Bookings vs. Billings: SaaS Business Model Guide

Bookings vs. Billings: What’s the Difference?

Bookings represent the total value of customer contracts a company secures, while billings reflect the amount of those contracts invoiced within a period. Bookings show future revenue potential, and billings track when those commitments turn into invoices and expected cash flow. 

In the SaaS industry, bookings and billings matter as both reveal aspects of a company’s growth momentum and financial stability.

What Are Bookings?

In SaaS, bookings capture the full value of signed customer contracts, regardless of when the revenue will be invoiced or recognized. When a new subscription deal closes, the total contracted amount is recorded as bookings. 

This forward-looking measure helps finance teams, executives, and investors understand how much future business has been locked in, even before invoices are sent.

Bookings are especially valuable in subscription businesses because they show the pace of new sales, expansions, and renewals. A company may not recognize this revenue yet, but strong bookings growth signals demand for the product and builds confidence in the revenue pipeline. 

How to Calculate Bookings

Bookings are the sum of the total contract value (TCV) of all customer contracts signed during a given period.

Bookings Formula

TCV Bookings = Σ Value of Committed Customer Contracts

For example, if a SaaS provider signs three contracts in a quarter worth $100,000, $60,000, and $40,000, the TCV bookings would equal $200,000.

In many cases, analysts also calculate annual contract value (ACV) to standardize bookings over a one-year term.

ACV Bookings = TCV / Contract Term (Years)

Suppose a company signs a $120,000 contract with a three-year term. The TCV bookings would be $120,000, while the ACV bookings would be $40,000 per year. If billing is monthly, the company could further divide ACV by 12 to understand expected monthly invoices.

What Are Billings?

Billings measure the amount a SaaS company invoices customers during a specific period. Billings reflect invoices issued according to the contract’s payment schedule. This makes billings a key indicator of near-term cash inflows and working capital needs.

Billings can vary depending on how contracts are structured:

• Annual upfront billing: A customer with a $36,000 annual contract pays the full amount at the start of the year. Billings record $36,000 immediately, even though revenue is recognized monthly.
• Quarterly billing: The same $36,000 contract billed quarterly would show $9,000 in billings each quarter.

For example, if a customer signs a $120,000 three-year contract, the full $120,000 is recorded as bookings, but only the portion invoiced that year — say $40,000 — counts toward billings.

Billings vs. GAAP Revenue

Billings and revenue are not the same. Billings reflect invoices sent, while GAAP revenue reflects services delivered. A company might bill $120,000 upfront for a one-year contract, but it can only recognize $10,000 in GAAP revenue each month as service is provided.

This timing gap creates deferred revenue on the balance sheet, showing obligations the company has been paid for but not yet delivered. Monitoring billings alongside GAAP revenue helps finance teams understand both cash inflows and compliance with revenue recognition standards.

Bookings vs. Billings: Key Differences Explained

In SaaS, bookings are the total value of contracts signed, while billings are the invoices issued under those contracts during a given period. Tracking both is essential because bookings highlight growth potential, while billings show how those commitments translate into cash flow. 

Comparison of Bookings and Billings in SaaS

The table below summarizes the key differences between bookings and billings:

For finance teams and investors, looking at bookings alone can overstate growth if billing schedules are stretched. Likewise, focusing only on billings might understate momentum if many contracts are signed but not yet invoiced.

Why Do Bookings Matter to SaaS Investors?

Bookings are one of the clearest indicators of growth predictability in SaaS. They provide forward-looking insight into how much revenue a company is positioned to generate, which makes them a central metric for investors.

Private equity firms often evaluate bookings to understand the durability and visibility of a SaaS company’s revenue stream. Consistent bookings growth signals that customer demand is reliable, which reduces downside risk and supports higher valuation multiples. 

Bookings also help private equity investors assess how much leverage a business can support by showing whether future cash inflows are sufficient to service debt.

Venture capital investors, by contrast, focus on bookings growth as evidence that a SaaS business is scaling effectively. Strong new bookings demonstrate product-market fit, while healthy renewal and expansion bookings highlight customer stickiness. 

Together, these signals build confidence that the company can grow its recurring revenue base over time and expand its market opportunity.

Bookings vs. Deferred Revenue

Bookings represent revenue that a SaaS company has contracted but not yet billed. Deferred revenue represents payments collected but not yet recognized as revenue under accounting rules. Neither billings nor bookings are recognized under United States Generally Accepted Accounting Principles (US GAAP).

For example, suppose a SaaS company signs a $120,000 one-year contract in January:

• The full $120,000 is recorded as bookings at the time of signing.
• If the customer pays the full amount upfront, the $120,000 is billed immediately.
• On the balance sheet, most of this amount sits in deferred revenue at first, because the company still owes services for the remaining months. Each month, $10,000 moves from deferred revenue into recognized GAAP revenue.

This distinction matters because bookings reflect future revenue, while deferred revenue shows contractual obligations the company has already been paid for but not yet delivered.

Example Calculation for Bookings and Billings

To see how bookings and billings differ in practice, let’s compare two fictional B2B SaaS businesses with different contract terms and billing structures.

Contract Assumptions

Bookings Calculation

Bookings always reflect the full contract value, regardless of how or when the customer is invoiced. At the time of signing:

• CloudSync Solutions recorded $300,000 in bookings in January.
• DataTrack Systems recorded $180,000 in bookings in January.

Total Bookings = $300,000 + $180,000 = $480,000

Billings Schedule

Next, calculate how each company invoices its customer.

CloudSync Solutions

CloudSync bills on an annual basis, so: 

• CloudSync divides the $300,000 TCV into three years. 
• They issue one invoice for $100,000 at the start of each contract year (January, Years 1–3). 
• CloudSync collects $100,000 upfront in Year 1 and again in Years 2 and 3.

DataTrack Systems

DataTrack bills on a monthly basis, so:

• DataTrack divides the $180,000 TCV into 24 months: Monthly Billing = $180,000 ÷ 24 Months = $7,500.
• Each month of the active contract, DataTrack bills its customer $7,500 starting in January of Year 1.

Total Billings

In Year 1, CloudSync’s total billings are $100,000 and DataTrack’s total billings are $90,000.

GAAP Revenue Recognition

Both companies recognize revenue evenly over the life of their contracts:

• CloudSync Solutions: $8,333 per month over 36 months.
• DataTrack Systems: $7,500 per month over 24 months.

Analysis: Bookings vs. Billings vs. Revenue

In the final part of our exercise, we’ll analyze the results to see how bookings, billings, and GAAP revenue look from an investor’s perspective.

CloudSync Solutions bills the $300,000 contract annually at $100,000, which means large cash inflows at the start of each year. However, GAAP revenue is recognized as $8,333 per month across the 36-month term. The ACV of $100,000 is spread evenly across months, rather than as one lump-sum revenue amount. 

Totals (Year 1, DataTrack Systems):

• Total Bookings: $300,000
• Total Billings: $100,000
• Monthly Revenue Recognition (GAAP): $100,000 / 12 Months = $8,333

DataTrack Systems records the $180,000 contract as bookings at signing and bills $7,500 per month, totaling $90,000 per year. GAAP revenue matches the billings at $7,500 per month since services are delivered in the same period.

Totals (Year 1, DataTrack Systems):

• Total Bookings: $180,000
• Total Billings: $90,000
• Monthly Revenue Recognition (GAAP): $90,000 / 12 months = $7,500 per month

Bookings vs. Billings: Key Takeaways

In SaaS, bookings are the total contract value signed, while billings are the invoices issued as those contracts are collected. Bookings highlight long-term revenue commitments, and billings reveal cash inflows over time. For investors, tracking both metrics is key to evaluating growth predictability and the stability of a SaaS business.

Frequently Asked Questions (FAQs)

What is the difference between bookings and billings in SaaS?

Bookings are the total value of contracts a company signs, while billings are the invoices issued under those contracts during a specific period. 

How do bookings differ from GAAP revenue?

Bookings capture the full value of a signed contract upfront, but revenue is recognized gradually as services are delivered. For example, a $120,000 annual contract is booked at signing, yet only $10,000 is recognized each month under GAAP.

Why are billings considered deferred revenue?

When a company bills and collects cash upfront, that amount is recorded as deferred revenue until services are provided. Deferred revenue then declines month by month as the company recognizes revenue from the billed contract.

Additional Resources

Bookings vs Annual Recurring Revenue

Gross Revenue Retention (GRR)

IFRS vs. GAAP

Monthly Recurring Revenue (MRR)

See all Accounting resources