Have you ever wondered how SaaS accountants could help your startup?
Since SaaS businesses sparked nearly two decades ago, customers and service providers have benefited from the convenience of subscription-based services. Customers get valuable services for low monthly fees, while providers benefit from predictable monthly (or annual) incomes.
The business model is relatively simple, but that doesn’t mean building a successful SaaS business is easy.
And because SaaS accounting can be so complex, even expert software developers shouldn’t try to DIY it. That’s one aspect of business best left to the pros.
SaaS Startups Have a Unique Business Model
SaaS businesses operate differently from other business models by creating an ongoing relationship between the buyer and seller.
Imagine a software company offering a subscription-based recruiting software. Potential customers can try the software (delivered online) for free for 30 days. But after 30 days, the user will pay a monthly fee to continue using the software. As long the recruiting tool fulfills the need, the customer will continue paying the monthly or annual fee.
In this setup, the software company invests a significant amount of capital upfront to build the tool, and should continuously improve the product and user experience.
It sounds simple enough. But how do you know when to recognize cost and revenue? What happens if customers pay upfront for a year of service?
The accounting side of SaaS, and other subscription-based businesses, can be very complex. This complexity is the main reason why you want an experienced SaaS accountant.
SaaS Accountants speak the Language of Investors
Building a great SaaS product and selling it to the masses can be very capital intensive.
You’ll need proper funding to scale a SaaS business, especially in a B2B market. Beyond building a great product, you’ll also need resources to invest in sales and service.
In most cases, this means external investment.
Because they have experience dealing with investors, good SaaS accountants know which figures investors want to see and how the business should present its financial picture.
A good SaaS accountant will have no trouble helping you tailor your finances to appeal to investors.
SaaS Accountants Know What Metrics to Track
Because SaaS is such a unique business model, there are also unique metrics to track.
Average Support Ticket Time
Even at scale, customers who need help give the company a chance to shine or flop. Ensuring that customer issues get solved quickly is one way to keep them coming back. This metric tracks how long it takes to solve those issues.
Return on Ad Spend (ROAS)
Ad spend normally doesn’t scale linearly. Monitoring what’s working and what isn’t allows you to double down on your successes and cut your losses.
Number of Lead Interactions
This metric helps measure the efficiency of your sales and marketing teams’ efforts.
Positive Cash Flow
Cash is a good indicator of overall business health, crucial for scaling, and necessary for keeping the business running.
You and your accountant should both know exactly how much time your business has left before running out of cash. Runway is a good indicator of how things are going.
But tracking metrics isn’t only about having numbers and knowing where you stand. Good SaaS accountants can help you turn those indicators into results.
That’s where accounting adds the most value to your organization.
SaaS Accountants are Well-Versed in Tax Planning
Tax planning saves startups money. For a growing business, any extra money is precious.
Tax planning can get complicated as your business expands. Here are a few common issues companies might face:
- You may qualify for new or different tax credits and deductions.
- You might need to restructure your entity.
- Or, you may decide to offer your growing team stock options and benefits.
An expert can help you navigate these essential and potentially very beneficial changes.
SaaS Accountants Build Accounting Systems that Scale with Your Startup
Founders often run into trouble because of the “what got you here won’t get you there” principle. What you did to win over your first five customers probably won’t work anymore when you have 500 or 5000.
You need a system built to scale. The same principle applies to your finance and accounting decisions. As you get more customers and more employees, your systems need to grow as well.
Great SaaS accountants know which tech stack and processes will grow best with your business.
Get in Touch with a SaaS Accounting Pro
Building a SaaS startup is a significant endeavor with some unique challenges.
Building lasting relationships with a growing customer base requires more than simply creating a great product. You need systems that can scale for everything from customer service to accounting. Scaling a business might also mean bringing on outside investors, which have their own needs and requirements.
For a busy founder, that can be a lot to handle. Bringing in a pro, like the SaaS accountants from Founder’s CPA, can lead to significant efficiency and process improvements. But more importantly, it can take some of the load off of the founder, so you can focus on running your business.
Contact us today to learn how we can help your SaaS business grow.