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SaaS Accounting: The blueprint to understanding and optimizing

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A bad accountant or finance manager can spell doom for your company though by causing you to not invest cash that you should be or worse - spending money you don’t have in the bank. This is why you need to know your SaaS accounting chops, too. To help, let’s walk through a breakdown of how revenue flows through your business from a booking all the way to cash collected.

Here we walk through exactly how to calculate ARPU (Average Revenue Per User) including what to and not to include in the calculation, as well as how to optimize this crucial SaaS metric.

Published in: Software

SaaS Accounting: The blueprint to understanding and optimizing

  1. 1. SaaS Accounting: Get to know your money flow Price Intelligently’s SaaS Metric Mondays SaaS Accounting
  2. 2. SaaS Accounting Let’s talk about SaaS accounting The spreadsheet science that drives your SaaS forward
  3. 3. Bookings: Exist when a customer agrees to spend money with you SaaS Accounting
  4. 4. Bookings Example A customer just signed an annual contract (12 months) on January 15 to use your app for $24,000 at $2,000 per month Want To See What Your SaaS Metrics Are Right Now? Get your free ProfitWell account – 1-click SaaS Metrics >> SaaS Accounting
  5. 5. Here’s how Bookings is recorded SaaS Accounting
  6. 6. Recognized Revenue: The point at which a booking becomes actual revenue by you delivering the product SaaS Accounting
  7. 7. Here’s how Recognized Revenue is recorded SaaS Accounting
  8. 8. Deferred Revenue: Revenue you’re expecting from your booking, but you haven't delivered on the agreement yet SaaS Accounting
  9. 9. Here’s how Deferred Revenue is recorded SaaS Accounting
  10. 10. Recognized/Deferred Revenue Example You received the $24,000 contract that you booked (the booking) on January ’15. You accrue revenue for each day you fulfill the contract with your customer, recognizing that revenue in your receivables. The rest of the revenue on the contract is deferred revenue until you deliver SaaS Accounting Get your free ProfitWell account – 1-click SaaS Metrics >> Want To See What Your Revenue Metrics Are Right Now?
  11. 11. Cash Collections: When cash hits your bank account from your customer SaaS Accounting
  12. 12. Here’s how Cash Collections is recorded SaaS Accounting
  13. 13. Cash Collections Example Continuing our example, we booked a $24,000 contract on January 15 where we agreed with the customer to collect payment on a quarterly basis. Giving us $6,000 per quarter. Note how our recognized and deferred revenue does not change SaaS Accounting Get your free ProfitWell account – 1-click SaaS Metrics >> Want To See What Your SaaS Accounting Metrics Are Right Now?
  14. 14. “Not utilizing your SaaS accountant is like having LeBron James on your pickup team and benching him” SaaS Accounting
  15. 15. All that stuff is great but…why do you need to track this stuff? SaaS Accounting
  16. 16. More specifically… Understanding your SaaS accounting metrics can help in these ways: See the breakdown of your Accounting Metrics with ProfitWell >> SaaS Accounting Bookings Recognized/Deferred Revenue Cash Collections MRR Measuring the impact and growth of your sales over time Making accurate predictions concerning your cash flow and clearing up the financial health of your business Knowing how much you can spend Identifying your Momentum as a subscription business
  17. 17. Awesome! You’ve just about mastered your SaaS accounting metrics. Here’s a quick recap of what you should know. SaaS Accounting
  18. 18. SaaS Accounting Type Description GAAP Used for Bookings Amount customer committed to spend No Measuring the impact and growth of your sales over time MRR Contract amortized into subscription revenue No Identifying your Momentum as a subscription business Recognized Revenue Revenue accrued for service/product delivered Yes Making accurate predictions concerning your cash flow and clearing up the financial health of your business Deferred Revenue Revenue not yet earned with service/product still owed to the customer Yes Making accurate predictions concerning your cash flow and clearing up the financial health of your business Cash Collections Actual cash collected and deposited into the bank from the customer No Knowing how much you can spend
  19. 19. Boom. You’re now a SaaS Accounting superstar. SaaS Accounting
  20. 20. Want real time SaaS Metrics? Know and understand your SaaS Metrics with ProfitWell for free – the most accurate metrics on the market Click here to get your free ProfitWell account >> SaaS Accounting

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