You’re a visionary founder of a software startup with big dreams of changing the world. As your company grows, you realize you can’t do everything yourself—you need help keeping the books in order. Don’t worry, we’ve got you covered. There are accounting solutions tailored for companies like yours that can scale with your business and give you insight into your financial performance.

In this guide, we’ll explore some of the leading subscription management software options for software-as-a-service (SaaS) companies so you can find a solution that fits your needs and budget. 

We’ll compare features like revenue recognition, billing, expense management, and reporting across various price points. With the right subscription management in place, you’ll gain valuable visibility into your company’s financial health and be able to make data-driven decisions to fuel your growth. 

Now take a deep breath and get ready to gain control of your books so you can get back to changing the world. The future is bright!

SAAS ACCOUNTING BEST PRACTICES AND GUIDELINES

As a SaaS company, following some best practices for your accounting will set you up for success.

First, make sure you have separate business bank accounts. Keeping your business and personal finances separate makes accounting so much easier and helps ensure accurate records and reporting.

Next, implement an automated accounting solution. Manual bookkeeping and spreadsheets just won’t cut it as your business grows. Choose a SaaS tool like QuickBooks that handles income statements, balance sheets, accounts payable and receivable, and general ledgers. These platforms integrate with your business bank accounts to automatically categorize transactions, track expenses, and generate reports. They’re a must for any scaling SaaS business.

Stay on top of billing and revenue recognition

SaaS companies live and die by their ability to bill customers on time and properly recognize revenue. Set up your subscription management software to automatically bill subscribers and integrate with payment gateways to collect payments. Recognize revenue as customers are billed to keep your finances accurate.

Keep good records

Document everything from customer contracts to invoices to expenses. Store records digitally and back them up regularly in case of disaster. Good record-keeping is essential for tax time, potential audits, and business planning.

If accounting isn’t your forte, consider hiring a bookkeeper or outsourcing to a virtual CFO service. They can handle the day-to-day and provide strategic financial guidance to help your SaaS business thrive. Focus on what you do best – building a great product and serving your customers! With the right tools and support in place, you’ll be managing your SaaS accounting in no time.

REVENUE RECOGNITION FOR SAAS COMPANIES

As a SaaS company, recognizing revenue properly is crucial to your success. There are a few methods allowed under GAAP, but for most SaaS businesses, the subscription model is ideal.

Recognizing Revenue from Subscriptions

When customers subscribe to your service, you can recognize revenue over the lifetime of the contract! This means if someone pays upfront for a year of service, you recognize 1/12 of the revenue each month.

This is fantastic because you get an influx of cash upfront but recognize it gradually, creating predictable revenue streams. Some tips for handling subscriptions:

• Bill customers at the beginning of each contract period (monthly, annually, etc.) so you have the cash on hand.
• For annual or longer contracts, make sure you allocate the revenue appropriately over each month. Don’t recognize it all at once!
• Track key dates like service start/end, renewal, and billing closely. Stay on top of expiring subscriptions and reach out to renew them.
• Consider offering monthly, quarterly and annual options to provide flexibility. The shorter the period, the more predictable your revenue will be.
• Sweeten long-term subscriptions with discounts. This encourages customers to commit to you long-term so you can recognize more revenue upfront.

With the right methods and tools in place, nailing subscription revenue recognition can be a breeze. Your investors and stakeholders will surely appreciate accurate financials, and you’ll have insight into your company’s true performance. Subscription-based success, here you come!

CHOOSING THE RIGHT SUBSCRIPTION MANAGEMENT SOFTWARE FOR YOUR SAAS

When it comes to managing the finances of your SaaS business, the subscription management software you choose can make a huge difference in how much time you spend on bookkeeping each month. With so many options out there, how do you decide which solution is right for your needs? Here are a few things to consider:

• Look for software built for SaaS and subscription businesses. Solutions like Chargebee, Recurly, and Chargify are designed specifically for managing recurring revenue and the metrics that matter most to SaaS companies like MRR, ARR and churn rate. They automate revenue recognition so you can focus on growing your business.
• Consider scalability and growth. As your customer base grows, you’ll want a system that can scale with you. Look for software that charges based on metrics like revenue, transactions or number of customers versus a flat fee. That way, you only pay for what you need. You’ll also want a solution with advanced features like revenue forecasting and analytics to gain insights into key growth metrics.
• Ease of use is key. The best subscription management software is intuitive and simple to navigate. Look for a clean interface, logical workflow, and features like drag-and-drop customization. The easier it is to use, the less time you’ll spend on daily accounting tasks. Minimal training required is always a plus!
• Mobility and access. Choose software with a web-based platform so you can access your financial data anywhere. Mobile apps are ideal for checking key metrics on the go. Your bookkeeping team and accountant should also have access to the software to collaborate efficiently.
• Don’t break the bank. Affordable software solutions for startups and small businesses are abundant. You can find very capable options for a few hundred dollars a month. Only pay more for enterprise-level software if you really need the advanced features and support.

The subscription management software you choose can save you valuable time and set your SaaS up for success and scalability. Do your research, evaluate your needs, and you’ll find a solution that’s a perfect fit! 

Keep your options open; there are many fish in the sea. With the right solution in place, you’ll gain insights into the metrics that truly matter and steer your business in the right direction.

TOP SUBSCRIPTION MANAGEMENT SOFTWARE SOLUTIONS FOR SAAS STARTUPS

• FreshBooks is a popular cloud-based accounting solution for small businesses. It’s simple to use yet powerful, with features like time tracking, expense management, and project management. FreshBooks integrates with many SaaS tools and allows you to bill clients on a recurring basis, which is perfect for subscription models. They have a free trial, so you can test it out!
• QuickBooks Online is one of the most well-known accounting platforms. Their ‘Simple Start’ plan is tailored to small SaaS companies and is very budget-friendly. You get income and expense tracking, invoice creation, and reporting to gain insights into your financials. QuickBooks integrates with many payment processors, payroll services, and other business tools. They frequently run promotions for 40-50% off the first year.
• Xero is an accounting solution built for startups and small businesses. Their platform is very intuitive and allows you to track income, expenses, invoices, bills, and more. Xero offers over 700 integrations so you can connect the tools you already use. They have plans specifically for tech startups and subscription businesses. Xero provides a free trial and often has discounts of up to 20% for the first year.

There are many fantastic accounting solutions for SaaS startups. The key is to evaluate your needs, priorities and budget to find an option that checks all the boxes for your unique business. With the right solution in place, you’ll gain valuable financial insights and be able to scale as your company grows. Now go get started – the accounting world awaits!

CONCLUSION

That covers the basics of subscription management software solutions tailored for SaaS companies. With the right tools in place, you’ll gain valuable insights into your financial performance and set your business up for success. The options available today are robust yet intuitive, allowing you to get up and running quickly without a huge learning curve. 

So, what are you waiting for? Take your accounting to the next level and unleash the full potential of your SaaS company. The road ahead is bright, and with the support of modern subscription management software, the sky’s the limit! Go get ’em!

If you are launching your business and aiming to effectively manage your finances and accounting, it is highly advisable to seek the expertise of a reputable finance and management consulting firm like GJM & Co.

GJM & Co., being a prominent outsourcing firm, provides advice and services for Accounting & Bookkeeping as well as offers Virtual CFO & Controller services.

Our team of experienced professionals at GJM can provide you with comprehensive financial solutions and insights to help you achieve your business objectives. Should you have any queries or need consultation, Schedule a Call today or write to us at info@gjmco.com