What is monthly recurring revenue?
Normalized subscription revenue for a single month. It is a metric, not a ledger account, and an annual plan still counts as one month.
Definition
Monthly recurring revenue, or MRR, is a one-month normalized view of repeating subscription sales. On the books, this is a metric, not a ledger account you will find next to cash or revenue.
A meal kit service uses it to ask how much repeating business one month represents. An annual prepay still counts as one month of that total, not as a single-month spike.
The Income Statement still shows earned sales under ordinary revenue rules. MRR restates the repeating book so months can be compared.
This number is a normalized month. It is not a chart-of-accounts line.
Where it shows up
Balance Sheet: Related to the deferred subscription cash this metric normalizes.
P&L: Related to one month of repeating earned sales.
See also: Annual Recurring Revenue · Recurring Revenue · Churn Rate
When you look at your P&L, you will not see a line titled monthly recurring revenue. You will see membership or subscription income as it was earned, which can jump in a month when annual plans are billed.
When MRR is high, the repeating book for one month is large. When it is low, fewer active plans remain after cancellations and pauses.
The Balance Sheet does not hold this metric. Prepaid unused boxes sit in deferred revenue until they are earned, and MRR is only the normalized month those plans represent.
On the Statement of Cash Flows, collecting an annual plan is an operating inflow in the collection month. MRR does not move with that cash spike, because the annual plan still counts as one month of repeating sales.
Some teams put MRR on a Key Metrics Dashboard next to churn. That is a management view, not a Balance Sheet account.
How it works
Start with every active repeating plan. Convert each one to a one-month amount.
A household that pays $60 every month adds $60. A household that pays $720 once a year also adds $60, because $720 divided by twelve is one month.
Add those monthly amounts together. The total is MRR.
Do not drop the annual plan into the billed month as $720 of MRR. That would treat a twelve-month plan as if it were twelve times larger for one month.
New sign-ups raise the total. Cancellations and pauses lower it.
Upgrades raise it when a household adds extra servings. Downgrades lower it when they shrink the box.
MRR is not cash collected this month. A week of heavy annual billings can flood the bank while this metric barely moves.
MRR is not the same as the revenue line on the P&L. Revenue follows when boxes are earned, and this metric follows the normalized repeating book.
Annual recurring revenue is this figure times twelve. Use one or the other consistently so a year and a month are not mixed in the same sentence.
Stay with the one-month normalized total when you read the dashboard. The invoice file explains what was billed, and this metric explains what one month of the repeating book looks like.
Keep a subscriber list that supports the number. Anyone should be able to see each plan's monthly equivalent.
Example
A meal kit service has 400 households on a $60 monthly plan. It also has 25 households that paid $720 up front for a year.
The monthly plans are $24,000. The annual plans are $60 each, or $1,500.
MRR is $25,500. It is not $24,000 plus $18,000 of annual billings dumped into one month.
If ten monthly households cancel, MRR falls by $600. If five monthly households add a larger box that costs $20 more, MRR rises by $100.
The P&L in the week the 25 annual plans were billed may show a lot of cash and a lot of deferred revenue. This metric still counts those 25 plans as $1,500, not as $18,000.
Common mix-ups
Monthly recurring revenue is not a ledger account. You will not find it in the chart of accounts next to cash or revenue.
Monthly recurring revenue is not cash billed this month. An annual prepay inflates billings and cash, and this metric still counts only one month of that plan.
Monthly recurring revenue is not the same as recurring revenue on the P&L. Recurring revenue is the repeating earned slice, and MRR is the one-month normalized measure of the book.
Related terms
- Annual Recurring Revenue: Monthly recurring revenue expressed on a yearly basis.
- Recurring Revenue: Revenue that repeats on a subscription or contract schedule.
- Churn Rate: The share of customers or revenue lost over a period.
- Net Revenue Retention: Revenue kept from existing customers including upgrades, after churn and downgrades.
- Deferred Revenue: Cash collected from customers before the work is delivered.
- Recurring Invoice: An invoice generated automatically on a repeating schedule.
- Run Rate: Annualizing a recent period's results as a rough forward estimate.
- Customer Lifetime Value: The total margin a customer is expected to produce before leaving.