Forecasting subscription revenue with explicit churn assumptions

For planning, forecast the charges expected at each billing opportunity. State which contracts are due, which may end before charging, which may skip or pause, and what each eligible cycle costs. Show collected cash separately. This charge forecast does not determine accounting revenue recognition.

Define the population and period

Choose whether the unit is a customer or a subscription contract. A customer with two plans may create two renewal charges. Group contracts by price, billing interval and payment model. Put quarterly renewals on their actual due dates rather than charging a fraction of those contracts in each monthly column.

For each period, record contracts due to charge at the start, assumed cancellations before that charge, skips or pauses that suppress it, and new sign-ups expected to pay. Keep prepaid plans on a separate schedule: parcels may remain due without a new charge until renewal.

Write the churn assumption with its denominator, period and event. For example, “five of 100 opening monthly contracts due to renew are assumed to end before this charge” is testable; “5% churn” alone is ambiguous. Keep requested cancellations, payment-related endings and agreed expiries separate if their timing differs.

Key Forecasting Metrics

Calculate expected charges

For a pay-per-delivery plan, use:

Expected renewing charges = contracts due at the start of the period − assumed pre-charge endings − skips or pauses that suppress the charge.

Multiply by the applicable charge, then add expected first charges from new sign-ups. Apply discounts only to eligible cycles. Put failed payments and refunds on separate lines; a scheduled charge is not collected cash.

Suppose a fictional plan starts with 100 contracts due to charge at $40 each. Five are assumed to end beforehand, none skip or pause, and 10 new customers each make a $40 first payment. Expected charges are 95 × $40 + 10 × $40 = $4,200.

With no other changes, 105 contracts remain. These invented inputs illustrate the method, not a churn benchmark or an observed result. The $40 is a customer charge; any GST and accounting treatment must be handled separately.

Carry assumptions forward

Move surviving contracts to their next charge dates, then add sign-ups and plan changes. Do not deduct one cancellation from the contract count and again from the eligible charge count. A customer who cancels after a charge may still have a parcel due under the offer’s terms.

Compare a base case with lower- and higher-retention cases using named assumptions. When history is short, treat each as a scenario. Reconcile later forecasts with contracts eligible to charge, attempted charges, captured payments and refunds, then revise assumptions where the records show a persistent difference.

Use the result to plan likely charges and related demand. Forecast cash receipts and prepaid delivery obligations in separate schedules.