How to calculate MRR when customers pay annually

Updated 2026-08-04

This is the single most common way MRR figures go wrong, and it's worth being blunt about the fix: divide the annual price by twelve.

A $490/year subscription contributes $40.83 of MRR, every month, for as long as it's active. Not $490 in January and nothing after.

Convert any interval instantly.

What happens if you don't

Say you have $3,000 of monthly subscriptions and sell ten annual plans at $490 during a January promotion.

Counted wrong: January MRR reads $3,000 + $4,900 = $7,900. February reads $3,000. Your chart shows a 62% collapse, and if you have any alerting on churn it fires. Nothing bad happened. You had a good January.

Counted right: January MRR reads $3,000 + $408 = $3,408, and February reads $3,408 too. Smooth, accurate, and it correctly reflects that you gained $408/month of durable recurring revenue.

The second version tells you something true. The first version is noise pretending to be signal.

The cash flow point is real — track it separately

Annual plans genuinely are better for you. You get twelve months of cash today, which funds development now and reduces the number of renewal decisions a customer makes.

That advantage is real and worth tracking. It just isn't MRR. Put it in cash collected, which is exactly where a spiky number belongs.

This is why FRGMNT reports True MRR and today's cash as two separate figures rather than blending them — annual plan sales show up as a great cash day and a modest MRR increase, which is precisely what they are.

The awkward cases

Mid-term cancellations. A customer on an annual plan cancels in month four. They've paid for twelve. Convention: remove them from MRR when the subscription actually ends, not when they cancel — they're still an active paying customer until the term expires.

Refunded annual plans. If you refund a full annual payment, remove the monthly contribution from MRR and record the refund in cash.

Multi-year plans. Divide by the total months. A two-year plan at $800 is $33.33/month, not $400/year.

Annual plans with a discount. Use the amount actually charged. A $490 plan sold at $390 contributes $32.50, not $40.83.

Why tools disagree with each other

If two dashboards show different MRR for the same account, annual normalisation is the first thing to check. Some tools recognise the full payment on the charge date; some normalise; some let you configure it. None of them are lying — they have different definitions.

FRGMNT normalises. Every active subscription is resolved to its interval and converted to a monthly figure before summing, across Stripe and Lemon Squeezy alike. It's why the number it shows is often lower — and more honest — than the one you'd guess from your processor's headline volume.