Article | June 19, 2018

SaaS Revenue Recognition Challenges With QuickBooks (And What You Can Do About It)

Source: SaaSOptics
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QuickBooks is an easy decision for a SaaS startup or SMB. However, subscription-based businesses quickly run into challenges. QuickBooks does many things well, but it doesn’t efficiently manage subscription revenue recognition or subscription billing, especially if you have sales-negotiated behavior in your contracts, which is the heart of financial operations for a SaaS business and is required by ASC 606 and GAAP compliance.

That’s why SaaS companies augment QuickBooks with spreadsheets. We’ve seen it all when it comes to revenue recognition spreadsheets — they’re complicated and error-prone.

There’s a reason revenue recognition gets complicated with subscription businesses

Subscription-based businesses can’t fully recognize revenue from a contract until they’ve delivered the agreed-upon services. But with varying contract lengths, sometimes bundled services and the occasional non-standard service, SaaS businesses need the flexibility to recognize revenue in a manner consistent with their agreements. In B2B SaaS, this might mean a combination of amortizing revenue over the term or recognizing it based on completing certain contractual milestones.

This is further complicated by the inherent contract volatility in SaaS financial operations. Upgrades, downgrades, renewals, re-negotiations of renewals, upgrade-extensions, cancellations and early terminations are all fair game in B2B SaaS, and they all put pressure on your financial operations team as QuickBooks and spreadsheets are poorly suited to managing it all.