Tech News, Magazine & Review WordPress Theme 2017
  • Tech
    • Android
    • Home Tech
    • Medical Tech
    • Artificial Intelligence
    • APK
    • Apple
  • Business
    • Startups
    • Marketing
  • Reviews
    • Best Apps
    • Software
    • VPNs
  • Blogging
    • SEO
  • Crypto
    • Blockchain
  • Contact Us
    • About us
    • Careers
    • Use of Cookies
    • Privacy Policy
No Result
View All Result
Techavy
  • Tech
    • Android
    • Home Tech
    • Medical Tech
    • Artificial Intelligence
    • APK
    • Apple
  • Business
    • Startups
    • Marketing
  • Reviews
    • Best Apps
    • Software
    • VPNs
  • Blogging
    • SEO
  • Crypto
    • Blockchain
  • Contact Us
    • About us
    • Careers
    • Use of Cookies
    • Privacy Policy
No Result
View All Result
Techavy
No Result
View All Result

Accounting for SaaS businesses

by Abhishek Yadav
January 27, 2020
Accounting for SaaS businesses
562
SHARES
3.7k
VIEWS
Share on FacebookShare on Twitter

BOOKINGS

The deals in SaaS businesses start with bookings. That is when accounting processes sets to roll. When a client books your product or service, he or she agrees to buy it.

It seems that now it is time to celebrate. Well, not so soon, it is only a beginning. When a client books it can be considered as signing a contract. This contract means that once the customer has your product delivered, he or she commits to paying for it. Hypothetically, if a customer has booked one year of using your product, you commit to providing him or her with an access to it for one year, and the customer commits to paying the annual price you charge for that access, let’s say $5,000.

But while you haven’t provide your customer with a product, hypothetically these $5,000 are still not yours.

REVENUE

So what can be considered to be a revenue, then? Revenue occurs when you provide your customer with the product or service they ordered. If a SaaS business uses a subscription model, this happens in several installments, e.g. on a monthly basis. For a booking with a value of $12,000 and monthly delivery over one year, this translates to a monthly revenue of $1,000. Your revenue reaches the full $12,000 at the end of the delivery term, in this case one year. This attribution of revenue comes from an accounting method called accrual accounting.

ACCRUAL ACCOUNTING

Accrual accounting records revenue and expenses when they are incurred, not when cash is exchanged. This method is used by most businesses, and can even be compulsory for some companies, depending on their nature and location.

In contrast to cash-based accounting, accrual accounting allows to get more accurate data on profitability. This is one of the main advantages of accrual accounting and the main reason it is important for management decision-making.

RelatedPosts

What is Business Intelligence?

Can You Perform A Business Registration In Ontario Online? 6 Things To Know

CASH COLLECTIONS (OR BILLINGS)

Now, ladies and gentlemen, this when long-awaited moment comes! Watch out, cash is there. Billings can occur at any time and solely depend on the terms on which you and your customer have agreed. Usually, you charge your client at the beginning or the end of their contract, or at regular intervals throughout.

Do not forget that cash collections and revenue are not the same thing. Cash collection can occur before revenue, and vice versa. Even if you have received the cash from your customer, but haven’t delivered the product yet, you still have not realized any revenue.

MRR (Monthly Recurring Revenue)

MRR, or ARR (annual recurring revenue), technically, is not a part of GAAP. It is rather widespread and worth closer look.

Saas product expert Maksym Babych says that MRR / ARR tracks the revenue your customers have agreed to spend with you on a monthly or yearly basis. This means that MRR / ARR are more similar to bookings than any other GAAP metrics. They will also give you the most accurate data as to the current status of your SaaS business. Bookings and revenue are not able to give the same kind of information, since they will not allow you to see subscriptions to your products/services build over time in the same way.

CONCLUSION

Generally Acceptable Accounting Principles may seem to be hard to understand at first. But the information below will help you to deal with them. The accounting principles will ease a decision-making process.

1.4k
SHARES
ShareTweet

Subscribe to Techavy to never miss out on the latest tech news!

Unsubscribe
Abhishek Yadav

Abhishek Yadav

Hello, I am Abhishek Yadav, I am an Internet Marketer and a Blogger. along with blogging I also have some Programming and content marketing skills. Connect with me on Twitter @Abhinemm to know more about me :)

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

  • 123MOVIES Unblocked – Ten 123 Movies Proxies and Mirrors

    123MOVIES Unblocked – Ten 123 Movies Proxies and Mirrors

    5707 shares
    Share 2229 Tweet 1393
  • Kickass Proxy – 30 KAT Mirror Sites & Proxies ~ KAT UnBlocked.

    9872 shares
    Share 3934 Tweet 2459
  • AceStream Mac – How to install AceStream on your MAC

    1717 shares
    Share 685 Tweet 428
  • Thop TV: Watch Movies and TV Shows for Free

    808 shares
    Share 323 Tweet 202
  • How to Download Torrent with IDM – 100% Working

    1897 shares
    Share 755 Tweet 472

Latest Posts

What is Business Intelligence?

What is Business Intelligence?

March 14, 2023
image_2022_12_30T05_21_33_976Z.png

CapCut – The Free Online Video Editor

March 14, 2023
What is an Integrated Development Environment (IDE)?

What is an Integrated Development Environment (IDE)?

March 14, 2023
Kajabi

A Straightforward Review of Why I Chose Kajabi

March 15, 2023
Can You Perform A Business Registration In Ontario Online? 6 Things To Know

Can You Perform A Business Registration In Ontario Online? 6 Things To Know

March 10, 2023
The Benefits Of WiFi-Enabled Furnaces: Control Your Home’s Heating Remotely

The Benefits Of WiFi-Enabled Furnaces: Control Your Home’s Heating Remotely

March 11, 2023
Learn about technology, product reviews, SEO, AI and more on Techavy.com
Techavy

© 2021 Techavy | All Rights Reserved.

Resources

  • Home
  • About us
  • Contact Us
  • Privacy Policy
  • Careers

Connect With Us

No Result
View All Result
  • Home
  • Tech
  • Business
  • Software
  • Android
  • Blogging
  • Gaming
  • Startups
  • Review
  • Use of Cookies
  • Privacy Policy
  • About us
  • Contact Us

© 2021 Techavy | All Rights Reserved.