We see these patterns repeatedly – SaaS businesses outgrowing their basic bookkeeping approaches as their pricing models become more complex.

Why Traditional Accounting Falls Short For SaaS

Consider a typical SaaS scenario: You have 1,000 customers spread across three pricing tiers. Some pay monthly, others annually. Last month, 50 customers upgraded mid-cycle, 30 downgraded, and you launched a new feature with usage-based pricing.

Traditional accounting wasn’t built for this. When you use QBO or [Xero], you need a system that handles:

• Revenue recognition for mixed subscription terms
• Mid-cycle plan changes
• Usage-based billing components
• Deferred revenue from annual subscriptions

Real SaaS Accounting Challenges

Take usage-based pricing: A customer starts on your $99/month base plan. They use additional API calls that add variable costs. Their monthly bill might be $99 one month and $399 the next. 

Your accounting system needs to track:

• Base subscription revenue
• Usage-based revenue
• When to recognize each component
• How to forecast based on usage patterns

Breaking Down SaaS Revenue Recognition

Let’s look at a common subscription model. You offer three tiers:

• Starter: $50/month
• Professional: $200/month with annual discount
• Enterprise: Custom pricing with implementation fees

Each tier creates distinct accounting needs. You might see a new Enterprise deal worth $60,000 annually plus a $10,000 setup fee. Here’s what full cycle accounting handles:

• The Implementation Fee

You can’t recognize that $10,000 setup fee immediately. It needs to be spread across the contract term. Your accounting system must track this deferred revenue and recognize it monthly.

• Annual vs Monthly Plans

A customer paying $200 monthly brings different accounting needs than one paying $2,160 annually ($180/month with discount). Both use your Professional tier, but their revenue recognition patterns differ.

Managing Mid-cycle Changes

SaaS companies face unique challenges when customers change plans. Consider these scenarios:

• Upgrades

A customer on the $50 Starter plan upgrades to Professional mid-month. Your accounting system needs to handle:

• Prorated charges for both plans
• Revenue recognition adjustments
• Commission calculations for sales team

• Downgrades

When a customer moves from Professional to Starter, you’ll need to:

• Calculate potential refunds
• Adjust deferred revenue
• Update future revenue forecasts

The Role Of Modern Tools

Today’s accounting tools transform these complex processes. Using financial software integrated with subscription management systems helps you:

Track Real-Time Changes

• Monitor daily MRR changes
• See expansion revenue separately from new sales
• Track customer-level profitability

I’ll continue with the SaaS-focused implementation sections.

Setting Up Full Cycle Accounting For SaaS

Moving from basic bookkeeping to full cycle accounting requires careful planning. Many SaaS companies start with Xero or QBO, but the real power comes from proper setup and integration.

Chart of Accounts Design

Your chart of accounts needs specific categories for SaaS operations:

Revenue Accounts

• Subscription Revenue (by tier)
• Setup Fee Revenue
• Usage-Based Revenue
• Professional Services

Deferred Revenue

• Annual Plan Prepayments
• Setup Fees
• Professional Services

Asset Accounts

• Account Receivables (by payment provider)
• Customer Acquisition Costs
• Sales Commission Assets

Connecting Your Revenue Stack

Your accounting system should talk to your other tools. Common integrations include:

• Payment Systems

When a customer’s card is charged, the transaction should flow automatically into your accounting system. This reduces manual entry and errors.

• Subscription Management

Tools connected to [JustWorks] for payroll and commission tracking help manage the full revenue cycle. When a customer upgrades, your accounting records should update automatically.

Common SaaS Accounting Problems Solved

By implementing a comprehensive system, you can overcome common obstacles and gain a clearer picture of your financial health. Let’s look at how full cycle accounting solves three critical issues: revenue recognition confusion, cash vs. accrual complications, and tracking key SaaS metrics.

Revenue Recognition Confusion

A proper full cycle accounting system helps you:

• Track multi-year contracts correctly
• Handle mixed subscription terms
• Document revenue recognition policies

Cash vs Accrual Complications

Many SaaS companies struggle with the gap between cash and accrual accounting. You might receive $12,000 for an annual contract, but you can only recognize $1,000 each month.

Metrics That Matter

Full cycle accounting helps track key SaaS metrics:

MRR Components

• New MRR from first-time customers
• Expansion MRR from upgrades
• Churned MRR from cancellations

Building SaaS Reporting Systems

Your reporting needs to show both standard financials and SaaS-specific metrics. Set up custom reports for:

Revenue Reports

Monthly snapshots should break down:

• Base subscription revenue
• Usage overage charges
• Add-on features
• Professional services

This breakdown helps you spot trends. Are customers buying more add-ons? Are usage charges increasing? These insights drive product decisions.

Customer Reports

Track metrics by customer segment:

• Average revenue per user (ARPU)
• Cost to serve each tier
• Gross margin by plan type
• Expansion rates

For example, if your Professional tier customers regularly hit usage limits, that’s a signal to adjust your pricing or create a new tier.

Understanding Your Unit Economics

Full cycle accounting reveals your true unit economics. Consider a typical SaaS customer:

Initial Costs:

• Customer acquisition cost
• Setup and onboarding expenses
• Initial support hours

Monthly Costs:

• Server costs per user
• Support tickets
• Payment processing fees

This detailed tracking helps you understand profitability at the customer level. We often show companies they’re losing money on customers they thought were profitable.

Planning For Scale

As your SaaS company grows, your accounting needs change. We often see companies hit friction points at:

• 500 Customers:
  • Manual billing becomes unsustainable
  • Basic spreadsheets can’t handle the complexity
  • Revenue recognition takes too much time

• 1,000 Customers:
  • Need automated dunning management
  • Require better churn tracking
  • Must automate renewal processing

• 2,000+ Customers:
  • Need sophisticated revenue forecasting
  • Require advanced reporting capabilities
  • Must handle complex pricing models

Making The Switch To Full Cycle Accounting

Start with a clear plan. Many SaaS companies try to change everything at once and create chaos. Here’s a better approach:

Phase 1: Core Systems Setup

First, get your base systems running:

• Set up your accounting software
• Design your SaaS-specific chart of accounts
• Create your basic workflows

Phase 2: Revenue Management

Next, focus on revenue processes:

• Configure subscription billing rules
• Set up revenue recognition schedules
• Create deferred revenue tracking

Phase 3: Integration and Automation

Then connect your systems:

• Link payment processors
• Connect JustWorks for commission tracking
• Set up Slack notifications for key metrics

What Success Looks Like

Proper full cycle accounting gives you:

• Clear Revenue Pictures

You can instantly see:

• This month’s recognized revenue
• Next month’s forecasted MRR
• Revenue by customer segment

• Accurate Cash Forecasting

Know exactly:

• When annual renewals hit
• Impact of upcoming price changes
• Expected collections timing

• Better Business Decisions

Understand:

• True customer profitability
• Impact of discounting
• Cost of customer support

Future-Proofing Your System

Your accounting system should grow with you. Consider these scenarios:

Adding New Pricing Tiers

Your system should easily handle:

• New revenue categories
• Different billing frequencies
• Mixed subscription terms

Geographic Expansion

Be ready for:

• Multi-currency billing
• International tax rules
• Local payment methods

Taking Action

Start improving your SaaS accounting today:

1. Audit your current setup
2. List your biggest pain points
3. Create your improvement plan
4. Pick your starting point
5. Begin step-by-step implementation

Ready to take control of your SaaS financials? Partner with Accounting Wise today for expert accounting services tailored to your business needs. Our team will help you:

• Implement a customized accounting system that scales with your growth
• Gain real-time visibility into your key SaaS metrics and revenue streams
• Make data-driven decisions to optimize your pricing, cost structure and cash flow
• Stay ahead of the curve with proactive planning for funding rounds, tax compliance and more

With us, you’ll have financial clarity and confidence. Don’t let ineffective accounting hold you back any longer. Contact us now.

FAQs

The post How Full Cycle Accounting Improves SaaS Business Financial Health appeared first on Accounting Wise.

Your SaaS company collects mountains of data, but can you predict next quarter’s performance? Through our accounting services, we help companies transform their data into actionable predictions that drive growth. Understanding these SaaS key performance indicators helps you build accurate prediction models.

Essential SaaS KPIs For Predictive Modeling

Not all metrics help predict future performance. When setting up predictive systems, focus on these key indicators:

Revenue Prediction Metrics

• Current MRR with growth rate trends
• Expansion revenue patterns by customer segment
• Trial conversion rates over time
• Price sensitivity indicators

For example, tracking trial conversions by source helps predict future revenue more accurately than overall conversion rates alone. A software company monitoring these patterns might notice that customers from direct traffic convert at 15% with high retention, while social media leads convert at 25% but churn faster.

Customer Behavior Indicators

For example. using Slack for real-time updates, track early warning signs:

• Feature usage patterns before upgrades
• Support ticket frequency changes
• Login frequency trends
• API call volumes

These behavioral signals often predict changes months before they impact revenue. When customers reduce their login frequency by 50%, they’re more likely to churn within 90 days.

Financial Health Predictors

Integrate data from systems to monitor:

• Cash conversion cycles
• Payment timing patterns
• Expense growth rates
• Unit economics trends

Building Your Predictive Analytics Framework

Successful prediction starts with clean, reliable data. Many companies struggle because they track the wrong metrics or collect data inconsistently. Here’s how to build a solid foundation:

Data Collection Priorities

Your collection strategy should prioritize the SaaS key performance indicators that directly impact your growth. Start by tracking these core metrics in your QBO or Xero system:

1. Customer Level Data

• Initial contract value
• Expansion timing
• Feature adoption rates
• Support interaction history

2. Revenue Patterns

• Payment timing
• Upgrade triggers
• Seasonal variations
• Discount impact

3. Cost Indicators

• Customer acquisition costs by channel
• Support costs per segment
• Server costs per customer
• Processing fees impact

Creating Reliable Data Flows

Your prediction models are only as good as your data. When connecting systems like Slack for notifications or JustWorks for payroll data, establish clear rules for:

1. Data Validation

• Standardize input formats
• Set acceptable ranges
• Flag unusual patterns
• Track data sources

2. Update Frequencies

• Real-time revenue data
• Daily usage metrics
• Weekly trend analysis
• Monthly pattern reviews

The IRS requires accurate financial records, but predictive analytics needs even more stringent data quality controls. Set up automated checks to flag data anomalies before they affect your predictions.

Predictive Models For SaaS

Different SaaS key performance indicators require different prediction models for accurate forecasting. Here’s how to approach each area:

Revenue Forecasting

Build models that consider:

• Historical growth patterns
• Seasonal variations
• Market conditions
• Customer segment behavior

For example, if you notice enterprise customers usually expand their accounts after nine months, you can build this pattern into your revenue predictions.

Churn Prediction Models

Track combinations of indicators:

• Decreasing product usage
• Support ticket patterns
• Late payment history
• Feature adoption rates

When customers drop below 60% feature usage and increase support tickets, they have a higher probability of churning within the next quarter.

Growth Pattern Models

Monitor expansion signals:

• API usage approaching limits
• Team size increases
• Feature utilization peaks
• Integration additions

These patterns help predict when customers are ready for upgrades, allowing your sales team to time their outreach effectively.

Cash Flow Prediction

Analyze payment behavior:

• Historical payment timing
• Seasonal revenue fluctuations
• Expense patterns
• Working capital needs

Understanding these patterns helps you predict and prepare for future cash flow needs during growth periods.

Customer Lifetime Value Models

Build predictions based on:

• Initial contract value
• Upgrade frequency
• Support cost trends
• Usage growth patterns

This helps you identify your most valuable customer segments and predict which new customers will likely follow similar patterns.

Turning Predictions Into Action

Having data is one thing – using it effectively is another. Your predictive analytics should trigger specific actions. Here’s how to make that happen:

Revenue Growth Signals

When your accounting system spots these patterns, take action:

Rising Customer Acquisition Costs

• Compare against projected lifetime value
• Analyze marketing channel performance
• Test new customer acquisition methods

Expanding Customer Revenue

• Look for common upgrade triggers
• Document successful expansion paths
• Replicate growth patterns

Early Warning Systems

Set up alerts in your communication platform when your analytics detect:

Usage Pattern Changes

• Decreasing feature adoption
• Falling login rates
• Support ticket increases

Payment Behavior Shifts

• Late payment patterns
• Changed payment methods
• Reduced subscription levels

Measuring Prediction Accuracy

Track how well your predictions match reality:

Revenue Forecasts

• Compare predicted vs actual MRR
• Track forecast accuracy by customer segment
• Note seasonal impact on predictions

 

Customer Behavior

• Monitor predicted vs actual churn
• Track upgrade timing accuracy
• Measure expansion revenue predictions

Making Analytics Work Daily

Daily monitoring of your SaaS key performance indicators ensures you catch trends early. Your team needs easy access to predictions. 

Today’s Focus

• Accounts needing attention
• Predicted changes coming
• Required actions

Weekly Trends

• Forecast vs actual comparisons
• New pattern detection
• Success rate tracking

Scaling Your Predictive Systems

As your business grows, relationships between different SaaS key performance indicators become more complex. Here’s how to scale effectively:

Data Volume Management

When you’re processing thousands of transactions daily, you need smart data handling:

Priority Data Points

• Active customer metrics
• Revenue impact signals
• Growth indicators
• Risk factors

Drop unnecessary tracking that doesn’t improve predictions. More data isn’t always better – focus on metrics that actually predict outcomes.

Advanced Pattern Detection

Look for complex patterns across multiple indicators:

Customer Success Signals

• Product usage combined with support tickets
• Payment history with feature adoption
• Team size changes with account expansion

Automated Response Systems

Use Slack integrations to automate responses to predictions:

Customer Risk Alerts

• Notify account managers of churn risks
• Flag accounts ready for expansion
• Highlight payment pattern changes

Revenue Forecasting

• Alert finance team to forecast changes
• Notify sales of predicted shortfalls
• Flag unexpected growth patterns

Handling Complex Predictions

As you track more metrics, you’ll need to manage increasingly complex predictions:

Multiple Growth Paths

• Account expansion patterns
• New product adoption
• Market segment growth
• Geographic expansion

Risk Combinations

• Economic indicators
• Usage pattern changes
• Industry-specific factors
• Customer health scores

Making Predictions Drive Revenue

Successful companies focus on the SaaS key performance indicators that consistently predict growth. Here’s what they track and act on:

Account Growth Patterns

Track these specific signals in your financial records:

1. Time from first upgrade to second
2. Feature usage before price changes
3. Support tickets preceding expansions
4. Team size increases before upgrades

Example: When customers add five new user seats within two months, they’re likely to need the next pricing tier within 60 days.

Red Flag Combinations

Watch for these patterns in your financial data:

1. Dropping usage + increasing support tickets
2. Late payments + decreasing feature use
3. Team size reduction + feature downgrades
4. Declining API calls + fewer logins

Cost Impact Tracking

Monitor through JustWorks:

1. Support cost per customer tier
2. Server cost by usage level
3. Sales cost per expansion dollar
4. Implementation cost impact on margins

Real Application:

Calculate the true cost of high-touch vs low-touch customers. High-touch customers might bring more revenue but often have lower margins due to support costs.

Action Triggers

Set these specific alerts:

• Usage drops 30% below average
• Support costs exceed tier averages
• API calls increase 50% above plan limits
• Payment methods fail twice

Taking Action Now

Start by tracking the most important SaaS key performance indicators for your business stage:

1. Set up basic tracking
2. Choose your priority metrics
3. Create your alert system
4. Monitor prediction accuracy
5. Adjust based on results

Remember: start small, focus on accuracy, and build from there. Your goal is to predict changes early enough to act on them.

Need help setting up your predictive systems? Schedule a free call with us today.

FAQs

How often should I review my SaaS KPI metrics?

Review core metrics like MRR and churn rates weekly, with a comprehensive analysis of all KPIs monthly. Set up real-time monitoring for critical metrics that impact cash flow.

What’s a good Customer Acquisition Cost (CAC) payback period?

Aim to recover your CAC within 12 months. For most successful SaaS companies, a payback period of 6-12 months is considered healthy.

How do I calculate Net Revenue Retention (NRR)?

Divide your current MRR from existing customers (including expansions and contractions) by the MRR from those same customers one year ago, then multiply by 100.

What’s the Rule of 40, and why does it matter?

The Rule of 40 states that your growth rate plus profit margin should exceed 40%. It helps balance growth with profitability for sustainable business success.

What’s the difference between MRR and ARR?

MRR is your monthly recurring revenue, while ARR is annual recurring revenue (MRR × 12). ARR is typically used for larger enterprise customers and annual contracts.

How can I improve my gross margins?

Focus on reducing hosting costs, automating customer support, optimizing your tech stack, and increasing operational efficiency. Most successful SaaS companies target 80%+ gross margins.

The post Forecasting Financial Success: Predictive Analytics For SaaS Key Performance Indicators appeared first on Accounting Wise.

You read that right! NINETY PERCENT. That means that only 1 in 10 survive in the long run. We know that starting a new business is much more than analyzing numbers, but we HAVE to because numbers don’t lie! Research shows that the % of businesses that fail because of cash flow problems is 82%.

This is sad, and it can be scary to start after learning these facts, but we are not here to discourage you! We are here to help! So, how could we, as accountants, help your startup succeed?

We prepared a list of 5 Preventable Mistakes to help you avoid failure and achieve the success your Startup deserves.

➊ Insufficient Capital

Small business owners tend to either overestimate or underestimate their cash flows, and that’s how 30% of businesses fail. Underestimating your cash flow means that you would probably run out of cash before paying your bills. To know if you are committing this mistake we first need to understand what cash flow is. 

In simple words Cash flow is the number ($) you get after subtracting ALL your expenses from your income. That does not sound complicated at all, right?

We agree! However, formulas to calculate this number can look like this:

Free Cash Flow = Net income + Depreciation – Change in Working Capital – Capital Expenditure

Operating Cash Flow = Operating Income + Depreciation – Taxes + Change in Working Capital

Cash Flow Forecast = Beginning Cash + Projected Inflows – Projected Outflows = Ending Cash

Not complicated, but tricky if you don’t have the knowledge.

Are you using any of those formulas to understand your cash flow? Do you need help to learn which one you should be using in your business? Feel free to get in touch with us and we can help you to figure that out!

➋ Poor Cash management

A cash forecast is crucial for any company! It does not matter its shape or size, and it is important to work on it at the very early stages of your startup, ideally before launching it!

Anticipating your payments and receivables is the only way to estimate your company’s future financial position. Wondering how to do that?

First, make sure to identify all fixed and variable costs! That’s crucial because knowing how much you will be spending each month (for at least the next 3 months) is the only way to understand how much you will need to make to successfully run your business.

Write down a complete list of all FIXED costs (rent, loans, insurance, advertising, utilities, etc) and all VARIABLE costs (labor, packaging, raw materials, commission, etc).
Then, work on estimating your cash inflows. That can be subjective and very variable, so dedicate time to this part of your business plan, and investigate as much as you can: scope out competitors, assess populations growth, survey potential customers, do all the research to figure out how many sales you can expect for each month and how much you can charge for your products and services.

That’s a simple overview of cash management. Get in touch us if you would like to receive a cash-flow forecast template!

➌ Poor Record Keeping & Controls

Mistake numero 3. Poor record keeping and controls. Yes, we are still talking about how to avoid the failure of a startup! Want to know why it is important to have good record-keeping? See below some pinpoints, and then what could happen if you don’t pay attention to it:

The vantages of being on top of it:

Increase the likelihood of business success by monitoring the progress of your startup;
Accurate information informs better decisions;
Investors and banks need that accurate information;
You need to track your tax obligations. 

The consequences of NOT being on top of it:

Trouble with collections;
Late payments to suppliers;
Difficulty getting bank loans;
Inaccurate pricing decisions;
Ineffective use of time, etc.

Questions to ask yourself to figure out if you are on a path to success:

How are you monitoring your company’s cash balances on a regular basis?
How do you manage and organize bills and invoices?
Do you collect sales information from multiple platforms vs. one source of truth?

We know that keeping receipts, bank statements, invoices, payroll records, and any other documentary evidence that supports an item of income, deduction, or credit shown on your tax return seems like a lot, but we hope that you understand now why this is so important (and hey! There is always QuickBooks Online, Xero, and many other softwares to make your life easier).

➍ Improper Product Pricing

We told you about cash management, cash inflows & outflows, fixed and variable costs, all of that, remember? If you paid attention to mistake #2, then pricing should be a piece of cake for you! But if after doing all that work you are still struggling to make sure your company is going to be profitable, consider the following:

Can you reduce any of my fixed costs? YES? By how much?
What about variable costs? Can you reduce some of that also?
How could you increase your customer lifespan?
How high can you raise your price before it is worth it for your customers to go elsewhere?

Keep in mind that the market is constantly changing. It is important to revisit your price strategy from time to time, to make sure you are still matching the needs of your customers, while also maintaining your profitability.

➎ Uncontrolled Growth

Last pain point (for this series) – Rapid & Uncontrolled growth. Wait, what? Are you telling me that growth is bad for my company? Are you crazy? I need to grow!

Noooo! I mean yes, but no! What I mean is that managing your growth is crucial, and uncontrolled growth is commonly a fatal mistake.

Most might think that the solution to cash flow problems is to grow faster, but in my opinion and personal experience, pressing the brakes is not always the worst option, the reason being that to grow faster you will have to spend more, but would still be relying too much on future revenue. The combination of exponential growth and basically no cash, could present lots of obstacles. Some could look like this:

Bad relationship with providers due to late payments of invoices
Higher Churn rate due to limited staff to support all these new clients, resulting in poor customer service
Unhappy, overworked staff working extra hours to support new clients
Extra expenses to build a retention plan ASAP

We absolutely want you to grow and succeed! But, we recommend that before going all in into your growth path, you take a deep breath and learn about these key SaaS metrics:

Customer lifetime value
Customer acquisition costs
Churn rates

I read somewhere that ❝running a business is not a sprint, it’s a marathon. The first one doesn’t always win the race❞

If you don’t agree with that, that’s fine! Just remember that Google was not the first search engine out there, however it is very possible you don’t even remember which one was the first one, I supposed they did not win that race huh?

We at Accounting Wise want to see startups thriving. If you have questions about setting up the accounting system for your SaaS do not hesitate to contact us!
Send us an email to information@accounting-wise.com or schedule a call using this link. We would love to hear from you!

The post What successful Startups do: Mistakes to avoid when launching a biz appeared first on Accounting Wise.

Topics are as follows:

1. Unearned Revenue
2. Maximize your Reports
3. Automate
4. Accounts Payable (AP)
5. Know your Expenses

1⃣  Unearned Revenue

Or Deferred Revenue: Money collected upfront for services that have yet to be performed. Very common for SaaS companies (subscriptions) and prepaid insurance for example.

Money collected upfront will directly affect the way you will recognize your revenue. You might say: “Hey, I sent out the invoice, and I got paid. This is revenue!”. 

NOPE! That is not revenue.

What you have to do is recognize the earnings throughout the period in which the services are performed. i.e. if you charge a customer for an annual subscription ($1200/year) and collect upfront, you have to recognize that income over the course of that year. It can be as simple as recognizing the revenue monthly ($100/month). Although, sometimes, the contract terms can affect this.

2⃣   Maximize your reports from the accounting system

Your accounting system is your database, so to maximize the effectiveness of your reports you should be fully utilizing all the tools that your system offers. 

That entails putting in all the data you have (from your vendors and customers): Payee, contact, description, reference… the more data that you put into the system the better information that you are going to get out of it. 

Time is money and it should be used wisely! Technology is on our side folks! You can easily reduce human intervention in some of your accounting processes, and use that extra time to grow your business

For your chart of accounts, for instance, you need to use accounts that better categorize your transactions. That will make recording transactions easy and it will allow you to break down all the transactions that your business made during a specific period into different subcategories. A chart of accounts enables you to gain insight into the effectiveness of different areas of your business.

Using the class and department systems you can separate business activities. Let’s say you have a SaaS Business selling Products and Services if you want to see a breakout of the Income and Expenses from those 2 different business activities in the same accounting system you can, if you are using those tools correctly.

3⃣   Automate, automate, automate

Time is money and it should be used wisely! Technology is on our side folks! You can easily reduce human intervention in some of your accounting processes, and use that extra time to grow your business

Set up the bank feeds in the accounting system – this will allow you to easily import the various transactions from the business’s financial accounts.

Softwares such as QBO or Xero have AI (artificial intelligence) built-in as well as the ability to set rules to automatically classify recurring transactions from the same vendor.  You can and should take advantage of the tools that the systems provide to make your life easier, BUT attention to detail and review are STILL needed as the AI may accidentally make an incorrect suggestion. We do recommend an overall review once you import all your transactions into the accounting system.

4⃣  Implementing an AP (Accounts Payable) system

Benefits of setting up your AP system:

No angry   vendors because of late payments
Better control over your cash flow
Organization: ONE place where you can see ALL your liabilities list it out

Accounting Wise recommendations:

1⃣ Set up an email account where you will only receive vendors’ invoices, for example, accounting@XYZ.com
2⃣ Use a software to record those invoices, like Bill.com
3⃣ or simply manually record invoices in QBO or Xero.com 

5⃣  Know your Expenses

Know your EXPENSES! This is topic #5 of the 5 things entrepreneurs should think about when setting up their company’s accounting system.

Not every expense is treated equally. Many SaaS founders have a misunderstanding of how expenses and assets should be treated for accounting purposes. Just because you spend money in the business does not mean that it should be an expense in the income statement.

For example, software development fees – If you are building software to sell, all the different costs that go into building that software is considered an ASSET, so instead of going to the income statement or profit and loss, it must go to your balance sheet. 

Capitalization rules can be very complicated. If you have any questions please leave them down below, we will be happy to help!

We at Accounting Wise want to see businesses thriving. If you have questions about setting up the accounting system for your SaaS do not hesitate to contact us!
Send us an email to information@accounting-wise.com or schedule a call using this link. We would love to hear from you!

The post Accounting Setup for SaaS: How to do it right from day 1 appeared first on Accounting Wise.