Modern businesses continue to move toward offers with complex pricing schemes that extend beyond traditional subscription-based models. Metered usage has become a popular choice because it allows service providers to grow revenue in line with their customers’ consumption and value gained.
While usage revenue (often dynamic) and subscription MRR (often static) are different by definition, many businesses need to view both revenue types concurrently. In order to support customers with complex business models, we’ve added the ability to augment MRR reporting with usage. This enhancement helps businesses better understand the complete picture of recurring revenue and how usage impacts growth, both in total and incrementally.
For businesses that leverage usage-based billing in their offers, reporting has been tricky because not every business equates usage revenue to monthly recurring revenue. There are two schools of thought and both have merit:
- Usage is Predictable like MRR: Businesses can make a strong argument that when usage is predictable, it should be included in MRR. This is commonly associated with consistent consumption usage such as the number of contacts managed, Gigabytes stored, revenue processed, and so on. As long as your customer’s business is stable, their usage will be consistent and/or growing with the business.
- Usage is Unpredictable such as one-time charges: When usage is unpredictable, revenue associated with that usage does not belong in MRR. This is commonly associated with telecom businesses, where subscriptions include X minutes per month and customers infrequently go over. These overages tend to be choppy, nonlinear, and unpredictable. Another example would be professional services where usage takes the form of consulting hours that may happen as a one-time, or rare occurrence.
With this release, we have added the ability to quickly display usage revenue in line with MRR reporting, providing the flexibility to report on usage when you need it and hide it when you don’t.
The new usage toggle enables businesses to monitor and understand usage revenue in two main ways—incremental usage growth and total usage.
Note: The following views display usage revenue alongside MRR as an aggregated sum of all subscription revenue running through Chargify. As a next step, we are planning more granular, decomposed revenue reporting, including usage, at the product/component level.
Incremental MRR Movement + Usage To Show Granular Growth
When usage is turned on, the MRR Growth graph and table will show you the incremental month-over-month changes in usage revenue. For the current month, the change will be calculated by comparing the current month-to-date activity to the prior month-to-date activity. For example, if you look at usage revenue growth on July 19th, it will show how your July month-to-date usage revenue compares to the same time period in June.
The same logic applies for daily summary emails which can be enabled in the MRR Settings dropdown. Every morning you will have an MRR Summary in your inbox that includes a month-to-date usage comparison.
MRR + Usage To Show Total Revenue
In the Total MRR view, you will see a broken out view of MRR revenue and usage revenue that illustrates Total Revenue and Growth Rate. As opposed to incremental usage above, this will reflect your total usage revenue month-to-date.
By leveraging these two views, you will always have a crystal clear understanding of usage revenue for any given month and how it impacts growth.
To enable this new feature, simply select “Display Usage on MRR Reports” from the MRR Settings dropdown. For more information, check out our documentation. In addition, we’ve added month-to-date incremental usage reporting into our daily summary emails to help you keep up on the health of your usage based offers on a daily basis.
Accuracy Is Mission Critical: Learn How Chargify Stands Out
Analytics are only as good as the data driving them and with Chargify as the underlying billing engine, you get reporting from the source of truth. With your product configurations and transactions running through Chargify, we’re able to see the full picture of what is happening in your business, breakdown revenue impacting events, and provide granular reporting that you can trust.
If you are interested in learning more about how to utilize usage-based billing in your offerings, contact us at 1.800.401.2414.