Revenue backlog is often treated as a secondary metric, but it can be one of the clearest indicators of future return, particularly for software-as-a-service (SaaS) businesses that take payments via subscription. The SaaS market in the US is expected to reach $271 billion in revenue by 2030, and these businesses can use revenue backlog insights to assess revenue performance, customer stability, staffing, fulfillment, and more.

Below, we’ll explain how revenue backlog forms, how to track it, and how to apply its lessons to your business.

What’s in this article?

• What is revenue backlog?
  
• Why does revenue backlog matter for businesses with recurring or long-term contracts?
  
• How is revenue backlog calculated?
  
• What challenges affect the reliability of revenue backlog as a performance metric?
  
• What processes can help with accurate revenue backlog management?
  
• How can businesses use revenue backlog to improve decision-making?
  
• How Stripe Payments can help
  

What is revenue backlog?

Revenue backlog is the value of the revenue a business is contracted to earn but hasn’t yet delivered. This backlog comes up frequently in longer-term agreements, such as annual SaaS subscriptions or multiyear service contracts. Once you’ve signed the agreement with a customer, there’s a set amount of revenue that will come through as you do the work. All of this revenue across projects makes up your revenue backlog.

Why does revenue backlog matter for businesses with recurring or long-term contracts?

Keeping track of revenue backlog can sharpen planning and strengthen internal alignment. It also provides a more farsighted sense of where the business is heading. Here’s what revenue backlog can give you:

Long view of growth

In recurring revenue models, what you earn in a given period rarely reflects the full impact of sales activity. A strong or growing backlog shows that future periods are already supported by committed revenue. When backlog plateaus or declines, it can be an early indicator that new sales or renewals are slowing.

Solid metric for business health

Because backlog is often built on signed agreements, it can offer a more concrete view of future performance than you might get from probability-based sales pipelines. Leadership teams might use revenue backlog to judge the effectiveness of recent sales cycles and check long-term revenue visibility. The metric can demonstrate durability to investors and signal that revenue is set rather than just forecast.

Planning tool

Delivery and customer success teams can use revenue backlog to understand the timing and scale of upcoming work. If the backlog is rising, it might be time to hire more staff. If the backlog is shrinking, that might be a good signal to redirect delivery capacity and reinforce lead generation and retention efforts.

How is revenue backlog calculated?

To calculate revenue backlog, identify the contracted revenue ahead of you. Then quantify the portion you have yet to earn.

Here’s how to do it:

1. Calculate the total contract value (TCV) for your business’s active agreements. TCV is the full amount the customer has agreed to pay over the life of the contract. Include one-time onboarding charges, implementation fees, milestone-based payments, or usage commitments—anything that’s part of the signed contract.

2. Decide whether you’ll include usage-based elements, performance-linked fees, or optional expansions. Apply that definition the same way across all contracts and reporting periods for consistency.

3. Leave out anything that isn’t part of a contract, such as forecasts or unsigned renewals.

4. Subtract all revenue already recognized from each contract. For example, if a customer signed a three-year agreement totaling $150,000 and you’ve earned $50,000 of that to date, the remaining $100,000 becomes revenue backlog.

5. Your TCV minus your total already-recognized revenue from those contracts equals your total revenue backlog.

What challenges affect the reliability of revenue backlog as a performance metric?

Several factors can distort your revenue backlog. Noting these factors makes this metric more useful and easier to interpret.

Here’s what to watch out for:

• Customer churn: Backlog assumes customers will fulfill their commitments, but sometimes they don’t. Cancellations, nonrenewals, and downgrades can bring down your realized revenue.

• External risk: New regulations, industry pressures, and economic shifts can endanger committed revenue. Long-term agreements might be renegotiated or paused if customers face external shocks.

• Misinterpretation: Backlog can be high or low for many reasons. To give a full picture, it must be paired with other metrics, such as booking numbers, churn, and customer health.

• Delivery slowdowns: A rising backlog can reflect delivery slowdowns rather than strong sales. When shipments get delayed, revenue recognition stalls and backlog grows for the wrong reasons.

What processes can help with accurate revenue backlog management?

Accurately tracking revenue backlog might help you look into your business’s future, but having an accurate view depends on certain habits in the present. Try to:

• Automate revenue and contract tracking: Connect your customer relationship management (CRM), billing, and revenue systems to reduce error-prone manual updates. Use automated recognition schedules and contract syncing to keep your backlog up-to-date.

• Assign ownership: Putting a specific team in charge of backlog hygiene keeps your numbers credible. Include backlog in regular performance reviews to ensure decisions are made with current information.

• Segment your backlog: To see where future revenue is concentrated, break down your backlog by customer, product line, contract type, or time horizon. Segmentation can surface risks, challenges, and opportunities.

• Balance sales and delivery capacity: A backlog that grows faster than delivery capacity can cause problems. Reviewing backlog alongside delivery bandwidth helps you decide when to rebalance workloads or hire more people.

How can businesses use revenue backlog to improve decision-making?

Knowing your revenue backlog can help with business decisions. The goal is to consider the value of the committed revenue and the realities of delivering on the contract.

Here’s how to do it:

• Use backlog as the starting point for forecasts: Start your revenue planning with what’s already contracted, and layer prospective growth on top. This keeps forecasts grounded and helps teams see how much growth must come from renewals or new sales.

• Prioritize with backlog insights: When each team understands where future revenue is concentrated, they can focus their efforts. Steady clients and important renewals become the priority.

• Guide planning with backlog trends: Surge periods and product-specific demand spikes can show up in backlog well ahead of time. Using these signals to plan hiring and resource allocation prevents strain when the work arrives.

• Build shared visibility: Backlog reporting by product, customer segment, and time horizon helps leaders spot risks and opportunities early. Frequent review builds a sense of what a healthy backlog looks like for the business.

• Measure backlog quality: Tracking conversion rates, concentration levels, and time-to-delivery shows what it takes to turn backlog into real revenue. Consider prioritizing contracts that turn out to be efficient and straightforward rather than just chasing healthier backlog numbers.

How Stripe Payments can help

Stripe Payments provides a unified, global payments solution that helps any business—from scaling startups to global enterprises—accept payments online, in person, and around the world.

Stripe Payments can help you:

• Optimize your checkout experience: Create a frictionless customer experience and save thousands of engineering hours with prebuilt payment user interfaces (UIs), access to 125+ payment methods, and Link, a wallet built by Stripe.

• Expand to new markets faster: Reach customers worldwide and reduce the complexity and cost of multicurrency management with cross-border payment options, available in 195 countries across 135+ currencies.

• Unify payments in person and online: Build a unified commerce experience across online and in-person channels to personalize interactions, reward loyalty, and grow revenue.

• Improve payments performance: Increase revenue with a range of customizable, easy-to-configure payment tools, including no-code fraud protection and advanced capabilities to improve authorization rates.

• Move faster with a flexible, reliable platform for growth: Build on a platform designed to scale with you, with 99.999% historical uptime and industry-leading reliability.

Learn more about how Stripe Payments can power your online and in-person payments, or get started today.