Annual billing brings cash upfront; monthly earns more over time. Compare them.
This calculator compares annual billing against monthly billing for a subscription by weighing upfront cash and discounts against ongoing revenue and churn.
Annual billing collects cash upfront and locks the customer in for a year, but usually requires a discount to win the commitment. Monthly billing brings in more total revenue at full price but loses some customers to churn each month. The tool discounts each stream to present value using your cost of capital, letting you compare a discounted lump sum against a stream of monthly payments that shrinks as customers cancel.
A higher present value points to the billing option that is worth more to your business today, given your assumptions. Results are sensitive to the churn rate and the discount you offer, so test a range of values rather than trusting a single scenario. The model simplifies real behavior and ignores factors like payment failures, upgrades, and the marketing cost of acquiring customers. Treat it as a directional guide, not financial advice.
Customers pay a year upfront and give up flexibility, so a discount compensates them for the commitment and improves conversion.
Annual customers cannot cancel mid-term, so their revenue is locked in, while monthly customers can leave each month and erode the total.
Use your cost of capital or required return, since it reflects the time value of receiving cash now versus later.
See the exact formula and a worked example on our methodology page.