What is Revenue Recognition for SaaS Companies and Why is it Important?
In 2017, the Financial Accounting Standards Board (FASB) set stringent financial reporting requirements for subscription businesses- particularly SaaS and other software companies. ASC 606 effects when and how SaaS companies can consider cash from bookings as revenue on their financial statements. This is often referred to as a deferred revenue model of accounting. Let’s break down some of the key points of SaaS revenue recognition accounting and how Lescault & Walderman can help you streamline the process.
Deferred revenue is the money you have billed to a client, but cannot recognize as revenue until the product or service has been provided.
SaaS companies that offer subscription services must consider how early termination and upgrades/downgrades effect revenue.
Your financial reports must stay compliant with Generally Accepted Accounting Principles (GAAP) guidelines for SaaS revenue recognition.
The Challenges of SaaS Revenue Recognition
- Are you using manual processes to record when revenue is recognized?
- Can you quickly adjust to changes or terminations in the contract?
- Can you easily create the reports you need to satisfy ASC 606 reporting requirements?
Revenue recognition for SaaS companies can be difficult and time consuming if you try to figure it out by yourself. Our outsourced accounting services will help you create an automated process to easily track and report your deferred revenue. We’ll handle the numbers while you focus on your core services.
Here’s How We Help SaaS Companies with Revenue Recognition
You don’t have to navigate ASC 606 compliance by yourself. Here’s how we can help.
SaaS Revenue Recognition Software
Track when revenue is recognized with customizable modules and ensure your billing capabilities get you paid on time.
ASC 606 Support
Utilize a team of SaaS accounting consultants who can walk you through every step of the process and provide ongoing support.
Customized Solutions
Identify the unique characteristics of your business- billing model, services provided- and receive a fully-customized accounting solution.
Here's how to get started:
1. Schedule a No-Obligation Call
Your time is valuable, and we don’t want to waste it. Let’s schedule a discovery meeting so we can discuss your needs and confirm there’s a fit.
2. Receive Your Accounting Review
We'll review your accounting documents, then provide you with a customized report that includes our findings and our recommendations for moving forward.
3. Attend Review Meeting
We'll host up to a 2 hour meeting to review our findings and recommendations, answer any further questions and outline how we'll work together.
4. Review Your Proposal
Working from our review, we’ll provide clear and actionable recommendations for improvement related to your particular processes, software, and systems.
5. Engage Us For Your Needs
If you approve of our recommendations, you’ll sign an engagement letter and we’ll start work!
Let’s Save You Time and Energy
How much time have you spent researching the nuances of the revenue recognition model for SaaS companies? If the answer is, way more than I would like to… then let’s have a conversation.
Accounting for deferred revenue can be tricky and burdensome if you do not have the right processes in place. At Lescault & Walderman, we have helped other software companies with SaaS revenue recognition and saved them countless hours of research and trial and error.
We follow all of the ASC 606 rules for the 5 Steps of Revenue Recognition:
1. Identify the contract with the customer.
2. Identify the performance obligations of the contract.
3. Determine the transaction price.
4. Allocate the transaction price.
5. Recognize revenue when or as the entity satisfies a performance obligation.
The only difference is… you don’t have to do any of the work yourself. We will handle the busy work and create a compliant process for you so you can focus on the revenue-generating operations of your business.