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Annual Contract Value (ACV)

Annual Contract Value (ACV) is a metric used to assess the average yearly revenue generated by a single customer contract. It helps businesses understand the annualized worth of their customer base, focusing on recurring revenue streams.

What is Annual Contract Value (ACV)?

Annual contract value (ACV) is a metric used primarily in subscription-based businesses and contract-based services to represent the average annual revenue generated from a single customer contract. It helps companies understand the revenue potential and profitability of their customer agreements on an annual basis.

ACV excludes one-time fees like setup costs or onboarding charges and it represents the ongoing value a customer brings each year. By looking at ACV, businesses can compare the value of different customers or contracts, even if they have varying lengths or pricing structures.

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Annual Contract Value (ACV)

What is Annual Contract Value (ACV)?

Annual contract value (ACV) is a metric used primarily in subscription-based businesses and contract-based services to represent the average annual revenue generated from a single customer contract. It helps companies understand the revenue potential and profitability of their customer agreements on an annual basis.

ACV excludes one-time fees like setup costs or onboarding charges and it represents the ongoing value a customer brings each year. By looking at ACV, businesses can compare the value of different customers or contracts, even if they have varying lengths or pricing structures.

Related terms

Billing and Invoicing
Automated Clearing House (ACH)
An Automated Clearing House (ACH) is an electronic network that facilitates the transfer of funds between bank accounts in the United States (and internationally with some variations).
Billing and Invoicing
B2B Payments
B2B payments, short for Business-to-Business payments, refer to financial transactions that occur between companies. This is distinct from B2C (Business-to-Consumer) transactions where businesses sell goods or services directly to individual customers.
AP Automation
AR Automation
Billing and Invoicing
Invoice Processing
Invoice processing is the entire workflow a business follows to manage incoming invoices from suppliers or vendors, all the way from receiving them to paying them. It's essentially how companies ensure they're paying the right amount, to the right vendor, at the right time.
Billing and Invoicing
Revenue Leakage
Revenue leakage refers to the unintentional loss of revenue that a business earns but fails to collect.
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Quote-to-Cash (Q2C)
Quote-to-Cash (Q2C), also sometimes referred to as Quote-to-Order-to-Cash (QTC), is the entire business process encompassing all the activities involved in generating a sale from the initial quote to receiving payment.
Billing and Invoicing
Annual Contract Value (ACV)
Annual Contract Value (ACV) is a metric used to assess the average yearly revenue generated by a single customer contract. It helps businesses understand the annualized worth of their customer base, focusing on recurring revenue streams.