What is Bookings vs Revenue?
Bookings represent the total value of signed contracts in a period, while revenue is the amount recognized according to accounting standards. A $120K annual contract is $120K in bookings but only $10K/month in recognized revenue.
The distinction between bookings and revenue trips up more sales leaders than almost any other finance concept. Sales teams celebrate bookings (closed-won contracts). Finance teams report revenue (recognized over the contract term). CROs need to speak both languages fluently.
Bookings, Billings, and Revenue
There are three related but different concepts. Bookings = total contract value signed (a $240K, 2-year deal = $240K in bookings). Billings = amount invoiced (that same deal might be billed $120K annually = $120K in billings year one). Revenue = amount recognized per accounting rules ($10K/month for 24 months). Most VP Sales are compensated on bookings (or ARR/ACV), not recognized revenue.
Why the Distinction Matters
A quarter with $5M in bookings sounds great. But if those contracts have 12-month ramp clauses, deferred start dates, or heavy implementation periods, the recognized revenue in that quarter might be $500K. Boards care about revenue for financial reporting, but they care about bookings as the leading indicator of future revenue. CROs need to track both and communicate the relationship clearly.
Multi-Year Deals and Bookings
Multi-year contracts inflate bookings numbers. A 3-year, $300K deal is $300K in total bookings but only $100K in ACV and $8,333/month in recognized revenue. Some orgs report bookings as ACV (annual contract value) to normalize for contract length. Others report TCV (total contract value). Know which metric your board uses and how your quota is measured against it.
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