What is the difference between cARR and ARR?
cARR counts every signed contract, including ones that have not started billing. ARR counts only what is live and generating revenue today. The difference is your signed backlog.A deal closes on March 20 with a May 1 start date. March cARR includes it. March ARR does not. On May 1 the deal moves from one bucket to the other and cARR does not change at all, because it was already counted. That single mechanic explains most of the confusion between the two figures.
Both are management metrics with no accounting definition, which means both get constructed differently across companies. When someone quotes an ARR figure in a fundraise or a competitive comparison, the first useful question is whether signed-not-started contracts are inside it.
What is committed ARR?
Committed ARR is the annualized recurring value of all contracts a customer has signed, whether or not service has begun. It answers what sales has secured as of today.The argument for it is straightforward. A contract with a signature on it is a commitment. A company that closes $4 million of enterprise ARR in Q4 with January start dates did that work in Q4, and a metric that shows nothing until January misrepresents the quarter.
The argument against is equally real. Signed does not mean live, and signed does not always mean paid. Implementation projects stall. Procurement adds conditions. A champion leaves and the new owner pauses the rollout. Every company that reports cARR should know its own activation rate, meaning the share of signed contracts that actually start billing on schedule.
What is live ARR?
Live ARR is the annualized recurring revenue from contracts currently in service and billing. It is the number that reconciles to your billing system and, with a recognition schedule applied, to your income statement.Live ARR is conservative by construction. It ignores signed enterprise deals still sitting in onboarding. For a company with long implementations, that understatement is material and persistent.
The advantage is that live ARR is verifiable. Every dollar has a customer receiving service against it. Retention, churn, and expansion all measure cleanly against a live base, because you cannot churn a contract that never started.
Where does the gap between cARR and ARR come from?
Three sources, and each behaves differently. The table separates them.| Source of gap | What it is | How it resolves |
|---|---|---|
| Signed, not started | Contract executed, service begins on a future date | Converts to ARR on the start date, if activation holds |
| In implementation | Service date passed, customer not yet live on the product | Converts when go-live completes, or churns before it does |
| Ramp not yet in effect | Contract steps up in year two or three | Converts on each step date, if counted at final rate |
When does cARR mislead?
When it counts value that will not materialize, and when nobody states the ramp treatment. Both are common enough to check before comparing any two cARR figures.Ramp is the bigger distortion. A three year contract priced at $100,000, $200,000, and $300,000 can be reported as $100,000 of cARR, $300,000, or $200,000 depending on whether the company counts the first step, the final step, or the average. The final-step version inflates the number by 200 percent on that one deal. There is no standard, so the treatment has to be disclosed.
Activation is the quieter risk. If 12 percent of signed contracts never go live, then 12 percent of your signed backlog is not revenue and never will be. Companies that do not measure activation carry that leakage inside cARR indefinitely, and it shows up later as an unexplained gap between what sales reported and what finance recognized.
The last failure is presentational. A deck that shows cARR growth against a prior-year ARR figure is comparing two different metrics and will always look better than the business performed.
Which number should you report?
Report live ARR as the headline and cARR alongside it with the bridge visible. Anyone reading it can then answer both questions without asking a follow-up.| Line | Amount |
|---|---|
| Live ARR | $24,000,000 |
| Signed, not yet started | $2,600,000 |
| In implementation, past start date | $900,000 |
| Ramp steps not yet in effect | $1,100,000 |
| cARR, all commitments at current step | $27,500,000 |
| cARR, including future ramp steps | $28,600,000 |
How should a forecast handle committed ARR?
Treat it as its own layer with an activation assumption, not as part of the live base. Folding it in assumes every signed dollar becomes a billing dollar on schedule, which your own data will tell you is not true.The structure that works has three tiers. Live ARR carries forward, adjusted for churn and expansion. Committed ARR converts at your measured activation rate on scheduled start dates. New bookings forecast from pipeline. Each tier has a different confidence level and should be shown separately rather than blended into one number that hides which part is soft.
Committed ARR is also the layer that responds fastest when conditions shift. If implementation queues lengthen or customers start delaying go-live dates, the signed-not-started balance builds and the conversion to live ARR slows. That shows up in the bridge months before it shows up in revenue. A forecast built on old assumptions misses precisely because it does not register changes like that, so the bridge is worth reviewing every month rather than every quarter.
For the new bookings tier, pipeline coverage is an input rather than an answer, and a proper sales forecast decomposes what will close from existing pipeline separately from what has to be created in-period. Our guide on how to forecast revenue walks through assembling all three tiers into one model.
Frequently Asked Questions
What is cARR?
cARR, or committed annual recurring revenue, is the annualized recurring value of every contract a customer has signed, including contracts that have not started billing yet. A deal signed on March 20 with a May 1 start date counts in March cARR and does not count in ARR until May. cARR measures what sales has secured. ARR measures what is live.
Is cARR higher than ARR?
Almost always, and the gap widens with longer implementation cycles and heavier use of ramped pricing. A company selling enterprise software with a long onboarding period can carry a cARR figure meaningfully above live ARR at any moment. If the two are identical, either you have no signed backlog or you are labeling one number with the other's name.
Should you report cARR or ARR to the board?
Report both, with the bridge between them. cARR alone lets a quarter look strong on deals that have not gone live and might never activate. ARR alone understates a company that just signed a large enterprise cohort still in implementation. The bridge, which is signed but not started plus ramp value not yet in effect, is where the real information sits.
What is ramped ARR and how does it affect cARR?
A ramped contract steps up in price over the term, for example $100,000 in year one and $200,000 in year two. Live ARR counts the current step. cARR is where companies diverge most: some count the year one rate, some the final rate, some an average. Counting the final step inflates the figure by the entire ramp. Any cARR figure needs its ramp treatment stated.
How should a forecast treat committed but unstarted contracts?
As a separate layer with its own activation assumption, never folded into live ARR. Some signed deals never go live. Implementation stalls, a champion leaves, or the customer cancels during onboarding. Model the activation rate from your own history and apply it, rather than assuming every signed dollar becomes a billing dollar on schedule.
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