Why SaaS Companies Struggle with Traditional Accounting

By September 23, 2016 July 14th, 2017 Uncategorized

SaaS companies are our main clients at Lucid Books, and our experience working with them has taught us that many SaaS guys are dying for an accountant that speaks their language and understands their goals. You might think that you simply don’t have the patience or attention span to work well with your traditional accountant. In reality, that’s probably not the case. There are real, important reasons why traditional accountants do not mesh well with SaaS companies, and it’s extremely important for startup SaaS companies to understand these industry specific accounting needs so that they make sure they are advised in the most effective way possible.

There are a couple of specific things I’ve noticed in particular that are common aspects of SaaS accounting that traditional accountants just don’t cater to. If you’ve been feeling out of touch with your accounting department, take a look at the suggestions below and see if any of these considerations could help you get your company back on track.  

1. Find a Financial Consultant, Not just an Accountant

First of all, SaaS companies are often startups, and as a startup, most of them need advice on how to cut costs in the most effective way possible while still investing in the things that matter. Traditional accountants are great at crunching numbers, but they don’t necessarily have the experience in subscription based software service companies to effectively consult and coach a SaaS start up. Your accountant should not just be showing you numbers every month. Today’s accountants double as financial consultants, and as any successful startup will tell you, getting an accountant who truly understands SaaS companies and their modern approach to company building is essential. Every month, your accountant should be looking at what you’re spending your money on and actively advising you on whether it’s paying off or not, and what changes you should be making. If your accountant isn’t doing this, you’re being gypped out of an essential resource.

2. SaaS have Special Industry Accounting Needs

The next thing is, not to state the obvious, but SaaS companies are software as a service companies, and this makes for interesting bookkeeping. It can be confusing and unusual to navigate how to record profits on software that is never actually being exchanged to the user. If your accountant does not have experience here, you are missing out on some good insights into your company’s health. You are also probably not with the right accountant. (You’re also probably wasting money.) A good SaaS accountant will get this, and will base your budget and accounting reports around it, and this will save you a lot of headache.

3. Find an Accountant that Works like You

The last thing is that SaaS companies are also often remote and cloud based. That being said, it would seem obvious that if all of your systems are cloud based, you’d want your accounting software to be cloud based too. This is one of the thousands of reasons we love Xero. In fact, at Lucid Books, we have a theory that the stereotype of accounting being boring, dry, and hard to understand comes directly from the kind of evil desktop accounting software that sucks the life out of its user. This hard to understand, confusing software even make accountants hate accounting. It shouldn’t be like that. Xero, and a few other software, aren’t like that. Their system is modernized, it’s user friendly, it looks like something you’ll want to use, and because of that, it won’t have you and your colleagues wanting to pull your hair out every time you read an A/R report. I’m not saying you absolutely have to use Xero, but I’m saying you should consider your options and shop around. This is one of those investments that a good accountant should be talking to you about and helping you decide on. There is no way around it: where you house the information about your profits and budget is really, really, important as a growing company, and you want to give it your full attention.

I think the most important take away from what I’ve learned as an SaaS accountant is that you can’t afford to settle with this stuff. There are resources out there for SaaS companies, and there is no reason to work with an accountant who is not diving head first into understanding how to work specifically with SaaS companies to understand and respond to their needs. Don’t waste your time beating yourself up struggling to understand and work with your outdated CPA. Instead, start looking for accounting resources that will compliment your company’s workflow instead of confuse it.

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