Booked It, Billed It, Recognized It — Which Recurring Revenue Metric Actually Counts?

“Recurring beauty, like recurring revenue, depends on what's quietly holding it up.”

Three Metrics, One Misunderstood Term: Recurring Revenue

Most recurring revenue metrics are built with good intentions — to track growth, measure stability, or report performance. But under the surface, many of those numbers don’t mean what people assume they mean.

A founder might report strong Monthly Recurring Revenue (MRR) while losing ground on customer retention. Another might report strong Contracted Annual Recurring Revenue (CARR), even though some contracts may never go live. Or they’ll use Live Annual Recurring Revenue (LARR) to reflect current run rate — but even cleanly calculated, it assumes every active contract will continue as-is, which can obscure near-term churn risk.

These aren’t deliberate errors. They’re structural blind spots — the result of using metrics that look simple on the surface, but quietly depend on clean inputs and clear definitions.

The danger isn’t in using these metrics — it’s in assuming they mean the same thing. Without structure behind the numbers, it’s easy to misread momentum, overstate stability, or build plans on revenue that isn’t real yet.

This blog breaks down the three recurring revenue metrics that matter — Monthly Recurring Revenue (MRR), Live Annual Recurring Revenue (LARR), and Contracted Annual Recurring Revenue (CARR) — with complete definitions, use cases, and common pitfalls.

Because not all recurring revenue is created equal — and knowing which version you're looking at is what keeps the rest of your metrics honest.

This framework applies broadly to recurring revenue businesses — particularly SaaS (Software as a Service) and RaaS (Robotics as a Service) models, where contracts, billing cycles, and revenue timing often shift as the business scales.

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1. Monthly Recurring Revenue (MRR) – Billed

When recurring revenue shows up in monthly reports, it’s usually Monthly Recurring Revenue (MRR) — the amount actively billed this month from live subscriptions or contracts. It’s often treated as the headline number for growth because it’s easy to track and reflects real, invoice-backed activity.

But billing doesn’t equal stability. MRR tells you what went out the door in invoices, not whether those clients will stay, whether the contract is fully ramped, or whether the revenue is recognized. It’s useful — but narrow. To make decisions based on it, you need to understand what it includes and what it quietly leaves out.

Formula

MRR = Total Monthly recurring invoice amount

When It’s Used

• Measuring month-over-month growth

• Tracking billing velocity

• Monitoring short-term revenue trends

What’s Included

• Monthly subscription revenue

• Mid-month activations (prorated where relevant)

What’s Not Included

• One-time charges (e.g., implementation, true-ups)

• Booked but not-yet-active contracts

• Canceled or churned contracts

• Deferred revenue from prior periods

Strengths

• Simple to calculate and trend over time

• Tied directly to invoicing behavior

• Helpful in assessing billing momentum

Limitations / Common Pitfalls

• Can give a false sense of stability if churn isn’t visible

• Doesn’t show full contract value or future obligations

• Annual prepayments may skew monthly trends

• Not helpful for understanding the actual run rate

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2. Live Annual Recurring Revenue (LARR) – Recognized

While MRR shows what was billed, Live Annual Recurring Revenue (LARR) shows what was recognized this month as recurring revenue — based on active contracts and accounting rules. It’s often the cleanest measure of the business’s current run rate because it reflects revenue earned, not just invoiced or signed.

LARR filters out noise like prepayments, unearned ramp periods, implementation fees, and even future commitments that haven’t gone live. When calculated cleanly, it gives you a grounded view of recurring revenue as it’s delivered, which makes it more stable and actionable than MRR. However, the tradeoff is that it depends entirely on a consistent structure. Recognition true-ups, catch-up revenue, or overdue churn adjustments can distort the number if not handled carefully.

Formula

LARR = Monthly recognized recurring revenue × 12 (months)

When It’s Used

• Measuring the current revenue run rate

• Assessing active contract value

• Comparing growth trends across quarters

What’s Included

• All recurring contracts that are currently billing

• Annual or multi-year contracts that have started

• Monthly subscriptions in active status

What’s Not Included

• Contracts not yet live (e.g., signed but future start)

• Expired or churned contracts

• One-time spike adjustments (e.g., true-ups)

• Usage-based elements without a fixed recurring base

• Temporary allowances that distort the actual run rate

• One-time fees, even if recognized as revenue (e.g., setup fees), should be excluded if not recurring.

Strengths

• Smooths out monthly billing fluctuations

• Helpful in understanding revenue stability

• More accurate than MRR in annual billing models

Limitations / Common Pitfalls

• Must remove non-recurring or revenue recognized up front

• LARR can be overstated if churned or paused customers aren’t removed promptly

• To avoid inflating the metric, you must clearly define and maintain which customers are considered 'active'.

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3. Contracted Annual Recurring Revenue (CARR) – Booked

Contracted Annual Recurring Revenue (CARR) represents the total contractual recurring value of all signed contracts — whether or not billing has begun. It reflects what's been booked, offering a forward-looking view of total contracted revenue expected to recur over time.

CARR is typically calculated using one of several timeframes — Month-to-Date (MTD), Quarter-to-Date (QTD), Year-to-Date (YTD), or inception-to-date — depending on the business’s reporting structure. It includes new bookings, renewals, and upsells signed within the chosen window.

For example, an addendum signed this year increases a base contract (originally signed last year) from $5K/month to $7K/month. In this case, only the incremental $2K would be included in this year’s Quarter-to-Date or Year-to-Date CARR. In contrast, the full $7K would appear only in inception-to-date views.

Since CARR is based on signed contracts, it operates independently from invoicing or revenue recognition. That’s why it’s commonly used in board decks, sales performance tracking, and fundraising conversations to highlight signed revenue momentum over time.

Formula

CARR = Monthly value of all signed recurring contracts (active or future-start) × 12 (months)

When It’s Used

• Showing booked revenue pipeline

• Supporting fundraising or board reporting

• Connecting sales performance to future revenue

What’s Included

• All signed contracts with a recurring component

• Future-start contracts

• Active multi-year agreements

• Annualized value of each contract per term

• Upsells or addendums that increase contract value should be included based on the period in which they were signed:

  • If calculating CARR as of today or inception-to-date → use the latest total amount (e.g., $7K/month if upsold from $5K).

  • If calculating CARR for a specific reporting window (e.g., QTD) → include only the additional upsell amount signed during that period.

What’s Not Included

• Churned contracts (must be manually excluded)

• Unsigned deals or letters of intent (LOIs)

• Contracts with opt-out terms that haven’t been scrubbed

• Non-binding or unapproved draft SOWs

Strengths

• Helps reflect sales momentum

• Useful in long sales cycles or delayed activation models

• Gives visibility into what’s coming

Limitations / Common Pitfalls

• Easily inflated if churned or failed activations remain

• Can quietly accumulate bad data without date filters

• Double-counting addendums across reporting periods if upsells aren’t isolated properly

• Requires clear time scoping (e.g., MTD, QTD, YTD)

• Often misunderstood as guaranteed revenue when it’s not

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So Which Recurring Revenue Metric Should You Use?

Metric	Best For	What to Watch For
MRR (Monthly Recurring Revenue)	Measuring current billing volume	Can hide churn or delayed payments
LARR (Live Annual Recurring Revenue)	Estimating current active run rate	May include expired or inflated contracts
CARR (Contracted Annual Recurring Revenue)	Reporting total signed revenue	Can overstate traction if churn or upsells aren’t tracked properly

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Final Thought

Recurring revenue only creates clarity if the structure behind it is clear. When those numbers are used without definitions — or pulled from systems that treat them differently — you risk building your decisions on something that doesn’t hold up. And when that happens, hiring gets ahead of itself, investor conversations drift, and operations start to plan against the wrong baseline.

MRR tells you what was billed. LARR tells you what’s running. CARR tells you what’s been booked. They’re all valid — as long as they’re used with intention, not assumption. Ultimately, what matters isn’t just which metric you choose, but whether it’s being calculated consistently and interpreted in context. That’s the difference between having numbers and having clarity.

Most metrics are only as good as the structure behind them.

If you're looking to bring more clarity to yours, get in touch.