Bookings vs Revenue vs Billings

Bookings are the total value of a contract signed with a customer, representing a commitment to pay for products or services. As a forward-looking metric, bookings signal future revenue and are a key indicator of sales momentum and market demand. For example, a two-year contract valued at $240,000 would be recorded as a $240,000 booking in the period it is signed.

Billings represent the amount of money invoiced to a customer within a specific period. Billings can occur at various intervals depending on the contract terms, such as upfront, monthly, or quarterly. Following the previous example, if the $240,000 contract is billed annually, the company would record $120,000 in billings at the start of each year. Billings directly impact accounts receivable and the cash flow statement.

Revenue is the income earned and recognized for the portion of the service that has been delivered to the customer. Governed by accounting principles like ASC 606, revenue recognition for a subscription service typically occurs ratably over the contract term. For the same $240,000 two-year contract, the company would recognize $10,000 in revenue each month. Revenue is a primary component of the profit and loss statement (P&L) and reflects the company's operational performance.