topic Re: Divide Line Items by Contract Duration for ARR Calculation in Tips, Tricks & Best Practices

Divide Line Items by Contract Duration for ARR Calculation

PatEnergy — Tue, 26 Sep 2023 16:00:28 GMT

Hey all,

in order to correctly calculate ARR the billing frequency policy of line items should be as follows:

(1) Contract duration <=12 months: one-time billing frequency

(2) Contract duration >12 months: monthly billing frequency

In the first case I simply add the line item to the deal and set the billing frequency to one-time - here the ARR gets calculated correctly.

In the second case I did not find a good solution yet. When I add the line item and select monthly billing frequency, the ARR increases by unit price * 12. However, I do NOT want the ARR to include the full unit price 12 times. I simply want to calculate a monthly unit price by dividing the full unit price by the contract duration (24, 36 months, etc.) and then include the respective 12 months value in the ARR.

I tried solving this problem by creating a new product line item for each possible contract length. However, being able to do this I had to manually divide the unit price by the contract length which resulted in rounding errors. Hence, that is no proper solution.

Is there any other solution to the above described problem?

Thanks in advance!

Re: Divide Line Items by Contract Duration for ARR Calculation

BérangèreL — Wed, 27 Sep 2023 07:15:12 GMT

Hi @PatEnergy,

Thank you for reaching out to the Community!

I'd like to invite a couple of subject matter experts to this conversation @danmoyle, @HubDoPete and @Josh do you have any tips to help @PatEnergy, please?

If anybody else has anything to add and/or share, please feel free to join in the conversation 🙂

Thanks and have a beautiful day!

Best,
Bérangère

Re: Divide Line Items by Contract Duration for ARR Calculation

danmoyle — Wed, 27 Sep 2023 12:37:11 GMT

Hey @PatEnergy - great question. (and thanks for the tag @BérangèreL 🙂 )

In my experience, I'm in agreement that calculating ARR with the granularity you're looking for isn't the easiest in HubSpot. I don't have a simple solution here, so I'm checking with my colleagues and I'll see if anyone has a client they've solved this for. I'll share it if so.

In the meantime, here are a few resources to possibly help:

Re: Divide Line Items by Contract Duration for ARR Calculation

PatEnergy — Mon, 02 Oct 2023 08:55:31 GMT

Hey @danmoyle - thank you very much for your help! I'm looking forward to hearing about your colleagues' solutions. Best, Patrick

Re: Divide Line Items by Contract Duration for ARR Calculation

danmoyle — Mon, 02 Oct 2023 12:38:55 GMT

Hey there Patrick. I don't have anything bubbling up beyond the resources shared. It looks like the exact need you have may need to be tailored a bit to the tool's abilities.

Re: Divide Line Items by Contract Duration for ARR Calculation

APE — Thu, 04 Apr 2024 13:58:56 GMT

Is there already a solution for this topic? We are facing the same problem:

Line item has 12 month runtime and yearly payment as a standard.
> When I update this to 24 month duration and upfront payment its not caluclated corretly. (see picture 1). The sum should be 20.000 €
> We need to adjust the amount from 1 to 2 that the values are right. This is consusing for our teams.
> When I update the item to 24 month runtime and yearly payment than its correct. (see picture 2)

There should be a solution where the runtime and ARR are calculated correctly. I could find the data fields to check whether this could be adjusted.
Best,
Alex