What is Bookings vs Billings vs Revenue?

Bookings, billings, and revenue often get used interchangeably, but they measure completely different pulse points of your business. Confusing them leads to fuzzy forecasts and misaligned expectations between teams. You need to separate these metrics to clearly understand customer commitments versus recognized income. Treating them as distinct levers allows you to track the right data at the right time.

This guide clears up the ambiguity for you. We'll cover precise definitions, formulas, and accounting methods for bookings, billings, and revenue. We break down how to track each metric and set up processes that keep your data clean across sales, finance, and leadership.

It’s time to stop debating definitions and start driving strategy confidently.

What is bookings vs billings vs revenue? (definition & distinctions)

Bookings are the total value of contracts your customers sign in a set period, even if you haven't invoiced or earned the money yet. If someone signs a three-year, $360,000 contract, you record $360,000 in bookings on that day. Bookings show future committed revenue and tell you how sales are trending.

Bookings focus on operational clarity, not revenue recognition. You can track bookings as total contract value (TCV) or annual contract value (ACV). Choose TCV to see full commitments or ACV if you want the yearly amount. Our ACV vs ARR vs TCV guide goes into deeper details on this.

Billings are the total you invoice to customers in a set period. Billings bridge the gap from contract to payment. If your customer agreed to $360,000 paid yearly, you'd send out a $120,000 invoice each year. Billings show your cash flow expectations and create accounts receivable on your balance sheet.

Here’s the formula:

Billings = Revenue recognized + Change in deferred revenue.

This accounts for what you've earned and what you've invoiced but haven’t earned yet.

Revenue is income you’ve earned by delivering your product or service, following GAAP rules. That $360,000 contract with a three-year term leads to $10,000 in revenue each month as you deliver the service. Revenue follows ASC 606 standards. You recognize it when you meet your obligations, not when you sign contracts or send invoices.

Take a look at our revenue recognition guide: Generally accepted accounting principles (GAAP) require that businesses recognize revenue when it's earned (accrual accounting) rather than when payment is received (cash accounting).

The tricky part is timeline overlap. Bookings hit at contract signature. Billings land when you send the invoice. Revenue gets recognized as you deliver. One deal lands in all three metrics at different times in different amounts.

Put your metrics to work

Every metric has a specific job. Bookings reveal sales momentum and future revenue. Billings help you manage cash flow. Revenue drives profit and GAAP compliance.

Investors analyze bookings for growth visibility while cash flow relies on billings. Revenue tells the real performance story.

Accurate forecasts help you spot churn risks, hiring needs, cash constraints, and progress toward targets. You can't forecast effectively if you treat bookings as revenue or billings as cash. Go deeper in our SaaS revenue forecasting guide.

Specific metrics drives specific moves:

Bookings inform sales capacity planning and quotas.
Billings guide collections and day sales outstanding (DSO) management.
Revenue supports hiring and investment timing.

Pick the wrong metric and your decision-making will be impacted negatively. This leads to under-hiring, cash crunches, or missed growth windows.

Consistency keeps the team aligned. Leadership sees mixed signals if sales reports bookings while finance shows revenue. Motivation drops if marketing counts TCV but sales earns on ACV. Define your terms and keep everyone on the same page.

Bookings: methodologies and approaches

You have options when tracking bookings. Pick the method based on what you need to measure and how you structure deals.

The standard approach tracks value at the signed contract or order form stage. This represents future committed revenue regardless of when you invoice or get paid. Record a booking when the contract becomes legally binding. Don't wait for the invoice or first payment.

Clear policies keep things simple. Spell out exactly when a deal counts as booked. Most teams use the signed contract, though some enterprise deals require extra steps like board approval. Finalize your policy and apply it across the entire sales team.

Recognizing total contract value (TCV)

TCV bookings represent the complete revenue from one contract. A three-year deal for $360,000 equals $360,000 in TCV bookings. This tracks full commitments and clarifies the cash flow story on long deals.

Annual contract value (ACV) bookings

ACV bookings smooth out the data. The formula is:

ACV = (TCV - One-time fees) ÷ contract term in years

Take a $360,000 deal with $12,000 in setup fees over three years. Subtract the fees and divide by three to get an ACV of $116,000.

Net-new bookings vs renewal bookings

Zero-in on true growth. Net-new bookings include new customer contracts and existing customer expansions like upsells or seat additions. Renewal bookings occur when contracts roll over at the same or lower value. Separate them to identify where growth comes from and eliminate double-counting.

The ARR/MRR bridge connects bookings to recurring revenue. Break bookings into new business, expansion, contraction, and churn. Link them to your month-end ARR results.

Our revenue forecasting guide demonstrates models where bookings convert into new customers. It accounts for churn and upgrades to help you see how sales efforts become actual revenue.

Billings: calculation and timelines

Billings are what you invoice in a specific period. They sit between the promise (bookings) and when you earn the money (revenue).

Billings = revenue recognized + change in deferred revenue

If you invoice $120,000 upfront for a yearly contract, you log $120,000 in billings. In month one, you recognize $10,000 in revenue. The difference ($110,000) is deferred revenue. That change matters to your billings total.

Billings timing comes down to your order-to-invoice cycles:

Top companies invoice within a few days of contract signature.
Some take up to a month if manual processes or approvals slow things down.

This lag creates a gap between when deals close and when billings show up in accounting.

Billing triggers and frequency

How and when you invoice drives billings patterns. Here’s what’s common:

Annual upfront billing: Invoice for the full year at once. Big cash hit, then quiet until renewal.
Quarterly billing: Invoice every three months. Spreads cash, but requires more admin work.
Monthly billing: Invoice monthly as you deliver. Syncs billings and revenue flows, but lowers upfront cash.
Milestone-based billing: Invoice when you hit deliverables. Great for services projects.
Usage-based billing: Invoice based on activity. Billings can lag bookings by a lot.

Billing frequency hits cash flow. Annual billing boosts cash but asks more from your customer. Monthly billing aligns with revenue but slows down cash collection.

Deferred revenue and reconciliation to revenue

Deferred revenue is money you’ve invoiced but haven’t earned yet. It’s a liability until you meet your obligation.

Use your deferred revenue schedule to track how billings become revenue over time. This builds a timeline for when cash and earnings match up.

Revenue: GAAP recognition under ASC 606

With revenue, you follow ASC 606. Recognize revenue when you hit your obligation, over time or at a point, never when you sign or invoice.

Here’s the ASC 606 five-step model:

Identify the contract
Spot performance obligations in the contract
Set the transaction price
Allocate price to obligations
Recognize revenue as you meet those obligations

Our revenue recognition guide shows how to do this: pull in contract amount, term, start and end dates, then spread that value across delivery months. Build drivers so contract value hits your model only between contract start and end dates. Divide by contract term to get the monthly recognized amount.

Performance obligations and allocation

Performance obligations are what you owe your customer. For SaaS, you’re usually promising combined software access, support, and maintenance. These get bundled as a single obligation since customers need both.

If you include different things, like professional services and training, you have to split the contract price between each item, based on their stand-alone price. This avoids speeding up subscription revenue recognition by underpricing services.

Allocating incorrectly distorts your income statement. If you skew too much to subscription, you’ll recognize that revenue too soon and professional services too slow. Stick to each obligation’s fair price.

Variable consideration and timing

Variable consideration is stuff like usage, discounts, and success fees that change what you actually earn. ASC 606 says you must estimate these and only include what you believe you'll actually collect.

For usage models, bookings might be much bigger than billings and revenue at first since revenue is earned as customers use what they’ve bought. Only recognize revenue when the customer uses the product or service.

You estimate overages, extra fees and even penalties at contract start. If you go too low, you’ll recognize less. Go too high, and you’ll have to roll back revenue later.

Check our revenue vs cash flow guide for more.

Key considerations and best practices

Tracking bookings, billings, and revenue well comes down to clear rules, steady application, and regular checks.

Set clear booking rules. Decide exactly when a deal is booked. Signed contract is standard, but some go with verbal, PO, or board approval for big deals. Consistency is everything. If teams do this differently, your data loses meaning.
Distinguish TCV and ACV bookings. Use TCV to see total contract commitments and cash impact. Use ACV for deal averages and performance.
Work multi-year contracts the same way every time. Book the full TCV or use ACV. Mixing methods muddies your growth story. If you make a change, explain it and show comparisons.
Define billing triggers and frequency. Spell out when to send invoices upon contract sign, service start, milestone, or usage. Different schedules affect the pattern of billings, bookings, and revenue. Yearly upfront billing spikes cash, monthly billing smooths it out but cash comes in slower.
Apply ASC 606 to the letter. Identify all obligations, set transaction price (variable consideration too), split prices fairly, and recognize revenue only after you’ve delivered value. Don’t recognize revenue at booking or billing, only after delivery.
Track professional services separately. Implementation, training, and consulting might be recognized differently, even in the same contract. If they’re a separate obligation, recognize revenue as you deliver those services.
Treat free trials and pilots carefully. Trials and pilots might lead to bookings only if a paid contract follows. Don’t count trials as bookings until customers commit.
Keep committed bookings and pipeline separate. Bookings = signed, legally binding contracts. Pipeline and forecasts aren’t bookings. Including non-binding deals confuses the numbers.
Break out one-time vs recurring bookings. Setup, hardware, and training are one-time. Subscription and usage-based are recurring. Keep these lines clear for your ARR to make sense.
Track contract changes. Renewals, expansions, downgrades all change your metrics. If a customer cancels before starting, back out the original booking.

Common pitfalls and how to avoid them

Define renewals clearly. New bookings grow revenue, while renewals sustain it. Avoid double counting renewals as new bookings. Keep these categories distinct to understand true growth.
Reconcile sales and accounting. Sales ops billings often drift from the accounting ledger due to credits or timing differences. Frequent checks catch these gaps early.
Don't mistake billings for cash. Billings are just invoices sent. Use an accounts receivable report to track actual cash collection and identify stuck payments.
Model deferred revenue. Build a waterfall model to visualize when deferred revenue converts to earned revenue. This significantly improves forecast accuracy.
Segment your metrics. Lumping data together hides the real drivers of growth. Break down bookings by product, customer type, and contract risk to reveal the full picture.
Account for seasonality. Compare year over year data rather than quarter to quarter if seasonal spikes occur. This prevents false alarms during naturally quiet periods.
Benchmark carefully. Define metrics like ACV clearly before comparing against others. Including one-time fees while others exclude them leads to confusing results.

How to track bookings vs billings vs revenue in Runway

In Runway, you keep bookings, billings, and revenue connected. Everything lives in one model and stays in sync. Start by connecting your contract data. You can pull deal info straight from your CRM or billing tools (or from our over 750+ integrations) into Runway.

Create a contracts database with columns for the customer, amount, start dates, end dates, and MRR. Segmenting by customer or contract ID keeps everything organized from the start. Our contract metrics guide walks you through this setup.

Next, calculate your contract terms and value metrics. Use dateDiff to find the contract term in months. Build a TCV driver using MRR times the term plus any setup fees. For your ACV driver, normalize TCV over the contract length. To track ARR, build an Is Active flag that checks if the current period falls between the start and end dates. Multiply MRR by 12 and apply the flag to isolate ARR by period.

Once the basics are in place, aggregate your bookings metrics. Use sum() to roll up contract-level numbers into global totals like Total TCV, Total ACV, and Total ARR. Segmenting new versus renewal bookings here gives you clear reporting on growth versus retention.

For billings, sync your invoice data by connecting QuickBooks Online or your accounting tool. Create a billings driver that sums invoices. Add an accounts receivable aging report for accurate insights. Our invoice modeling update explains how you can track unpaid invoices alongside cash flow.

Build your revenue recognition logic next. Apply the contract value between the start and end dates. Divide by the contract length for monthly revenue. Setting clear start and end date rules keeps everything in line with service delivery.

Wire that revenue into your topline by using sum() in your Revenue driver. Drill into the data to ensure values match up with your contract terms every time. Runway’s reporting features let you create dashboards to compare bookings, billings, and revenue side by side. You can spot trends and gaps immediately.

As our revenue vs cash guide notes, you should always present revenue and cash flow together. A variance line helps explain the gap. Track bookings and billings together to ensure nothing gets missed.

Finally, use scenario tools to model outcomes like payments coming in late or deals stretching out. Build best, base, and worst-case bookings to see how they flow through billings, revenue, and cash. Set up monthly checks to reconcile everything. Bookings in your CRM should match contracts in Runway. Invoices should match billings. Recognized revenue should match the general ledger. Regular audits keep you in control.

Connect your bookings, billings, and revenue

Bookings, billings, and revenue quantify every step of your customer relationships. Bookings represent the promise of future value when the ink hits the paper. Billings determine exactly when cash hits the bank. Revenue reflects the income you have logically earned and recorded.

You need a consistent playbook to track these effectively:

Set specific rules for booking deals, valuing contracts, and recognizing revenue.
Apply these standards across every customer to maintain data integrity.
Reconcile frequently to catch discrepancies early.
Document your methods so cross-functional partners understand the definitions.

Runway keeps these metrics synchronized in one place. Your contracts, invoices, and revenue recognition live in a single live model. You can track TCV, ACV, and ARR directly from source contracts. The platform ties billings to invoices and deferred revenue while running GAAP-compliant revenue recognition automatically. You get total control over your financial story without the bottlenecks.

Ready to see how Runway clarifies your financial picture? Book a demo and start tracking the numbers that matter.