Definition

Revenue backlog is the portion of contracted revenue that is not yet recognized within a SaaS company's subscription agreement. Simply put, it is the money that a company's customers have promised to pay for a future product/service delivery. Knowing the revenue backlog can help companies get an accurate picture of their current and future financial state.

Example

Suppose, a customer has agreed to a $1,000 subscription to be paid monthly for one year's service. On January 1, the company bills $100 for the first month. Thus, its revenue backlog will be $900. On February 1, as the fresh billing happens, the revenue backlog reduces to $800.

Why it matters

Tracking revenue backlog is crucial for SaaS companies as it gives a clear picture of revenues. It can be used for the valuation of the company. Investors prefer a company with a robust revenue backlog as it is a reflection of the overall financial health of the company. It also allows companies to chalk out a fair budget estimate for the future.

Get Started

Ready to see Vareto in action?

Give your finance team the tools they deserve so your company can make better, faster operational decisions.

Request a demo