Bookings

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Bookings are the total value of contracts or orders signed with customers during a period, regardless of when the revenue from them will be recognised or the cash received.

Bookings measure new business won. They are especially important for companies that sign long-term contracts, such as software, defence, construction and engineering businesses.

Bookings differ from revenue. For example, if a customer signs a three-year software contract worth 36,000, the company records bookings of 36,000 in the period the contract is signed, but recognises revenue of 12,000 a year over the three years as the service is provided.

Strong bookings suggest future revenue growth, which is why investors watch them closely. Comparing bookings with revenue gives the book-to-bill ratio; a ratio above 1 indicates the company is winning new business faster than it is delivering existing work.

Bookings are not defined by accounting standards, so companies calculate them differently. Some include only firm orders, while others include options or renewals. Contracts can also be cancelled, so bookings do not guarantee future revenue.

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