From seed stage to Series B, SaaS financials have specific requirements that general accountants often get wrong. We have done this before.
SaaS accounting is not standard bookkeeping. Annual contracts, monthly subscriptions, usage-based billing, and multi-element arrangements all require technical accounting judgment that the IRS and your investors will scrutinize.
ASC 606 applies to all revenue contracts with customers, regardless of company size. For SaaS, this means analyzing each contract to identify performance obligations and determine when and how much revenue to recognize. It applies from day one, not just when you get audited.
Cash received upfront for an annual subscription is recorded as deferred revenue, a liability on your balance sheet. It is recognized ratably each month as the subscription service is delivered. Booking it all as revenue in month one is one of the most common SaaS accounting errors.
Software development that involves technological uncertainty, including building new features, improving performance, and resolving technical challenges, generally qualifies. Engineering salaries, contractor costs, and cloud computing expenses used in development are often includable. The credit can be substantial for early-stage companies.
Six to twelve months before your expected audit start date. The cleanup and documentation required for an audit-ready set of books takes time, and doing it under time pressure with auditors watching is expensive and stressful. Starting early means a smoother, faster, cheaper audit.
Schedule a free consultation. We will assess your current accounting setup and tell you what needs to change before your next raise or audit.
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