How Is SAAS Revenue Recognition From Annual Contracts Billed Upfront?

Kruze Consulting منتشر شده در تاریخ 1401/03/19

6.3 هزار بار بازدید - 2 سال پیش - In this video, you'll learn

In this video, you'll learn about SAAS revenue recognition from annual contracts billed up front. ******************************* Additional Resources • What Are The Rules For Sales Tax For ... • How the correction in public SaaS sto... • Brian Parks of Bigfoot Capital, lende... ******************************* Does your VC-backed startup need help to manage your books, burn, and projections? Kruze’s clients have raised over $6 billion in venture funding - find out how we help companies fly through diligence and raise the next round: kruzeconsulting.com/startup-venture-capital-financ… #saasrevenuerecognition #saasrevenue #kruzeconsulting Be sure to subscribe for more accounting, HR, and finance tips for your startup. youtube.com/c/KruzeConsulting MORE FROM KRUZE CONSULTING: Website ► kruzeconsulting.com/ YouTube ► youtube.com/c/KruzeConsulting Facebook ► www.facebook.com/KruzeConsulting Twitter ►twitter.com/KruzeConsulting Hey, it's Scott Orn at Kruze Consulting and today I'm answering the question, how do SaaS companies recognize revenue on contracts that are annual and billed and collected upfront? This is a very common question. The answer is you always want to use accrual GAAP-based accounting and you always want to recognize that revenue on a monthly basis as you provide the service over the year. It doesn't matter if you collected the cash up front. If you booked it that way that would be called cash accounting. That's not accrual. That's not the right way to do things for startups. That's not the way that VCs, that's not the way that corporate development offices, they don't view your financials that way. They don't wanna see your financials that way. They want to see 'em on an accrual basis every time. And it's better for management and for the investors. Imagine you're sitting in a board meeting and you haven't been booking your reoccurring revenue stream on a monthly basis and your revenue, 'cause it's on cash, is bouncing all around and the board is freaking out because they invested in a SaaS company, thinking this is gonna be a smooth, long build. And you put up a zero this month, right? People are gonna lose their minds. So you're gonna take a lot of grief if your revenue is not booked correctly. And imagine when you go through an M&A, like if the corporate development group or the accounting firm that they hired to do due diligence on you, is looking at this and it's cash accounting, again bouncing all over, not consistent, not SaaS-like, they're gonna be worried that they're working or buying a company that isn't run by a super sophisticated team. They're also gonna be worried that the accounting firm that you're using is not doing their job correctly. And the next natural step is, well, what else is wrong? What else do I not know about? What's lurking beneath the surface here in this M&A deal? And it could literally make the deal fall apart. It could make them give you a haircut. There's a lot of bad things that could happen. So do your revenue recognition correctly, work with a CPA firm that knows what they're doing, that will be there for you during diligence, and always book this stuff on a monthly basis as you earn the revenue as you deliver the service. It doesn't matter if you collect the cash up front, although that's really good for mitigating your burn. So definitely try to collect upfront if possible. Hope that helps. If you have any questions on revenue recognition, SaaS companies, hit us up at kruzeconsulting.com and hey, while you're on our YouTube channel if you don't mind clicking the old subscribe button we'd appreciate it. We put a lot of time and energy into these videos and hope you see more of them. Thanks.

2 سال پیش در تاریخ 1401/03/19 منتشر شده است.

6,325 بـار بازدید شده

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