CHURN & RENEWAL — Q&A
Q: What are the 6 churn scenarios? Scenario 1 — Proper notice (within notice period): contract ends on contracted date. Final invoice raised. ARR decrements on end date. Scenario 2 — Late notice (beyond notice period): contractual obligation continues until notice period expires. Invoice raised for the additional period. Scenario 3A — Mid-year churn, no refund (View A): revenue recognised through original end date. ARR decrements on termination date. Scenario 3B — Mid-year churn, with refund (View B): revenue stops at termination. Credit note raised for undelivered period. ARR and revenue both adjusted. Scenario 4 — Immediate exit: both parties agree to terminate today. Treated as View A or View B per CFO decision. Scenario 5 — Mid-year refund on annual invoice: partial credit note. Revenue recognised only for delivered period. Scenario 6 — Non-renewal (contract expires naturally): no active termination. Subscription status moves to expired on end date. ARR decrements on end date.
Q: What is contraction ARR and how is it different from churn? Contraction = customer stays but pays less (fewer seats, downgrade). Churn = customer leaves entirely. Both appear in the ARR waterfall but in separate buckets. Contraction ARR is tracked from the effective date of the seat reduction. Fincelo detects ratchet clauses automatically: minimum guarantee users, minimum agreed headcount, floor quantity, base commitment, minimum licences. If a contraction would breach a ratchet clause, Fincelo alerts before processing.
Q: How does the renewal health composite score work? Score 1–100 calculated by the Renewal Agent from:
- Payment score (0–100) → contributes up to 30 points
- Product usage (logins, feature adoption) → contributes up to 25 points
- QBR / executive engagement → contributes up to 20 points
- Support ticket sentiment → contributes up to 15 points
- Contract tenure (longer = better) → contributes up to 10 points