> ## Documentation Index
> Fetch the complete documentation index at: https://docs.fincelo.app/llms.txt
> Use this file to discover all available pages before exploring further.

# Churn, Contraction & Renewal

> How Fincelo tracks churn, contraction ARR, and manages the renewal pipeline.

### CHURN & RENEWAL — Q\&A

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**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.

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**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

Score updates weekly. Drops below 50 → agent escalates to AM.
Drops below 30 → agent escalates to CFO.

***