SaaS Companies
Remember when Software as a Service (SaaS) was a relatively new concept? Now, it’s everywhere. And that means your business can be everywhere, providing what your customers need.
Just because your type of business is increasingly common doesn’t mean its accounting is simple. In fact, as technology evolves and new tax regulation comes into play, more and more SaaS companies are discovering that they need a specialized accounting team behind them.
Why SaaS companies need expert accounting
Why SaaS accounting is anything but simple
Your SaaS company is in the business of providing software applications or services to your customers. Two key things make that possible: the internet and a subscription-based model. You host your software on the cloud, and customers access it through a web browser or mobile application.
In exchange, you probably charge a monthly or annual subscription fee based on the features and usage level. This model creates a predictable revenue stream while reducing the cost of distributing and updating software. But it also brings specific accounting considerations into play.
So if you’re operating alongside companies like Salesforce, Dropbox, Zoom, HubSpot, and Google Workspace, there are a few things you should know.
Specialized Accounting for Software as a Service
SaaS companies are unique in how they generate revenue and operate their business. As a result, accounting for SAAS companies involves specific accounting principles and procedures that differ from traditional businesses.
Here are some key accounting considerations for your SaaS business:
Software Development Costs
The odds are high that your SaaS company invests heavily in software development. These costs must be capitalized and amortized over the expected life of the software.
Subscription-based accounting
If your SaaS company operates on a subscription-based business model, it changes your accounting. Subscription-based accounting involves tracking monthly recurring revenue (MRR) and annual recurring revenue (ARR) and forecasting future revenue.
Taxation
Your company might face different tax requirements and regulations than traditional businesses, like the potential sales tax on subscription-based revenue.
Payroll
For companies like yours, proper payroll accounting means accurately tracking employee compensation along with their taxes and benefits. Employment laws and regulations need to come into play, too. And all the while, your payroll accounting should inform your headcount strategy, helping you stay properly staffed and on budget while positioning you to grow.
SaaS need to consider:
Finding the accounting your SaaS company needs
Accounting for SAAS companies requires careful attention to the unique factors at play, like revenue recognition, customer acquisition costs, churn, and software development costs. To make informed business decisions and manage your finances effectively, you need accurate and timely accounting information.
Enter: our team. Here at ShayCPA, we specialize in providing accounting services for companies like yours. To talk with a team of accounting professionals that understand the world of SaaS and what it means for your books, get in touch.
Case Study
Stylesage
Stylesage is a New York-based AI-driven strategic analytics SaaS platform for fashion, beauty, home goods brands, and retailers that helps industry decision-makers with critical benchmarking and market trend insights to understand competition, style, color, and size trends based on market data.
The platform was founded in 2013 by Jade Huang and Robert Figie; Stylesage quickly became a leader and industry expert in AI image recognition and real-world data aggregation, which led to their acquisition in 2022 by Centric Software.
We’ve assisted Stylesage with:
- Worked with founders from inception to exit
- Due diligence throughout the M&A process
- Financial reporting on a month-to-month basis and help founders with investor reporting.
- Manage all Federal and State tax compliance.
- Put cash back into the Startup by helping Stylesage qualify for valuable Research & Development Tax Credits.
“Stylesage has worked with ShayCPA since 2013 when I graduated from INSEAD with my co-founder Robert Figiel. We love working with Akshay and his team because they were perfectly aligned with our needs at every growth stage. When we were at the Pre-seed stage, we just needed light touch bookkeeping to ensure we were tax compliant. At Seed and Series A, with more investor requests and board reporting, the ShayCPA team helped to take over the month-to-month accounting and financial reporting process so I could focus on scaling my business. When it came time for us to explore our exit strategy, the ShayCPA team helped us navigate through due diligence, and ultimately, we were successful in the sale of our business. Post-acquisition, the ShayCPA team continued to help the Centric team with complex tax compliance and financial reporting, which was on an accelerated schedule due to them being a public company. I recommend founders consider Akshay and his team – they understand the importance of being detail-oriented and punctual with deadlines and provide personable advice to companies navigating multiple rounds of fundraising and rapid growth.
Monthly Accounting Pricing
Quarterly
Starting at
- Reconcile Quickbooks Online (10 hours per Quarter)
- Cash-Based Bookkeeping
- Quarterly Video Review
- Chart of Accounts Template Provided
- Annual Meeting
Pre-Seed
Starting at
- Reconcile Quickbooks Online
Accrual Based Bookkeeping - Monthly Call
- Chart of Accounts Template Provide
A/P A/R Tracking By Client
Monthly
Starting at
- Reconcile Quickbooks Online
- Accrual Based Bookkeeping
- Monthly Call
- Customized Chart of Accounts
- Deferred Revenue Recognition
- A/P, A/R Tracking
- Inventory/COGS Reconciliation
- Financial Metrics
- Sales Tax Filings *
- Monthly Financials delivered by the 15th after month end
*up to one state included in sales tax
Series A & Beyond
Based On Your Needs
Custom Quote
(discount if billed annually)
- Reconcile Quickbooks Online
- Accrual Based Bookkeeping
- Monthly Calls and ongoing communication
- Customized Chart of Accounts
- Deferred Revenue Recognition
- A/P, A/R Tracking
- Inventory/COGS Reconciliation
- Board Financials and Metrics
- Sales Tax Filings
- Monthly Financials delivered based date requested
Additional Tax Services
State and local taxes (SALT)
Beyond the corporate taxes to which your company is subject, we also provide services for any state and local taxes that apply to your startup. For example, we work with many tech companies incorporated in Delaware and support them with their Delaware Annual Filings.
Cross-border taxes
If you work with international investors or you plan to expand abroad, our cross-border tax expertise can help you comply with the complex applicable tax regulations. We have experience working with companies that have connections in Lebanon, Canada, the UK, South America, and various EU nations.
Our Process
1
Step 1: Contact Us
Get in touch and we’ll reach out to you to schedule a video call to better understand your tech startups needs and prepare a custom quote.
2
Step 2: Onboarding
We’ll invite you to our secure client portal where you can use our easy to use onboarding checklist to get started. See general pricing guide here.
3
Step 3: Review
We schedule ongoing video calls with you to review your financials and ensure all of your tax compliance is taken care off.
If you’re ready to explore our tax services for tech startup C corporations, don’t hesitate to contact our team today.