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Dissecting Bookings and Annual Recurring Revenue

4 min read

What is Bookings and Annual Recurring RevenueWith the number of Amazon Prime member subscribers growing from 58 million in 2016 to 180 million in 2024, according to Statista, there’s a sustained recurring subscription model that one of America’s most successful retailers has increased more than 200 percent in eight years. Whether it’s a large company such as Amazon or a solopreneur beginning their recurring subscription services, it’s important to first distinguish between overall bookings and recurring revenue; and then to illustrate how businesses can measure these two types of revenue.

Dissecting Annual Recurring Revenue (ARR) and Bookings

Bookings are assurances of all anticipated earnings (recurring and one-off deals) because the business hasn’t satisfied the terms of the contracted services. Once it’s completed, the booking will turn into actual revenue. This factor is present in all sales deals, regardless of when revenue or cash will be transferred to the business from the customer. Non-recurring revenue includes training, special consulting projects, etc. (things that are one-off).

Annual Recurring Revenue (ARR) is a way to gauge recurring revenue a business projects to earn on a yearly basis. It’s quite common in eCommerce industries – be it subscriptions for food, software, etc. that are billed on a monthly or annual time frame.

How ARR Helps Businesses Analyze Operations

Businesses can determine demand trends, which help forecast recurring revenue. Lenders and investors can see how (in)efficient a company is with its marketing and sales efforts. It gives business owners and management the ability to determine customer retention and growth prospects while it provides internal and external users the ability to estimate a subscription’s worth. Additional insight businesses can gain from this metric include how much new customers add, how much renewals and upgrades impact ARR, and how churn and downgrades impact ARR.

How to Value a Company Using ARR

One common metric is Enterprise Value divided by ARR (EV/ARR), which is similar but important to distinguish from the EV/Revenue ratio. Since the ARR only factors in recurring revenue versus the EV/Revenue, which factors in all revenue regardless of the revenue recurring, the initial ratio provides a better assessment of the recurring revenue only. Assuming a company has an ARR multiple of 7 and its ARR is $15 million, the ARR has an enterprise value of $105 million.

Monthly Versus Yearly Recurring Revenue

While Monthly Recurring Revenue is not an entry on a business’s financial statements, it’s more of a key performance indicator (KPI). It’s not uncommon for companies to include it as part of their earnings releases. If a recurring subscription revenue is done monthly, it’s converted into Annual Recurring Revenue (ARR) as follows: MRR x 12 = ARR.

Recording Bookings

When a contract is signed, or an order is placed, it depends on how it’s handled. If the business receives cash prior to completing their monthly or yearly service expectation and say the contract is for $20,000 per month for 12 months, it would be recorded as follows:

Debit: Cash $240,000

Credit: Deferred Revenue $240,000

Since the contract has just been signed, but there’s been no product/service rendered, deferred or unearned, revenue has been created.

For every month that passes, the journal entry will progress as follows:

Debit: Deferred Revenue $20,000

Credit: Revenue $20,000

The deferred revenue account drops from $240,000 to $220,000, assuming the starting deferred revenue balance is even and there’s no deferred revenue.

The following month, the journal entries would be as follows:

Debit: Deferred Revenue $20,000

Credit: Revenue $20,000

This would occur every month until the end of the 12-month period.

Conclusion

When it comes to accounting for revenue, whether it’s booked, fulfilled by the company, or the payment received by the company, along with analyzing the time frame, it’s equally important to be familiar with the type of revenue it is for one to see how the company is performing.

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5 Tips on How to Track Monthly Expenses

4 min read

5 Tips on How to Track Monthly ExpensesKeeping tabs on what you spend isn’t hard. It just has to become a habit. But here’s the good news: Studies show that it only takes an average of 66 days to form a habit. A little over two months. With these easy ways to track your monthly expenses, you’ll be a regular money manager in no time.

Add Up Your Monthly Income

We’re talking about your regular paychecks – and extras from any side hustles. Have irregular income? No problem. Look at what you’ve made in the past few months and list the lowest amount as this month’s planned income. When you know how much you have to work with, you’ll be ready to dive in.

Calculate Your Monthly Expenses

Open up your bank account and start dividing your expenses into buckets, e.g., rent/mortgage, food, utilities, etc. The numbers may surprise you. Think about your needs and wants. What’s really important? What can you live without? Where can you cut? Or if you have a surplus, where should this money go? Regardless, here’s a good way to categorize your income:

  •  Four walls (food, utilities, shelter/housing, and transportation)
  • Other essentials (insurance, debt, childcare, etc.)
  • Extras (entertainment, restaurants, etc.)
  • Giving (10 percent of your income)
  • Savings (varies based on your resources)

Create a Budget

Now that you know how much you make and what you spend, do a little mat,h and you’ll have a sum total. Dave Ramsey recommends a zero-based budget, where you give every dollar a job to do, such as spending, saving, or giving. But in these categories, you’ll want to get more detailed. For instance, under Food, you might list Dining Out and Groceries. When you get specific, it’s easier to track where you spend.

Track Any Money You Earn and Spend

When you get paid, enter the amount. When you spend, enter the amount. This repetition contributes to forming a habit. If you need a bit more immediacy and structure, get a handy budget app for your phone. Mint (it’s free!), YNAB (You Need a Budget), and Simplifi are a few of many others. It might well be a fail-safe idea, given how much we humans love to be on our phones.

While tracking is super important for those who have a regular income, it’s even more important if you have an irregular income. As mentioned above, the recommendation is to plan around the lowest amount of money you make. If you happen to earn more in any given month, adjust the number and your current money goals. This way, you can cover some extras in your budget.

Tracking also applies to the money you spend. Enter every single transaction, then do that math. Whether your expenditure is coming from your bank account or piggy bank, keeping up-to-date on outflow is key to not overspending.

Create a Regular Rhythm for Tracking

This cadence is totally up to you and what works best for your life. It might be daily or weekly – or before you leave the gas station or grocery store. When you enter the amount of what you spent right after you do it, chances are you won’t forget about it. (Nod to the budget app!) If you’re married and/or have a partner, having a central location for money management increases communication and accountability. Neither one of you can say, “Oh, I didn’t know you were going to spend all our fun money on pickleball lessons. I wanted to sign us up for bridge at the community center.”

Having a handle on monthly expenses (tracking them) means being more aware of what’s going on, avoiding surprises, and being in control. And that’s a good thing for everyone.

Sources

How Long Does it Take to Build a Habit?

How to Track Your Monthly Expenses – Ramsey

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2025 U.S. Tax Legislation Forecast: What to Expect

4 min read

2025 U.S. Tax Legislation ForecastAs 2025 unfolds, U.S. tax policy is poised for significant shifts, particularly with a new Republican administration under President Donald Trump. The year ahead will likely see a range of tax reforms, largely driven by the GOP’s objectives and campaign promises. In this article, we’ll explore the major tax policy trends, legislative developments, and administration changes that may shape U.S. tax law in 2025.

The Impact of Supreme Court Decisions

2024 also saw two major Supreme Court decisions with significant tax implications. In the Moore case, the Court ruled narrowly on the issue of wealth taxation, leaving open the possibility of revisiting the question in the future. While wealth tax proposals had gained some traction among Democrats, the Court’s decision, combined with the political climate, suggests that such proposals are unlikely to gain much momentum under the new administration.

The Loper Bright decision, which questioned the deference given to government regulations, could have far-reaching effects on tax policy. The ruling makes it more difficult for agencies like the IRS to issue regulations without clear legislative guidance, potentially leading to more legal challenges to IRS regulations and shifting the balance of power between lawmakers and regulatory agencies.

2025: A New Republican Agenda

With a Republican administration taking office in 2025, tax policy is expected to shift dramatically. President Trump, along with a Republican-controlled Senate and House, will likely push for several key changes to tax law.

One of the primary objectives will be to extend provisions of the 2017 Tax Cuts and Jobs Act (TCJA) that are set to expire. This includes individual tax cuts, corporate rate reductions and changes to the state and local tax (SALT) deduction cap. The extension of other expiring provisions involving lifetime gift and estate tax exemptions, AMT, child tax credits, and the mortgage interest deduction may also be on the table. Additionally, the GOP is expected to explore new tax cuts, with some lawmakers proposing measures like eliminating taxes on tips, which was promoted during Trump’s election campaign.

On the corporate side, there may be discussions about lowering the effective tax rate through credits and incentives rather than direct reductions to the statutory corporate tax rate. There also could be movement on tax expensing for research and development, as well as other measures to incentivize business investment.

Potential Revenue-Raising Measures

Despite the tax cuts expected to dominate the agenda, there may be some revenue-raising measures included in the GOP’s tax proposals. The focus on reducing deficits could lead to efforts to cut some of the green credits in the Inflation Reduction Act, although these cuts are unlikely to raise significant revenue. There also may be attempts to tighten international tax rules from the TCJA to generate more revenue.

President Trump has also proposed replacing individual income taxes with increases in tariffs, implementing a universal 20 percent tariff across the board, and implementing an additional 50 percent tariff on imports from China.

IRS Funding and Administration Changes

Under the new administration, the IRS is expected to face significant cuts, particularly in its enforcement budget. The $80 billion allocated to the agency in recent years, which was intended to improve taxpayer services and combat tax evasion, is likely to be rolled back. Republicans have expressed strong opposition to the IRS’ expanded powers and are expected to push for a reallocation of those funds toward customer service rather than enforcement.

Additionally, the new administration may replace current IRS Commissioner Daniel Werfel, who was appointed during the Biden administration. Trump could nominate a new commissioner, and if this happens, it could spark further debates over the direction of the IRS in the coming years.

Conclusion

2025 promises to be a dynamic year for U.S. tax policy, with significant changes expected under the new administration. Key issues to watch include the fate of the TCJA’s expiring provisions, potential new tax cuts, and ongoing debates over IRS funding and regulations. As the administration works to implement its agenda, there will likely be contentious discussions and compromises on Capitol Hill, setting the stage for a new era of tax policy for the United States.

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Securing Client Data: The Importance of Encrypted Apps

4 min read

Securing Client DataThe Salt Typhoon cyberattack is among recent cyberattacks that reaffirm the urgent need for robust data security measures. This attack targeted major telecommunications providers, compromising critical infrastructure and potentially exposing vast amounts of sensitive data. With cyberthreats becoming more sophisticated, businesses and individuals must prioritize data security to maintain trust and compliance.

The Role of Apps in Managing and Protecting Client Data

Businesses need apps because they make the work easier and more organized. Apps help teams communicate better, manage tasks, and share information quickly, no matter where people are. The apps also simplify handling customer needs, improving service, and tracking business performance. Generally, apps save time while helping businesses work smarter and stay competitive.

One of the most critical uses of apps is managing client data. This data includes personal details like names and addresses. It also includes financial information such as bank details, as well as business-specific data like contracts and project plans. Losing or exposing this sensitive information can lead to severe consequences, including financial losses, legal penalties, and damaged reputations. Clients may lose trust in your business, leading to lost opportunities and reduced customer loyalty. By using apps effectively, businesses can better organize, safeguard, and utilize client data to build stronger relationships and maintain long-term success.

Encryption: A Critical Security Measure

Encryption has become crucial in modern data security. It transforms readable data into an unreadable format, ensuring only authorized parties can access the information. There are various types of encryptions, including end-to-end encryption (E2EE), which protects data during transmission, and at-rest encryption, which secures stored data.

Following the Salt Typhoon cyberattacks, the FBI and Cybersecurity and Infrastructure Security Agency (CISA) issued a joint advisory urging individuals and organizations to prioritize using encrypted communication channels. Given the vulnerability of traditional communication methods, the agencies strongly recommended adopting end-to-end encrypted messaging apps like Signal for secure communication. This recommendation aims to mitigate the risks associated with compromised telecommunication networks. It also helps protect sensitive information from unauthorized access. Even if cybercriminals intercept the data, they cannot decipher it without the encryption key. This layer of protection mitigates the risks of unauthorized access and data breaches, making encryption an essential tool for businesses.

The Role of Encrypted Apps

  1. Enhanced security: Encrypted apps provide a critical layer of defense against sophisticated cyberattacks. By encrypting data both in transit and at rest, these apps ensure that even if communication networks are compromised, sensitive information remains inaccessible to attackers.
  2. Compliance with regulations: With so many ongoing cyberattacks, regulatory scrutiny of data security practices has intensified. Encrypted apps can help businesses comply with relevant regulations, such as the GDPR and CCPA, by demonstrating a commitment to data protection.
  3. Building trust and customer loyalty: Customers are increasingly wary of data breaches in an era of heightened cybersecurity concerns. Utilizing encrypted apps demonstrates a commitment to data security and privacy, fostering trust and loyalty among clients.
  4. Protecting business operations: Encrypted apps are crucial for protecting client data and safeguarding critical business information, such as intellectual property, financial records, and internal communications. This ensures the continuity and integrity of business operations, even in the face of advanced cyber threats.

Choosing and Implementing Encrypted Apps

When selecting and implementing the right encrypted apps, it is important to consider them carefully. First, it is good to consider industry-specific needs as different industries have different data security needs. For example, while a healthcare provider must comply with Health Insurance Portability and Accountability Act (HIPAA) regulations, a business in the financial industry must adhere to banking regulations. This calls for selecting industry-specific apps.

Businesses also must prioritize apps with robust security features, such as strong encryption algorithms, multifactor authentication, and regular security updates. It is also important to carefully review the data privacy policies of app providers and ensure compliance with relevant regulations.

Effective employee training is also essential for successfully implementing encrypted apps. Employees must be educated on the importance of data security, the proper use of encrypted apps, and best practices for handling sensitive information.

Conclusion

Client data is one of a business’s most valuable assets, and protecting it is paramount. The growing threat of cyberattacks and the increasing complexity of data protection regulations make encryption an essential tool. By embracing encrypted communication channels, businesses can significantly enhance their resilience against sophisticated cyberattacks, protect sensitive client data, and maintain a competitive edge in today’s digital economy.

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National Security

4 min read

National Security, S 3613, HR 5009, HR 2950, S 4367, HR 9668, HR 9716Improving Federal Building Security Act of 2024 (S 3613) – The Federal Protective Service (FPS) contracts security guards to control access to government facilities and screen visitors to detect prohibited items, such as pepper spray and batons. Earlier this year, FPS investigators conducted a covert test at certain federal buildings in which the guards failed to detect prohibited items about 50 percent of the time. In response, Congress passed this bill requiring Facility Security Committees to respond to security recommendations issued by the FPS. It also mandates that the Homeland Security Department submit an unredacted report to Congress regarding FPS surveillance technology recommendations as well as summarize the FPS recommendations that buildings accepted or rejected. However, no additional funding for security is appropriated by the bill, which will sunset five years following enactment. The act was introduced on Jan. 18, 2024, by Sen. Gary Peters (D-MI). It passed in the Senate on March 23, the House on Dec. 10, and was signed into law on Dec. 17.

Servicemember Quality of Life Improvement and National Defense Authorization Act for Fiscal Year 2025 (HR 5009) – This year’s version of the annual funding bill features a 14.5 percent increase in pay for junior enlisted servicemembers, as well as a 4.5 percent pay raise for all other personnel. The legislation also provides cost-of-living allowances per location, improved housing/barracks repair programs, more access to medical and mental health services, and increased employment support for military spouses. The legislation was introduced by Rep. David Joyce (R-OH) on July 27, 2023. This is a bipartisan bill that has passed in both the Senate and the House with various changes. It is currently awaiting signature by the White House for enactment.

Coastal Habitat Conservation Act of 2023 (HR 2950) – Introduced by Rep. Jared Huffman (D-CA) on April 7, 2023, this bill passed the House on Sept. 24, 2024, the Senate on Nov. 21, and was signed into law on Dec. 11. The legislation empowers the Coastal Program of the United States Fish and Wildlife Service to increase efforts to assess, protect, restore and enhance key coastal environments that provide fish and wildlife habitats for certain federal trust species.

Thomas R. Carper Water Resources Development Act of 2024 (S 4367) – This legislation was introduced by Sen. Thomas Carper (D-DE) on May 20, 2024. It passed in the Senate on Aug. 1 and in the House (with changes) on Dec. 10; the final bill is expected to be approved and signed into law by the end of the congressional session. This bipartisan bill is designed to improve the nation’s water resources infrastructure, including ports and harbors, inland waterway navigation, and flood and storm protection; it also strengthens our resilience during natural disasters. The legislation also institutes reforms at the U.S. Army Corps of Engineers in order to streamline processes and deploy projects faster.

SHIELD Against CCP Act (HR 9668) – Introduced on Sept. 18, 2024, by Rep. Dale Strong (R-AL), this bill would establish a task force working with the Department of Homeland Security. The group’s sole focus would be on countering terrorism, cybersecurity, and border/port security related to threats posed by the Chinese Communist Party. The legislation is in response to recent CCP activities such as stealing intellectual property and technology, threats to economic supply chain security and critical infrastructure, and surveillance activities targeting U.S. defense sites and even American citizens. The bipartisan bill passed in the House on Dec. 10 and is currently in the Senate.

Increasing Baseline Updates Act (HR 9716) – In the first quarter of each year, the Congressional Budget Office provides Congress with an annual baseline 10-year projection of the budget and economy based on the fiscal impact of legislative proposals. Updates are released in Q2 and Q3 to reflect newly enacted laws and economic conditions. This bill would mandate that the executive branch provide critical data to the CBO by February 1 of each year to produce a more accurate annual budget baseline. The bill passed in the House on Dec. 11 and currently lies with the Senate. It was introduced by Rep. Blake Moore (R-UT) on Sept. 20, 2024.