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Revenue Recognition for SaaS Businesses

What is Saas revenue recognition?

SaaS (software-as-a-service) is a business model in which a company provides access to software applications over the internet, on a subscription basis. SaaS revenue recognition refers to the way in which companies that use this business model account for their revenues from subscriptions to their software applications.

Revenue recognition for SaaS companies typically involves recognising revenue on a subscription basis, over the term of the subscription. This means that a SaaS company would recognise a portion of the revenue each month.

 

What are term licenses? How do they differ from SaaS licenses?

Term licenses are a type of license agreement that allows a customer to use a software application for a fixed period of time. The recognition of revenue from term licenses is typically different from the recognition of revenue from SaaS subscriptions, as the customer receives the right to use the software application for a specific period of time, rather than access to the application on an ongoing basis.

 

What is SaaS revenue recognition software?

SaaS revenue recognition software ensures that revenue is recognised correctly and according to accounting standards.  The most sophisticated programmes will use smart automations, such as text recognition, to capture the data directly from invoices.  Other programmes can require that all contractual terms are entered manually, which creates a longer setup process.

SaaS revenue recognition software will also include the ability to track all critical SaaS metrics including annual recurring revenue (or ARR), and monthly recurring revenue (MRR), customer acquisition costs (CAC) and lifetime value (LTV).

Read about ScaleXP SaaS metrics automation here.

Read our latest SaaS benchmarks here.

 

Who are the leading SaaS software providers?

The two leading SaaS revenue recognition providers are Maxio and ScaleXP.  Maxio requires all transactions to be processed through their platform and takes a % of revenue as their fee. ScaleXP can import data from any payment platform (bank transfer, Stripe, any other provider). The fee is set, making it much less expensive as companies scale.

Read about ScaleXP’s revenue recognition automation here.