<\/strong>(<\/p>\n (Initial ARR + Expansion – Contraction – Churn) \/ Initial ARR * 100<\/em><\/p>\n NRR measures whether the existing customer base grows or contracts on its own, predicting sustainable growth. An NRR exceeding 100% indicates that expansions and upselling more than compensate for cancellations. Recent studies show that B2B companies with this KPI above 110%<\/strong> grow at a faster pace with less pressure on new customer acquisition. What is your company’s NRR?<\/p>\nWhat are the essential ARR KPIs?<\/strong><\/h3>\n