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

Demystifying SaaS Revenue: A Hierarchy for Predictability & Valuation

SaaS Metrics School