You Don't Actually Know Your ARR: Why Most SaaS MRR Schedules Are Wrong

You don't actually know your ARR

I ask every SaaS founder the same question in our first meeting: "What is your ARR?"

They always have an answer. Usually delivered with confidence. Usually wrong.

Not wrong as in slightly off — wrong as in the number they quote does not match what their accounting system says. The MRR schedule says one thing. The P&L says another. And when you dig in, neither number is fully correct.

This is not a rounding error. At the £1M to £5M ARR stage, I regularly see gaps of 10-20% between the MRR schedule and the P&L revenue. That is the difference between a business growing at 40% year-over-year and one growing at 25%. It changes the entire narrative.

Why your MRR schedule is wrong

The MRR schedule is usually a spreadsheet. Someone built it when the company had 10 customers. It worked fine then. Now there are 80 customers and the schedule has not kept up.

Here is what typically goes wrong:

This is separate from — but related to — the revenue recognition problem. Even if your P&L revenue is recognised correctly, the MRR schedule can still be wrong. And when both are wrong, your entire financial picture falls apart.

It only gets updated when a new customer lands

A new customer signs? Someone adds them to the MRR schedule. Great. But what about the customer who upgraded from the £500/month plan to the £800/month plan three months ago? That expansion revenue is in the accounting system (they are being invoiced £800) but the MRR schedule still says £500.

What about the customer who downgraded? Still showing the old amount.

What about the customer who churned two months ago? Sometimes still in the schedule, quietly inflating the number.

Revenue from month 1 differs from a few months later

A customer signs a £24,000 annual contract. MRR = £2,000. But three months in, they add 5 more seats at £100/month. The invoice goes up to £2,500/month. The accounting system reflects this. The MRR schedule does not.

Over time, these small discrepancies accumulate. Each one is minor. Together, they make the MRR schedule fiction.

One-off revenue leaks into recurring numbers

Setup fees, implementation charges, consulting hours — these appear in the accounting system as revenue. If someone is not carefully separating recurring from non-recurring, one-off revenue ends up in the MRR calculation. This inflates ARR, makes growth look better than it is, and — worst of all — creates artificial churn when that non-recurring revenue does not repeat.

Investors see high churn and get nervous. But the churn is not real. It is an accounting artefact from mixing revenue types.

MRR is the foundation — everything else sits on top

Your MRR schedule is not just a number for your pitch deck. It is the foundation for every SaaS metric that matters:

If your MRR is 15% overstated, your NRR looks better than it is, your CAC payback looks shorter, and your LTV looks higher. Every metric tells a more optimistic story than reality.

This is fine until someone checks the numbers against your actual accounts. And that someone is always an investor during due diligence.

Investors will check

Here is what happens during a Series A or growth round:

1. You tell the investor your ARR is £2.4M
2. They ask for your MRR schedule (customer-level, month-by-month)
3. They ask for your P&L (management accounts, monthly)
4. They compare the two

If monthly revenue on your P&L is £180,000 but your MRR schedule says £200,000, they will ask why. The answer is almost always a combination of the issues above: stale MRR data, mixed revenue types, missing churn entries.

This does not kill the deal by itself. But it damages trust. The investor now questions every other number you have presented. If the most basic metric — how much recurring revenue do you actually have — is wrong, what else is wrong?

I have seen this delay term sheets by weeks while the finance team scrambles to reconcile. I have seen it reduce valuations because investors apply a discount for "data quality risk." And in one case, I saw it kill a deal entirely because the gap was so large (25%+) that the investor concluded the management team did not understand their own business.

How to fix it

The fix is a monthly reconciliation process. It takes 3-5 hours per month and it should be non-negotiable.

Step 1: Pull the account transactions report

From your accounting system (Xero, QuickBooks), pull the detailed transactions for all recurring revenue accounts. This shows every invoice raised, at customer level, for the month.

Step 2: Compare to your MRR schedule

For each customer, check:

• Does the MRR schedule amount match the latest invoice?
• Are there customers in the accounting system not in the MRR schedule?
• Are there customers in the MRR schedule not in the accounting system?

Step 3: Update the MRR schedule

Fix every discrepancy. Record the expansion, contraction, or churn that caused it. Your MRR waterfall (opening MRR + new + expansion - contraction - churn = closing MRR) must reconcile to within 1-2% of P&L recurring revenue.

Step 4: Separate non-recurring revenue

Any one-off revenue (setup fees, consulting, implementation) must live in a separate P&L account and must NOT be included in the MRR schedule. If your chart of accounts mixes these together, fix that first.

Step 5: Make it monthly

This is not a quarterly exercise. MRR changes every month. Customers upgrade, downgrade, churn, and renew. If you reconcile quarterly, you are always three months behind reality.

The number that matters most

ARR is the single most important number in a SaaS business. It drives your valuation multiple, your fundraising narrative, your hiring plan, and your strategic decisions. It needs to be right.

Not approximately right. Actually right. Reconciled to your accounting system, updated monthly, with every expansion, contraction, and churn event captured.

If you are not sure your MRR schedule is accurate, it probably is not. The companies that get this right are the ones that treat it as a monthly discipline, not a fundraising exercise. And once your ARR is accurate, make sure you are using it correctly in your runway calculation — that is the next number most founders get wrong.

Need help building a reliable MRR schedule and monthly reconciliation process? That is core to our monthly reporting service. If your financials need a broader clean-up first, start with a financial review — we will audit your accounts, fix the data, and build the processes to keep it accurate going forward.