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sdfsdWhat is revenue backlog and how do subscription businesses classify it?

Individual workers can also develop a backlog of work which needs to be completed. Being able to balance items in a stack of tasks is also important for employees, as they must determine which work should move to the head …

19th December, 2023

Individual workers can also develop a backlog of work which needs to be completed. Being able to balance items in a stack of tasks is also important for employees, as they must determine which work should move to the head of the queue and which items can wait. If you’ve ever had to manage a ‘to-do’ list, you’ll know that they don’t always work as well as expected. This is the product backlog, and, in many ways, it’s more important than the roadmap itself — at least on the day-to-day level. Let’s say that in our example above, the company has a sales backlog of 10 orders per week. One possibility is that they’re receiving 110 orders per week while their processing capacity remains at 100 percent, resulting in a steady backlog of 10 orders each week.

One key component that gives a backlog meaning is the prioritized items. Therefore, the items ranked highest on the list represent the team’s most important or urgent items to complete. The only thing required to help project your revenue backlog calculation is satisfactory evidence that each customer will fulfill their obligations and your company can meet their terms. The ultimate stake of a SaaS business lies in the number of successful subscriptions it can generate in time.

Backlog

Product development can be an incredibly complex task, even when teams leverage the agile model, so it’s vital to have one overarching source of truth. The simplest way to find a sales backlog ratio is by dividing the number of backlogged orders by the number of sales in a given time. Ideally, this is reported in days or weeks to provide more granular data about sales backlog.

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Such invoices are sent as separate periods provided by you, like weekly, monthly, quarterly as per your wish. Several SaaS businesses are not huge fans of tracking the revenue generated by each subscription. However, revenue backlog calculations are necessary for a B2B SaaS business to track its overall growth and how far it has reached since its inception. This kind of poor planning will likely lead to pushed deadlines and last-minute change orders, which means unhappy customers, stressed-out team members, and the potential of losing future business.

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Sure, the product roadmap is the reference point for the overall vision of a development project. But zoom in a little closer, and you’ll see that the roadmap itself is made up of many smaller tasks. It has a clear boundary, known stakeholders, well-defined users or customers. A product could be a service, a physical product, or something more abstract. Product Backlog items that can be Done by the Scrum Team within one Sprint are deemed ready for selection in a Sprint Planning event.

The reason is revenue backlog remains constant while deferred revenue fluctuates a lot. Buyers prefer to use revenue backlog as a metric to adjudge the performance of your business so far. Having a firm grip over your revenue backlog can make a huge difference between a good and a bad valuation. The first thing that comes into mind when it comes to valuing your B2B SaaS business is your acumen of valuing the contracts you are signing compared to your stated aims. The simplest way of tracking it is by keeping a close tab on the difference between your revenue target and your revenue backlog. The peculiar thing about revenue backlog is that it does not come in the balance sheet.

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When a product backlog item is initially added to a product backlog it only needs to have enough information to remind the team what the option was. A product backlog item only needs to be fully described when a team is about to start work on it. The sequence of product backlog items on a product backlog changes as a team gains a better understanding of the outcome and the identified solution. Once the team chooses the roadmap, the backlog serves as a source for specific development items.

Assume that a company is selling umbrellas in a polka dot pattern. It has the capability of manufacturing 10,000 polka dot umbrellas every day. The amount of production is usually right in line with the demand for the company’s umbrella, as it receives about 10,000 daily orders. Similarly, a dropping backlog can be a portentous sign of lagging demand but may also mean increasing efficiency in production.

Backlog tasks lack the necessary detail to make them actionable

They need to be meticulous in their approach while arriving at the results. Orders that remain unfulfilled or unprocessed are considered backlogged orders. These incomplete orders represent unearned sales revenue that remain available for the company to earn. When managed effectively, the company’s backlog can ensure that customer demand is satisfied.


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