Which SaaS Accounting Tools Should you Choose for your Growing Business
Feb 16, 2022
Which SaaS accounting software is the right one for us? That’s a question every CFO/CEO of a B2B SaaS company has been faced with.
The B2B SaaS industry is quite specific and so are your accounting needs. With a high volume of sales and fast growth, you need to be able to rely on your accounting software and tools to make strategic decisions. Revenue recognition is also something your tech stack must facilitate.
However, we’ll admit it’s not easy to navigate through all the different types of tools and features they offer. Each software offers a unique set of possibilities, the question is: which one is the right one for your business?
Want advice on choosing the right one and making your accounting solution a building block of your finance tech stack that drives your growth? Read on!
You’ll learn about SaaS accounting and read a comparison of the most popular accounting software and tools for SaaS businesses. You’ll also learn more about Upflow, our Accounts Receivable software that makes you gain time and efficiency.
Small reminders about SaaS Accounting :
What is SaaS Accounting?
SaaS accounting is different from “normal” accounting on different levels:
SaaS deal with high volumes of sales,
There is a high diversity of offers and contracts,
Some SaaS have a subscription business model.
The last characteristic is especially important, because it dictates how and when the revenue needs to be recognized. SaaS revenue recognition is highly specific and needs features of its own.
Indeed, following the FASB’s ASC 606 and the IFRS15 standards, subscription revenues are to be recognized only when the service has been provided - not when income is received.
From an accounting standpoint, this means having to spread out the revenues over a time period instead of being able to “cash it in” straight away.
Types of SaaS accounting
There are two types of accounting methods for SaaS:
Cash-based method: the transaction is recorded when the cash arrives or leaves the business’ bank account.
Accrual method: revenues and expenses are recorded when they are earned, i.e. when the service is rendered or the product ownership is transferred.
The cash-based accounting method suits small businesses better, as it is simple and relies on cash flow. For fast-growing companies, however, the accrual method is more efficient, tax-friendly and adapted to deferred revenue.
SaaS scale-ups use the accrual method, which means they have to comply with the GAAP principles and the standards from the FASB and/or IFRS for revenue recognition.
Fortunately, most SaaS accounting tools will facilitate this process.
Signs your accounting tools are no longer working for your business
Your reporting isn’t accurate enough
Your financial tech stack should be able to present you with live data 24/7. Ideally, you should have a global view of your financial state while giving you the option to zoom in to every transaction. It should help you build strong financial reporting.
Your operations are growing too complex for your current tools.
SaaS have a growing complexity of offers and clients as they scale.
As you expand your product range and customer base, you find yourself having to deal with a wide variety of contracts. That’s also true when you enter new markets or countries: each has its own specificities. Your operations are growing, and fast. You’re not able to keep up easily with the accounting side.
Your team spends too much time chasing the right data.
Growing SaaS means growing teams. It also means needing to work more efficiently. Instead of relying on different spreadsheets, or having the sales team always asking you for an invoice number, it makes sense to have centralized software that compiles and streamlines all your business information. Now more than ever, organizations understand the need for centralized data and transparency.
Your accounting system isn’t integrated in your tech stack
If your accounting software is an island of its own - maybe residing only in your accountant’s offices - you’re doing something wrong.
If you want to propel your growth, your accounting tools need to be connected to your tech stack. Working in an open ecosystem, through native integrations or APIs, will support your current needs and help you grow. In the future, it means you’ll be able to add new software that all connect together.
Best Accounting Software & tools for SaaS Companies in 2022
There is no one software that will meet all of your accounting needs. Hence the need to work within an open ecosystem where you can add software as you grow without having to replace everything.
We’ve broken down the accounting software and tools into various categories:
Cloud-based accounting software,
Expense management tools,
Subscription management tools.
Account Receivables Software
Cloud Accounting Software
Well-known across industries, Quickbooks is easy to use, affordable and integrates well with other applications. On the downside, its limitation on the number of users doesn’t make it the best software for SaaS scale-ups.
Quickbooks offers a “Recurring Transactions” feature that allows you to automate a part of your subscription management.
Sadly, its level of financial reporting is limited, so you’ll have to look at third-party applications to calculate your MRR and other relevant KPIs for your SaaS.
nFor these reasons, Quickbooks is a better choice for small businesses like startups at an early stage.
Xero offers the same type of features and pricing as Quickbooks: the difference between the two mainly lies in geography. The company is based in New Zealand and particularly adapted for firms in the APAC region.
Xero’s main advantage is the handling of multiple currencies as well as some refined functionalities such as the ability to sync bank transactions for automatic bank reconciliation.
On the downside, it doesn’t have built-in payroll functionality, and offers it as an add-on with Gusto.
NetSuite, from the Oracle group, is a great option for fast-growing SaaS.
It offers various features to simplify your processes, from recording transactions to closing the books. Since your daily bookkeeping operations are automated, it gives you more time to dedicate to financial analysis and planning.
It’s a centralized solution that integrates seamlessly with other applications, while remaining comprehensible and customizable. It’s a solid choice for the future, as it will be able to support your needs as you scale.
Last but not least, NetSuite provides real-time insights on macro and micro levels.
Read more here: Why Fast-growing Companies Should Choose NetSuite Accounting.
Expense Management Tools
As its name suggests, Zoho expense is dedicated to tracking your company’s expenses. It automates your cash outflows operations using your receipts or credit cards transactions, groups them together, and generates expense reports as you need them. Their reporting features are strong.
Their user experience is good for finance and non-finance professionals alike. It’s a great tool to use when it comes to tracking your expenses throughout your company. You can set up expenses limits for your teams and make sure they are respected.
Zoho Expense integrates with ZohoBooks and ZohoCRM, so you have a full suite fulfilling your business needs.
Another good choice to track your expenses is Spendesk. This software also allows you to set limitations over your company’s expenses, empowering teams to spend on what’s needed with virtual or prepaid credit cards.
It offers real-time insights on expenses, allowing you to manage expenses across your company, see its evolution and dive down into each team’s spending. Bonus: you can have an unlimited number of users.
Spendesk centralizes your expenses data without fussing over paperwork, producing in-depth reports. It states making book closing four times faster with their streamlined bookkeeping processes.
Subscription Management Tools.
Subscription management tools can make or break a SaaS business. It’s essential to choose the right software for your business - one that integrates into your finance tech stack.
A leading subscription management platform that provides a payment processor as well, Chargebee is 100% dedicated to SaaS businesses.
Their features allow for easy subscription management, from first subscription to set up fees and renewal. As they have in-built tools to reduce churn rates and remain compliant, they’re a one-stop software for B2B SaaS companies.
Since their target market is quite specific, you also know they'll keep adding features that make your life easier.
Specialized in subscription management across industries, Zuora offers three main features: finance, billing, and commerce. Together, they allow you to manage all the activities of your subscription management. From billing to tax management, they make your processes easier.
With Zuora, you can manage different currencies and attribute different roles to your teams.
They offer three different versions of their software depending on your current needs. They also provide extensive access to online resources to make the most of their software.
Accounts Receivables Softwares
Last but not least, we can’t recommend enough to think about an accounts receivable software, like Upflow.
Automating your accounts receivables will make you gain time and efficiency: no more manual invoice chasing and less late payments. Spend more time making strategic decisions and planning your growth.
At Upflow, we offer useful features like real time A/R analytics, automated dunning and personalized customer portals for easy payment.
Accounting is an essential activity for SaaS that goes beyond simply complying with legal requirements.
SaaS accounting tends to require more advanced features due to its complexity, especially as most SaaS are subscription-based.
Real-time reporting and centralized data will make your decision-making more efficient across your company.
Your accounting SaaS stack needs to evolve with you as you grow - today and tomorrow. Choose a solution that integrates into an open ecosystem to help you propel your growth.
Automating the more tiresome bookkeeping tasks frees up your time for strategic financial planning
Accounts Receivables software like Upflow is the cherry on the cake of your finance stack: less manual tasks and more time for strategic planning.