How to calculate billings
Billings capture what you actually invoiced, bridging bookings (committed value) and recognized revenue (earned income). For subscription businesses, billings are a closely watched forward indicator.
The standard way to compute billings from financial statements is revenue plus the change in deferred revenue, which captures amounts invoiced up front that have not yet been recognized.
- Revenue + change in deferred The formula
- Leads revenue Up-front invoicing shows first
- Drives cash What you invoiced
Short answer
Billings measure what you invoiced in a period, and a common formula is recognized revenue plus the change in deferred revenue. If you recognized 1,000,000 dollars and deferred revenue rose by 300,000 dollars, billings were 1,300,000 dollars. Billings often lead revenue, since invoicing a multi-period contract up front shows as billings before the revenue is recognized.
Step by step
Take recognized revenue
Use the revenue recognized in the period from the income statement.
Find the change in deferred revenue
Subtract beginning deferred revenue from ending deferred revenue on the balance sheet to get the change over the period.
Add the two
Billings equals recognized revenue plus the change in deferred revenue. A rising deferred balance means you invoiced more than you recognized.
Interpret the signal
Growing billings ahead of revenue signal strong new and renewal invoicing, a forward indicator of future recognized revenue.
Worked example
In the quarter you recognized 2,000,000 dollars of revenue. Deferred revenue rose from 1,500,000 to 2,100,000 dollars, a change of 600,000 dollars.
Billings = 2,000,000 plus 600,000 = 2,600,000 dollars. The 600,000 dollar rise in deferred revenue reflects contracts invoiced up front that will be recognized in future periods, which is why billings ran ahead of recognized revenue this quarter.
How Ardovo handles it
Ardovo connects billings to bookings and recognized revenue, so the three views reconcile. Rook flags when billings diverge from revenue and explains why, whether from up-front annual invoicing or a shift in billing terms.
Frequently asked questions
What is the billings formula?
A common version is recognized revenue plus the change in deferred revenue over the period. It captures amounts invoiced, including up-front payments not yet recognized as revenue, so it can exceed recognized revenue.
Why do billings lead revenue?
Because invoicing a multi-period contract up front shows as billings immediately, while the revenue is recognized gradually over the contract term. Growing billings therefore signal future recognized revenue before it appears on the income statement.
What is the difference between billings and bookings?
Bookings are the total value a customer committed to at signing; billings are what you actually invoiced. A customer can book a year but be billed monthly, so bookings and billings diverge by the billing schedule.