metrics explained

Sales vs Bookings: What's the Difference?

Sales and bookings are two terms that are often used interchangeably in the business world. However, there is a big difference between the two, and it's important to understand the distinction. Here's a look at the key differences between sales and bookings.

What is Sales?

Sales is the total revenue generated from the sale of goods or services. This figure includes all revenue streams, such as cash, credit, and barter. Sales is a top-line number that reflects the total amount of money that a company has brought in from its customers.

What is Bookings?

Bookings, on the other hand, is a metric that measures the value of contracts that have been signed. This number reflects the total value of all future revenue that has been contracted, but has not yet been recognized. In other words, bookings is a forward-looking metric that gives a snapshot of future sales.

Key Differences

Now that we've defined sales and bookings, let's take a closer look at the key differences between the two:

  • Timing: Sales is a lagging indicator, meaning it is a historical metric that looks back at what has already happened. Bookings, on the other hand, is a leading indicator, meaning it looks forward at what is likely to happen in the future. This is one of the key reasons why bookings is such a valuable metric.
  • Recognition: Sales is recognized immediately when the transaction occurs. Bookings, on the other hand, is only recognized when the service is delivered or the product is shipped. This can often be months or even years after the contract is signed.
  • Visibility: Sales is a public metric that is typically disclosed in a company's financial statements. Bookings, on the other hand, is often a private metric that is not disclosed. This is because bookings can give insight into a company's future sales, which can be used by competitors.

The Bottom Line

Sales and bookings are two important metrics in the business world. However, there is a big difference between the two. Sales is a lagging indicator that looks back at what has already happened, while bookings is a leading indicator that looks forward at what is likely to happen in the future. Additionally, sales is recognized immediately when the transaction occurs, while bookings is only recognized when the service is delivered or the product is shipped. Finally, sales is a public metric that is typically disclosed in a company's financial statements, while bookings is often a private metric that is not disclosed.

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