Committed vs Billed ARR: What’s the Difference?

If you track ARR, you’ve probably looked at a dashboard and wondered why the sales team’s number doesn’t match the finance team’s. One big reason: the difference between Committed ARR and Billed ARR. These two metrics measure different things. Get them mixed up, and you’ll misforecast cash flow, overstate short-term revenue, or undercount your real traction. Here’s what each one means and how to use both.

What Is Committed ARR?

Committed ARR is the annualized value of all contracts that have been signed by a customer. The deal is done. Both parties have agreed to the terms. The contract may include upfront payments, monthly billing, or annual billing — but the revenue itself is committed. You can count it as ARR even if you haven’t sent the first invoice yet.

Think of Committed ARR as your forward-looking backlog. It tells you how much recurring revenue you can expect from contracts already in force. It’s not cash in the bank, but it’s contractually obligated. This metric is critical for understanding sales performance and future growth trajectory. For a deeper walkthrough on calculating ARR from contracts, check out How to Calculate ARR the Right Way.

What Is Billed ARR?

Billed ARR is the annualized value of invoices that have actually been sent to customers. The invoice may have been paid or remain outstanding, but the billing event has occurred. If you bill monthly, Billed ARR only includes the current month’s invoice annualized. If you bill annually, Billed ARR jumps when you send the yearly invoice and then stays flat until the next renewal.

Billed ARR aligns with cash cycle events. It’s what your collections team cares about. It’s also the metric that feeds into deferred revenue calculations. But it’s not the same as cash received — that’s collections. Billed ARR simply says: we have invoiced this amount for recurring services.

Key Differences Between Committed and Billed ARR

The core difference is timing and obligation. Committed ARR is about contractual obligation. Billed ARR is about administrative action. A contract can be signed (committed) but not yet invoiced (unbilled). That gap can last weeks or months depending on your billing cycle and implementation process.

Here’s a comparison:

Aspect	Committed ARR	Billed ARR
Trigger event	Contract signature	Invoice sent
What it measures	Contracted future revenue	Revenue that entered billing
Cash implication	Not yet cash	Expected cash (if collected)
Timing vs sales close	Instant	Delayed by billing cycle
Best use	Forecasting growth	Cash flow and collections

For a broader view of how ARR fits into your metrics framework, read the Beginner’s Guide to SaaS Revenue Metrics.

Why the Gap Matters

The difference between Committed ARR and Billed ARR is your unbilled contracted revenue. A growing gap means you’re signing deals faster than you can invoice them. That’s fine if it’s temporary. A persistent or widening gap signals problems: maybe sales incentives push early commits, or implementation takes too long, or billing processes are slow.

Watch the ratio of Billed ARR to Committed ARR. For established SaaS businesses, that ratio should stay above 80%. If it drops below, you need to investigate why contracts aren’t converting to invoices quickly. Common culprits include: custom contract clauses that delay invoicing, long professional services phases, or customers dragging their feet on onboarding.

Conversely, if Committed ARR is growing but Billed ARR is flat, your cash runway will tighten even though your sales look strong. That’s a warning sign every founder should catch early.

How to Calculate Each

Let’s make it concrete. Suppose you sign a new customer on January 15 to a $12,000 annual contract, payable monthly. The first invoice goes out February 1.

Committed ARR: Immediately upon signing, you add $12,000 to your Committed ARR. Because the contract is one year long, the annualized value is $12,000. That number stays until renewal or churn.

Billed ARR: On February 1, you send an invoice for $1,000 (monthly). At that point, Billed ARR increases by $12,000 (the annualized value of that invoice). Wait — why $12,000? Because Billed ARR annualizes the invoice amount. You billed $1,000 for one month, so annualized that’s $12,000. This means Billed ARR can be lumpy. If you bill annually, Billed ARR jumps by the whole amount at once. If you bill monthly, it grows steadily.

Most companies reconcile both metrics by tracking unbilled ARR (Committed minus Billed). That’s your implementation pipeline in dollar terms.

Common Mistakes to Avoid

One common mistake is treating Committed ARR as cash-in-hand. It’s not. Don’t use it for short-term cash forecasting unless you’ve adjusted for billing lag. Another mistake is using Billed ARR alone to judge sales performance. A rep could sign $100K in contracts, but if billing lags, Billed ARR shows zero. That doesn’t mean the rep failed.

Also, be careful with multi-year deals. If you sign a two-year contract for $24,000, Committed ARR should reflect the annualized value — $12,000 per year. Some teams mistakenly add the full $24,000 to ARR. That inflates your Committed ARR. Always annualize.

Finally, don’t confuse Billed ARR with cash collected. Billed ARR includes invoices not yet paid. You need a separate collections metric to track cash. For a complete look at ARR nuances, see How to Calculate ARR the Right Way.

Which One Should You Track?

Track both. Committed ARR is your go-to for growth forecasting, sales performance, and investor updates. Billed ARR is your go-to for cash forecasting, revenue recognition planning, and accounting. If you have to pick one for a board meeting, lead with Committed ARR but also show the billings gap.

Set up a dashboard that shows both metrics as time series, plus the ratio. Review it weekly. When the ratio shrinks, celebrate. When it grows, investigate. Use it as an early warning system for operational friction between sales and finance.

In practice, the best B2B SaaS teams manage Committed ARR as a leading indicator of growth and Billed ARR as a lagging indicator of cash cycles. The gap between them is where operational excellence — or mediocrity — shows up. Tighten that gap, and you tighten your forecast accuracy. That’s a win no matter which metric you prefer.

Frequently asked questions

What is the main difference between Committed ARR and Billed ARR?

Committed ARR is the annualized value of signed contracts, reflecting future revenue obligations. Billed ARR is the annualized value of invoices sent, reflecting billing events. The difference is unbilled contracted revenue.

Can Committed ARR be higher than Billed ARR?

Yes, almost always. Committed ARR leads Billed ARR because contracts are signed before invoices are sent. The gap is unbilled ARR. In healthy SaaS businesses, Billed ARR should be at least 80% of Committed ARR.

Why does Billed ARR sometimes appear lumpy?

Billed ARR annualizes each invoice sent. If you bill annually, a single invoice for $12,000 adds $12,000 to Billed ARR at once. Monthly billing adds smaller amounts each month. This creates jumps and plateaus.

Should I use Committed ARR or Billed ARR for cash forecasting?

For short-term cash forecasting, use Billed ARR (adjusted for payment terms and collection rates). For long-term growth forecasting, use Committed ARR. Neither alone is sufficient for accurate cash forecasts.

How do I calculate unbilled ARR?

Unbilled ARR equals Committed ARR minus Billed ARR. For example, if Committed ARR is $1M and Billed ARR is $800K, unbilled ARR is $200K. Track this metric to monitor how quickly you convert contracts to invoices.