Recurring revenue
MRR is the monthly recurring revenue from active subscriptions, and ARR is MRR times twelve. With opening MRR of $40,000, new revenue of $5,000, expansion of $2,000, contraction of $1,000 and churn of $2,000, the closing MRR is $44,000 and ARR is $528,000. Both come from billing data, so tie them to the ledger with a monthly bridge.
Retention
Net revenue retention is opening MRR plus expansion, minus contraction and churn, divided by opening MRR. Here that is $39,000 over $40,000, or 97.5%. Gross revenue retention leaves out expansion: $37,000 over $40,000, or 92.5%. Logo churn counts customers instead of dollars: losing 10 of 200 is 5%. Use one definition and keep it the same from month to month.
Gross margin
Revenue minus the direct cost of delivering the service, divided by revenue. Suppose revenue is $44,000 and delivery costs are $6,000 of hosting, $3,500 of support and $1,300 of payment fees. Costs are $10,800, profit is $33,200 and gross margin is 75.5%. This number is only as good as the way costs are sorted, which is why hosting, support and processing fees need their own accounts.
Burn and runway
Net burn is cash going out minus cash coming in during a month. Runway is cash on hand divided by net burn. With $300,000 in the bank and a net burn of $20,000, runway is 15 months. Annual prepay can make cash look better than the business is, so track burn alongside deferred revenue.
What the books must get right
Each metric depends on classification. Refunds need to be visible and not netted away. Delivery costs must sit apart from sales and research costs. Customers, plans and billing dates must match between the billing system and the ledger. Clean books come first and metrics come after.
Definitions vary between companies and investors, and none of these has an official standard. Write yours down and show the formula beside the number. The free burn-rate calculator turns the last example into a month-by-month forecast.
Customer acquisition and payback
Customer acquisition cost is sales and marketing spend divided by the number of new customers. If you spent $30,000 and won 30 customers, the cost is $1,000 each. If a customer averages $200 of monthly revenue and your gross margin is 75%, each customer returns $150 of gross profit a month, so payback takes about 6.7 months. Spend counted in the formula should match the period and the customers it produced.
This only works when sales and marketing costs are separate from other spending in your books. One more reason to keep the account structure tidy.
Common questions
Is net revenue retention above 100% good?
It means expansion from existing customers more than offsets losses. Whether that is good depends on your market, your pricing and your stage.
Should gross margin include customer support?
Many companies include the cost of supporting paying customers in cost of delivery. Choose a rule, apply it every month and tell readers what it is.
Who calculates these, the bookkeeper or the founder?
Bookkeeping supplies clean cost and revenue data. The definitions are the company's own, set by the founder with advice from a CPA.
This guide is general information, not tax, legal or accounting advice. Rules, fees and due dates change; check with the IRS, the NJ Division of Taxation or a licensed professional for your situation.