In episode #337 of SaaS Metrics School, Ben breaks down why software revenue categorization is a foundational requirement for strong finance, accounting, and SaaS metrics. He explains the core revenue types every SaaS, AI, or software company should separate on their P&L—and why commingling revenue creates downstream issues in MRR tracking, retention metrics, forecasting, and company valuation.

Ben walks through the major recurring and non-recurring revenue categories, then shows how clean revenue segmentation enables accurate MRR schedules, retention analysis, cash flow forecasting, and smoother due diligence with investors and acquirers.

What You’ll Learn

• The core revenue categories every SaaS or AI company should clearly define
• The difference between subscription, usage, overage, services, managed services, and hardware revenue
• Why overages must be separated at both the SKU and general ledger level
• How revenue categorization feeds directly into MRR schedules and waterfalls
• Why recurring and variable revenue must be forecasted differently
• How clean revenue data improves retention metrics and go-to-market efficiency analysis
• Why investors and acquirers expect revenue clarity during fundraising and due diligence

Why It Matters

• Accurate MRR and ARR tracking depends on clearly defined revenue streams
• Retention metrics (GRR and NRR) break when revenue types are mixed together
• Revenue forecasting and financial modeling require different assumptions by revenue type
• Cash flow forecasting becomes unreliable without segmented recurring revenue data
• Company valuation is directly impacted by the perceived quality of recurring revenue
• Investors and acquirers expect detailed revenue schedules during fundraising and due diligence
• Strong financial systems and accounting discipline reduce friction in audits and exits

Resources Mentioned

Ben’s SaaS revenue hierarchy framework: https://www.thesaascfo.com/the-saas-revenue-hierarchy-why-defining-your-revenue-streams-matter/

SaaS Metrics course at The SaaS Academy: https://www.thesaasacademy.com/the-saas-metrics-foundation