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.

1. SaaS Accounting:
Get to know your money flow
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SaaS Accounting

2. SaaS Accounting
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The spreadsheet science that drives your SaaS forward

3. Bookings:
Exist when a customer
agrees to spend money with
you
SaaS Accounting

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
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SaaS Accounting

5. Here’s how Bookings is recorded
SaaS Accounting

6. Recognized Revenue:
The point at which a booking
becomes actual revenue by
you delivering the product
SaaS Accounting

7. Here’s how Recognized Revenue is recorded
SaaS Accounting

8. Deferred Revenue:
Revenue you’re expecting
from your booking, but you
haven't delivered on the
agreement yet
SaaS Accounting

9. Here’s how Deferred Revenue is recorded
SaaS Accounting

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
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11. Cash Collections:
When cash hits your bank
account from your customer
SaaS Accounting

12. Here’s how Cash Collections is recorded
SaaS Accounting

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
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14. “Not utilizing your SaaS accountant
is like having LeBron James on
your pickup team and benching
him”
SaaS Accounting

15. All that stuff is great but…why do
you need to track this stuff?
SaaS Accounting

16. More specifically…
Understanding your SaaS accounting metrics can
help in these ways:
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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. Awesome! You’ve just about
mastered your SaaS
accounting metrics. Here’s a
quick recap of what you
should know.
SaaS Accounting

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. Boom. You’re now a SaaS
Accounting superstar.
SaaS Accounting

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metrics on the market
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SaaS Accounting