Announcing: Principles of Revenue Management  
Sequence

Glossary

Terms and phrases related to revenue management

a

Accounts receivable

Money owed to a company by its customers for products or services that have been delivered but not yet paid for. Effective management of accounts receivable is essential for cash flow.

Advance billing

A billing method where customers are invoiced before the service is provided or the product is delivered. Advance billing helps ensure cash flow and financial stability for the provider.

Annual commitment

An agreement where a customer commits to using a service for a full year, often in exchange for a discounted rate. Annual commitments provide revenue predictability for businesses.

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Annual contract value (ACV)

The average annual value of a contract, typically used to understand the size of contracts in subscription-based businesses. ACV helps in evaluating the revenue potential of long-term contracts.

Annual recurring revenue (ARR)

The total recurring revenue expected from customers over a year excluding one-time fees, assuming no cancellations or upgrades. ARR provides insight into the business's long-term financial health.

Arrears billing

A billing method where customers are charged after the service has been provided or the product has been delivered. Arrears billing is common in services where the exact usage needs to be measured before invoicing.

ASC 606

A revenue recognition standard established by the Financial Accounting Standards Board (FASB) that outlines how companies should recognize revenue from contracts with customers. ASC 606 ensures consistency in financial reporting.

b

Bank transfer

A method of transferring money from one bank account to another, either domestically or internationally. Bank transfers are commonly used for large transactions and can take a few days to process.

BigQuery

A fully-managed, serverless data warehouse offered by Google Cloud that allows users to run SQL queries on large datasets quickly. BigQuery is used for data analysis and business intelligence.

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Billing address

The address associated with the customer’s payment method, used for sending invoices and verifying payment information. The billing address is essential for accurate billing and fraud prevention.

Billing frequency

The interval at which a customer is billed for a product or service, such as monthly, quarterly, or annually. Billing frequency impacts cash flow and customer satisfaction.

Billing schedule

A predetermined timeline that outlines when customers are invoiced and payments are collected. It simplifies the revenue collection process by automating invoicing according to the terms of the customer contract.

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c

Chart of accounts

The list of all ledger accounts in the GL is called chart of accounts (CoA). CoAs are relatively standard in structure, but businesses will often refine it and customise it to reflect their own conventions and categories – for example, they may track revenue from different product lines under separate ledger accounts.

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Configure, price, quote (CPQ)

A software tool that helps companies configure complex products, set prices, and generate accurate quotes quickly. CPQ systems streamline the sales process and ensure consistency.

Contract amendment

A change or addition to an existing contract, often used to modify terms, pricing, or service levels. Contract amendments are common in B2B relationships and require careful management to ensure both parties are in agreement.

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Contract management

The process of managing contract creation, execution, and analysis to maximize operational and financial performance. Effective contract management reduces risks and ensures compliance with terms.

Contract value

The total monetary worth of a contract, including all components such as one-time fees, recurring charges, and usage-based fees. Understanding contract value is essential for revenue forecasting.

Contractual obligation

A binding agreement between a customer and a company, where the customer agrees to specific terms, such as payment or usage commitments. Contractual obligations are crucial for enforcing contracts and managing revenue expectations.

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Customer relationship management (CRM)

A system used by businesses to manage interactions with current and potential customers. CRMs help in tracking sales, customer service, and marketing efforts, ultimately improving customer relationships.

Cross-selling

A sales strategy that involves offering additional products or services to an existing customer. Cross-selling is designed to increase revenue by meeting more of the customer's needs.

Customer acquisition cost (CAC)

The cost associated with acquiring a new customer, including marketing and sales expenses. CAC is a critical metric in determining the profitability of customer acquisition strategies.

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Customer alias

An alternate identifier for a customer, often used to protect customer privacy or to manage multiple customer accounts under one profile. Customer aliases help in maintaining data integrity across systems.

d

Days sales outstanding (DSO)

A financial metric that measures the average number of days it takes for a company to collect payment after a sale has been made. DSO is a key indicator of a company’s cash flow and efficiency in collecting receivables.

Deferred billing

A billing arrangement where charges are invoiced after the service or product has been delivered, often at the end of a billing cycle. This model can help align cash flow with revenue recognition.

Deferred revenue sub-ledger

A specialized ledger that tracks deferred revenue, ensuring that revenue is recognized correctly in accordance with accounting standards like ASC 606. It helps maintain accurate financial statements.

Direct debit

An arrangement where a customer authorizes a business to withdraw funds directly from their bank account on a recurring basis. Direct debits are often used for subscription services and recurring payments.

Dynamic pricing

A pricing strategy where the price of a product or service is flexible and can change based on real-time demand, competition, or other market conditions. This approach helps maximize revenue and market share.

e

Economic nexus

A tax obligation that arises when a business has sufficient economic activity in a state or jurisdiction, even without a physical presence. Economic nexus often triggers sales tax collection responsibilities.

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Enterprise resource planning (ERP)

A software platform that integrates and manages core business processes such as finance, HR, supply chain, and operations. ERPs help organizations streamline operations and improve efficiency.

Event property

A specific attribute or characteristic of a usage event, such as the timestamp, location, or user ID. Event properties are used in analytics to provide context and enable deeper insights into customer behavior.

f

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Freemium model

A business model that offers basic features of a product or service for free, while charging for advanced features. The freemium model is often used to attract a large user base and convert a percentage into paying customers.

g

General ledger

Companies use a ledger to track how economic value moves across different buckets in the business, such as asset, liability, equity, revenue and expenses. The central ledger for the whole business is called general ledger (GL), and typically lives in the ERP.

Graduated tier pricing

A pricing model where different pricing tiers are applied as usage or consumption increases. Each tier is charged at a different rate, typically with higher usage resulting in higher per-unit costs.

Guardrail

A control or set of controls put in place to prevent errors or risky behavior in pricing, billing, or sales processes. Guardrails help ensure consistency and compliance with company policies.

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h

Hubspot

A CRM platform that offers tools for inbound marketing, sales, customer service, and content management. HubSpot is known for its user-friendly interface and integration capabilities.

i

IFRS 15

An international financial reporting standard that provides guidelines on how companies should recognize revenue from contracts with customers. IFRS 15 aligns with ASC 606 to promote global consistency in financial reporting.

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k

Kicker

A financial term that refers to an additional feature or clause in a contract, such as an incentive or bonus, which is triggered under certain conditions. In the context of SaaS billing, a kicker could be a provision that adds extra fees or discounts based on specific usage thresholds or contract terms.

l

Ledger

A record of all financial transactions within an organization, used to track income, expenses, assets, and liabilities. Ledgers are fundamental to accounting and financial reporting.

Ledger transaction

A ledger is an append-only database that records transactions between a set of ledger accounts. A ledger account is a container of money: it has a balance, which can go up or down. Each ledger transaction involves moving money across ledger accounts, with the constraint that money can’t be created or destroyed.

Lifetime value (LTV)

The total revenue a company can expect to generate from a customer over the entire duration of their relationship. LTV is a key metric for assessing the long-term profitability of customer acquisition strategies.

List price

The manufacturer's suggested retail price (MSRP) or base price for a product or service before any discounts are applied. The list price is often used as a reference point in pricing strategies.

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m

Metering

The process of tracking and recording customer usage of a product or service, often for the purpose of billing or analytics. Metering ensures accurate billing in usage-based pricing models.

Minimum

The lowest acceptable level of a charge, service, or product usage, often used in pricing models to ensure a base level of revenue. Minimums are commonly seen in contracts and pricing agreements.

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Monthly commitment

An agreement where a customer commits to using a service on a month-to-month basis, often with the flexibility to cancel at any time. This model offers less revenue predictability compared to annual commitments.

Monthly recurring revenue (MRR)

The predictable revenue a company expects to earn each month from subscription-based services. MRR helps in tracking growth trends and making financial forecasts.

Multi-year contract

A contract that spans multiple years, often providing stability in revenue and customer commitment. It may include clauses for price increases or additional services over the contract's term.

n

Net dollar retention (NDR)

A metric that shows how much recurring revenue is retained from existing customers, including upgrades, downgrades, and churn. NDR over 100% indicates revenue growth from the existing customer base.

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Net revenue

The amount of revenue that remains after deducting returns, discounts, and allowances from gross revenue. Net revenue gives a clearer picture of actual revenue generated by a company.

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Netsuite

A cloud-based ERP software that helps businesses manage their financials, operations, and customer relationships. Netsuite is widely used for automating business processes and integrating various functions.

o

Overage fees

Overages are additional charges incurred when a customer exceeds the usage limits outlined in their plan, such as data, API calls, or seats. Overages are a helpful mechanism to ensure businesses are compensated for higher-than-expected usage.

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p

Packaged pricing

A pricing strategy where multiple products or services are bundled together and sold at a single price. Packaged pricing can increase perceived value and simplify purchasing decisions.

Packaging

The way products or services are bundled and presented to customers, often combining multiple offerings into one package. Effective packaging can enhance perceived value and simplify purchasing decisions.

Payment terms

Payment terms determine when payment is due, any discounts for early payment, and penalties for late payment. Payment terms are critical for managing cash flow and customer relationships. NET30 payment terms is a common payment term, but NET15, NET45 or NET60 are also used.

Per-seat pricing

A pricing model where the cost is based on the number of users (or seats) that have access to the product or service. It's common in collaboration or software tools used by teams.

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Phase

A specific period or stage within a contract or project, often used to define milestones, deliverables, or changes in pricing. Phases help in structuring long-term agreements and managing expectations.

Pricing ramp

A gradual increase in pricing over time, typically agreed upon in advance. Pricing ramps are often used in contracts to align costs with the growing value provided to the customer.

Product catalogue

A structured list of a company's products or services, including descriptions, pricing, and other relevant details. A well-maintained product catalogue is essential for effective sales and inventory management.

Product-led growth (PLG)

A growth strategy where the product itself drives user acquisition, expansion, and retention. It typically involves offering a free or low-cost version of the product to encourage adoption and upsell.

Proration

The process of adjusting charges or credits based on the time a service was used or provided, particularly when the service starts or ends mid-billing cycle. Proration ensures fair billing for partial periods.

q

Quickbooks

An accounting software package developed by Intuit, offering features for managing income, expenses, payroll, and taxes. QuickBooks is popular among small businesses for its ease of use.

Quote-to-cash process

The end-to-end business process that starts with a customer quote and ends with cash collection. It includes stages like quoting, contract management, order fulfillment, billing, and payment collection.

Quotes

A formal document provided to potential customers outlining the price and terms for a specific product or service. Quotes are essential for establishing clear expectations before a sale.

r

Rate card

A pricing document that outlines the cost of various services or products, often used in industries like advertising and media. Rate cards are used to standardize pricing and communicate it to customers.

Recurring billing

The process of charging customers at regular intervals, typically associated with subscription-based services. Recurring billing is crucial for generating predictable revenue streams.

Recurring revenue

Revenue that is consistently earned from customers on a regular basis, typically from subscription services. Recurring revenue provides financial stability and predictability for businesses.

Revenue leakage

Revenue that is lost due to inefficiencies, errors, or omissions in billing, pricing, or contract management. Identifying and addressing revenue leakage is crucial for maintaining profitability.

Revenue operations (RevOps)

A strategic approach that aligns sales, marketing, and customer success operations to optimize revenue growth. RevOps focuses on streamlining processes and improving data-driven decision-making across these functions.

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Revenue sub-ledger

A dedicated ledger that tracks all revenue-related transactions, separate from the general ledger. It provides a detailed view of revenue streams and ensures accurate revenue recognition.

s

Sales-led growth

A growth strategy focused on direct sales efforts to acquire and expand customer relationships, often involving personalized sales processes and high-touch customer engagement.

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Sales tax

A tax imposed by the government on the sale of goods and services, typically calculated as a percentage of the purchase price. Businesses are responsible for collecting sales tax from customers and remitting it to the appropriate tax authority.

Salesforce

A leading cloud-based CRM platform that helps businesses manage customer relationships, sales processes, and marketing campaigns. Salesforce is widely used for its scalability and extensive ecosystem of integrations.

Seat-based pricing

A pricing model where customers are charged based on the number of users (or seats) accessing a product or service. This model is common in SaaS applications used by teams.

Self-service model

A business model where customers can independently sign up, access, and use a product or service without direct interaction with sales or support teams. This model is often associated with lower customer acquisition costs.

Shipping address

The address where goods are delivered, sometimes different from the billing address. Accurate shipping addresses are crucial for ensuring timely and correct delivery of products and for sales tax.

SKU (stock keeping unit)

A unique identifier for a product, used to track inventory, sales, and product details. SKUs help businesses manage their product catalogues efficiently and avoid confusion in inventory management.

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Snowflake

A cloud-based data warehousing service that provides scalable storage and computing power for data analytics. Snowflake is known for its performance, flexibility, and ability to handle diverse data types.

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Standalone selling price (SSP)

Standalone Selling Price (SSP) is a revenue recognition methodology that's used when multiple performance obligations are bundled into a single transaction price. The SSP is the price at which the obligation would have been sold in isolation. Broadly speaking, to determine the amount of revenue each obligation is responsible for, the total transaction price is split across obligations in proportion to their SSP.

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Stripe

A technology company that provides payment processing software and APIs for e-commerce and online businesses. Stripe supports a wide range of payment methods and is known for its developer-friendly platform.

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Sub-ledger

A subledger is uniquely identified by its set of ledger accounts, which is a subset of the parent’s ledger chart of accounts. Sub-ledgers support the general ledger by providing more detailed transaction data.

Subscription pricing

A pricing model where customers pay a recurring fee at regular intervals (e.g., monthly or annually) to access a product or service. This model is commonly used in SaaS businesses.

t

Total contract value (TCV)

The total revenue expected from a contract, including one-time charges and recurring revenue over the contract's lifespan. TCV provides a comprehensive view of the contract's value.

Trial period

A designated period during which a customer can use a product or service for free or at a reduced cost. The trial period allows customers to evaluate the offering before committing to a purchase.

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True-up

An adjustment made to reconcile any discrepancies between estimated and actual usage, often applied at the end of a billing period. True-ups ensure that customers are charged accurately for their usage.

u

Upselling

A sales strategy that encourages customers to purchase a more expensive version of a product or service or to add features or services. Upselling increases the customer's lifetime value.

Usage event

A customer’s interaction with a product or service that is tracked for billing or analytics purposes (e.g. an API call, a verification or a transaction). Usage events are critical in usage-based pricing models.

Usage metric

A specific measure used to quantify the usage of a product or service, often forming the basis for usage-based pricing models. Examples include API calls, data storage, or number of transactions.

v

Value metric

Value metrics help quantiy the value customers receive from a product, often used to set pricing in usage-based models. A good value metric is easy to track and aligns customer usage with perceived value.

w

Wire transfer

An electronic transfer of funds from one bank account to another. Wire transfers are often used for large transactions or international payments due to their speed and security.

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