What are Bookings?

Bookings represent the total value of a single contract; the point at which the customer decides to pay for the product or service being offered by the organization. It is said that “the bookings have been made,” although nothing tangible has happened just yet. When it comes to SaaS and subscriptions, bookings are perhaps the most important indicator of momentum in the business.

A booking takes place when there is a commitment by a customer under an order or a contract, although this can happen at different times in some cases, and there may be different ways of accounting for it. Booking does not imply that payment has taken place.

Bookings, billing, and revenue are some of the key metrics used by companies to measure their sales performance. Each of these business metrics reveals something different about the company’s financial performance. Let me explain how they are different:

• Bookings: The total value of a signed contract, recognized when the customer commits to the agreement. 

• Billings: The amount of the contract already billed to the customer and due for payment. 

• Revenue: The portion that can be formally recognized as revenue under GAAP after the product or service has been delivered. 

Bookings Types

• New bookings: The revenue from fresh customer contracts.
• Renewal bookings: The revenue from existing customers renewing their contract.
• Upgrade bookings: The additional revenue from existing customers expanding their plans/services.

Importance of Bookings

• An early sign of growth: As the revenue from the closed deal is counted, bookings provide the founders and investors with the most recent insight into the sales performance well before it becomes the recognized revenue.
• Sales and forecasting tool: Tracking the different types of bookings- new, renewal, and upgrade- allows management to see where the growth comes from, new customers or expanded existing relationships, and what strategy should be followed to generate growth.
• Planning cash flow: As bookings do not mean the cash on hand, the difference between bookings, billings, and revenue has to be taken into account in order to forecast the future cash flow.
• Fundraising key metric: Investors analyzing SaaS businesses pay special attention to bookings as a metric reflecting customer retention and expansion, the key signs of business sustainability.

Want Help With Your Finance and Business Operations?

Atidiv helps growing businesses streamline finance and accounting processes with reliable, technology-enabled solutions designed around their unique needs. With expertise in accounting support, financial reporting, back-office management, and process improvement, our professional team can help you achieve greater precision and efficiency across your business’s financial operations.

If you need assistance with simplifying accounting, improving your financial processes, or scaling your operations, Atidiv can help. Contact our team to see how we can help you with our finance and accounting services.

Talk to our expert!