This best practice gives you a more accurate view of retention / churn rate that general monthly churn calculation, especially for growing businesses.
For concrete example of why this tool would be useful please have a look at the following article
For each month, you will need to indicate either the number of customers who subscribe in this month (or the monthly $ value generated by these customers) and for every subsequent months (in the columns on the right) you will indicate how many of these customers were still active ( or how much $ the business was still generating from these customers on a monthly basis).
Once you have input this information, the chart will automatically update and give you an overview of how well your business has been doing in terms of retention for each "pool" of newly subscribed customers.
That will allow you to accurately assess the behavior of your customers and better understand who and when your customers churns, which should help you focus your attention to discover the "why".
It will also be a good analytical tool to see the impact of your ongoing changes. For instance if you have recently improved your onboarding process, or focused more on a different category of customers, you will be able to see the impact on the retention rate of customers onboarded in the most recent months vs historical.
This chart basically replicates one of the charts generated by profitwell (Disclaimer, I have no relationship with them)