Our company recently encountered problems creating line items to reflect TCV, ACV, MRR, and billing accurately.
Our client is signing a 3-year contract and wants to pay upfront. We want this to reflect in the revenue booking for dashboard review and an easy understanding for the client on the quote (generated via Hubspot) but also for our accounting team to understand how to collect and bill this deal.
The problem that exists is if you choose the billing frequency as 3 years and the term as 36 months the system reduces the booking to a 1-year deal for TCV, ACV, and MRR.
To make the calculation accurate we have to change the billing frequency to annual. The problem here is this is telling the accounting team that billing will recur every year for the length of the term.
The Billing Frequency, Terms, Quantity factor, and Unit Price are not aligned correctly based on logic (for me). I hope they can make an adjustment here to allow for proper reporting, quoting, and billing.
Billing Frequency will multiply the selection you choose (monthly, annually, etc) by the term x net price.
What you want to do is keep the Billing Frequency to the specific line item (if you charge monthly for the product or service, keep it monthly, if it's an annual subscription, use annual, and for a one-off payment use One-time). Create a new property and call it something like "Payment Schedule" with options for Monthly, Annually, Upfront.
Accounting can then use that property to understand when/how to bill.
Having the same issue! Creating a second property for Payment Schedule as "EMcCuin" suggests is not a good workaround.
Since total amount will still be shown wrongly if you generate the quote through hubspot
Please solve this, this is a very basic feature... A lot of B2B SaaS companies that have a monthly license fee do not necessarily invoice this on a monthly basis,
yet from an MRR and ARR point of view this is the way revenue recognition works...
An additional issue linked to the above: If I add the 21% VAT that applies in Belgium, it only applies this to the fixed cost and the first month, not the months that follow in deal value... Either it applies to nothin and my deal values are without VAT, or to everything. But this is quite absurd (why is there no standard VAT feature that applies to all deals? This is needed in pretty much any European country ...)
I have an update!! And the solution is way easier than I had expected it to be! All you need to do is change the Billing Frequency to the length of the deal, and it will calculate all the fields (ARR, MRR, Total Due, etc) correctly.
however, this does not calculate the monthly fee correctly in that case. + Only populates MRR in the quote screen, but not in the subsequent reporting
To showcase this: The original:
If I then invoice it semi-annually, all of a sudden the MRR is only 83 euros. This is incorrect. The unit price is €500/month. And it are 6 units, invoiced every 6 months (in this example). And in the reporting (within dashboards afterwards) the 83 euros does not even show in MRR ...
@BeckaD : we are on professional. And indeed, what you are showing there is the exact problem. Unit price is per time unit in saas and should multiply with the period, independently of billing frequency. And that is the big mistake Hubspot made here ...
By the way: you see MRR calculated on top, but the number you see there (whether right or wrong) does not even propagate correctly to reporting if you select the MRR property in the reporting module (unless you invoice monthly) ... So there are 2 mistakes in a row at play...
@JVleminckx -- It actually does populate into reporting correctly, but again, I think that's a feature of Sales Hub Enterprise.
The math isn't actually wrong, just confusing. If a customer is billed $100k every year, for 3 years, then the MRR is $8333.33 (300/36). But if they are billed $100k once for 3 years of product, the MRR is $2777.78 (100/36).
@BeckaD : of course. Problem is that it says unit price (e.g. price/asset/month) instead of total price. Different thing. And every customer that saw the offer resulting out of it so far was super confused with the way it is laid out in the resulting offer.
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