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Overview

Your opportunities automatically track key revenue metrics to help you forecast and measure deal value accurately. When you add products to an opportunity, the system calculates three important financial metrics:
  • TCV (Total Contract Value): The total revenue from the entire contract period
  • ACV (Annual Contract Value): Revenue recognized in the first 12 months
  • ARR (Annual Recurring Revenue): The annualized run rate for recurring revenue
These metrics update automatically as you add, remove, or modify products on the opportunity. The Amount field on the opportunity reflects the ACV value, giving you a standardized view of deal size across your pipeline.

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Step-by-Step Instructions

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Adding Products to an Opportunity

  1. Navigate to the opportunity you want to configure
  2. Locate the products or line items section on the opportunity
  3. Add each product you plan to sell as part of this deal
  4. For each product, specify:
    • Quantity: Number of units or seats
    • Start Date: When the customer’s subscription or service begins
    • End Date: When the subscription or service period ends
    • Billing Frequency: How often the customer is billed (monthly, quarterly, annually, or one-time)
  5. The system automatically calculates pricing based on the contract period

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Understanding Revenue Calculations

  • TCV Calculation: The system multiplies your per-period price by the total number of billing periods in the contract.
    • For example, a 12-month contract at $100/month yields $1,200 TCV.
  • ACV Calculation: For contracts longer than 12 months, ACV caps at the first year’s value.
    • A 6-month contract shows the full 6 months as ACV. An 18-month contract shows only the first 12 months as ACV.
  • ARR Calculation: This shows the fully annualized run rate.
    • If you sell 6 months at $100/month, ARR calculates as $1,200 (the annual equivalent), even though TCV is only $600.
  • One-Time Products: Products sold as one-time purchases contribute to TCV but do not count toward ACV or ARR, since they are not recurring revenue.

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How Proration Works

The system uses date-based proration to handle partial billing periods accurately. When a contract starts or ends mid-period, charges are prorated based on the number of active days in that billing cycle.
  • Anchored Billing: Billing periods align to your contract start date, not calendar months. If your contract starts on January 31, monthly billing periods anchor to the 31st of each month (or the last day of shorter months like February 28).
  • Proration Formula: For partial periods, the system calculates the fraction of days active within that billing cycle. A contract that runs for 15 days of a 30-day billing period is charged for 50% of that period.
Example Scenario:
  • Monthly subscription starts January 15
  • First billing period runs January 15 to February 14 (31 days)
  • Second billing period runs February 15 to March 14 (28 days in February)
  • If the contract ends February 20, the final period is prorated to 6 days out of 28 days

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Applying Discounts

You can apply discounts at two levels:
  • Line Item Discounts: Apply to individual products. The discount reduces that product’s TCV, ACV, and ARR proportionally.
  • Opportunity-Level Discounts: Apply to the entire deal. These discounts are applied after line item discounts, affecting the overall opportunity metrics.
When multiple discounts exist, they apply sequentially rather than stacking multiplicatively.

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Reviewing Calculated Metrics

After adding products and configuring dates, review the calculated metrics displayed on the opportunity. The system shows:
  • Opportunity TCV: Total contract value across all products
  • Opportunity ACV: Annual contract value (first year revenue)
  • Opportunity ARR: Annualized recurring revenue run rate
  • Amount: This field syncs with the ACV value for consistent pipeline reporting
These metrics update in real time as you modify products, quantities, dates, or discounts.

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Troubleshooting/FAQ

One-time products only contribute to TCV because they do not represent recurring revenue. ARR and ACV specifically measure subscription and recurring revenue streams.
Yes. ACV shows the actual revenue in the first 12 months (for a 6-month contract, this is 6 months of value). ARR shows what the revenue would be if annualized (12 months at that rate). This helps you compare deals of different lengths.
TCV captures the full multi-year value. ACV caps at 12 months of revenue. ARR shows the annual run rate. For example, a 24-month contract at $100/month shows: TCV = $2,400, ACV = $1,200, ARR = $1,200.
The system recalculates all metrics automatically based on the new date range. Proration adjusts for any partial billing periods created by the new date
The Amount field syncs automatically with the ACV calculation to ensure consistency across your pipeline. To change the value, modify the underlying products, quantities, dates, or discounts.
The Amount field reflects ACV (first year value), not TCV (total contract value). For multi-year deals, check the TCV metric to see the full contract value you quoted.
The system uses day-level precision for proration, accounting for different month lengths and leap years. This ensures accurate calculations even for contracts with mid-month start or end dates.