Entering recurring charges (subscription) revenue streams

Recurring charges revenue streams are very useful for forecasting products or services that involve signups, recurring billings, cancellation rates, and the like. Some good examples are magazine subscriptions, gym memberships, or software-as-a-service products. If your business is building a subscription service, creating a reliable sales forecast is a critical step to understanding how your business will grow, and what the key drivers of revenue growth will be.

Note: When you create a recurring charges revenue stream, the revenue will be calculated into your financials according to how your forecast is set for multi-month charges. Read Changing the setting for multi-month charges.

To learn more about how to forecast and track your recurring revenue business, read these related posts:

Adding a recurring charges stream to your forecast

  1. In the Forecast section, on the Revenue page, click the Add Revenue Stream button:
    Arrow Pointing to Add Revenue.png

  2. Enter a name for your recurring charges revenue stream, then click Type or Next:
    2023-02-06_11-44-35.png

  3. Choose Recurring charges, then click Signups or Next:
    2023-02-06_11-45-52.png

  4. Choose the month/year that you plan to begin signing people up for your subscription product or service:

    Note: if your subscription starts before your forecast start date, choose Before plan start date. You'll find additional instructions about this option below, after these steps.
    recurring_charges_start_date.png

    If you think you will have the same number of signups per month, choose Constant amount and enter the number per month:
    constant_amount_recurring.png

    If you expect different numbers of customers to sign up depending on the month (for example, if your business has seasonal highs and lows), choose Varying amounts over time. This will give you a grid so you can enter varying amounts:
    varying_amounts_recurring_revenue.png

    Note: If you'd like to enter monthly numbers for more than one year of your forecast, you can update the amount of monthly detail in your forecast easily.

  5. Click Charges or Next.
  6. If you charge a setup fee (or other one-time charge) when customers sign up, enter that amount. If there is no initial charge, click No fee:
    up_front_fee.png

  7. Next, choose whether you will charge a constant price or varying prices over time for the subscription:
    constant_or_varying_recurring.png

  8. Enter the amount that you will charge for each period of the subscription - this is your renewal charge:recurring_charge_amount.png

  9. Indicate how often you will charge your customers. This is your renewal period (for example, are your customers charged monthly, quarterly, every six months, etc.). Then click Churn Rate or Next:
    how_often_is_charge_assessed.png

  10. Churn Rate is the percentage of customers that cancel your service in a given month—when they leave, they’ve “churned out” and are no longer subscribing. For your business to grow, you need to add customers at a faster pace than they are canceling their subscriptions.

    If you're not sure how to estimate your churn rate, start with the number of customers you expect to cancel in a given month, and divide that by the total number of customers that you forecast at the beginning of that month.

    Note: If the renewal period you specified is monthly, then the churn rate applies to monthly renewals. If your renewal period is quarterly, then the churn rate applies only to quarterly renewals (and not for the months in between). Also, the churn rate is applied to the number of customers you have at the beginning of each month - before any new signups are added. Subscribers are not charged for the period in which they've canceled.

    churn_rate_recurring.png

  11. Click Create & Exit (or Save & Exit if editing an existing revenue stream)

Starting a recurring charges revenue stream before the forecast start date

If your subscription began before the forecast's start date (Say, you have an existing business rather than a start-up), begin your revenue stream following the steps above. Under When will this revenue start, choose Before plan start date:

before_plan_start_date_recurring.png

Then proceed with entering the number of new sign-ups, up-front fee, and renewal charge and period.

Finally, before entering the churn rate, you'll be able to indicate how many of your existing customers will have a renewal charge happening in the months listed:

churn_rate_recurring.png

When you enter your numbers here, it helps LivePlan calculate your customer retention and revenue accurately. LivePlan will also apply the churn rate to your existing customers, so you can accurately forecast how many of them will cancel in the initial months of your forecast.

If you are forecasting for an existing company, and your subscription charge happens every 2-12 months, then LivePlan will also use this information to calculate the prepaid revenue for these existing subscribers. The data will appear in your Starting Balances input. For more details, see Entering initial balances for an existing company.

Editing or deleting a recurring charges revenue stream

Editing

  1. To edit a revenue stream, click on its name in the table on the Revenue page:
    revenue_stream_forecast_highlighted.png

  2. The edit overlay will appear. You can click on any of the steps across the top that you wish to edit. For more details, see How do I edit or delete forecast entries?
    forecast_entry_steps_highlighted.png

Deleting

  1. To delete a revenue stream, hover your mouse over the entry and click on the three dots that appear next to its name:
    forecast item showing three dot menu highlighted.png

  2. Select Delete from the menu:
    delete forecast item menu delete highlighted.png

  3. Click Delete:
    please confirm forecast item delete.png

Where does this entry appear in the financial statements?

Your revenue streams will be used to calculate the highlighted lines the Profit & Loss, Balance Sheet, and Cash Flow table shown below:
Profit & Loss
P&L revenue line highlighted.png

Balance Sheet

balance sheet cash highlighted new2.png

Cash Flow

cash flow net profit highlighted new.png

If you've set your Multi-month charges to "Spread out multi-month charges," you will also see a Prepaid Revenue line in your balance sheet. Read Changing the setting for multi-month charges.

balance-sheet-prepaid-rev.png

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