Play as a Podcast

SAAS – Software as a Service

SAAS – Software as a service refers to Companies: who sell Software as a service e.g. SAP, Oracle, Zoom, Salesforce, & Cisco. SAP & Oracle are considered to be the big-players as far as the accounting ERP Systems are concerned. There are Professional Accountants who hold SAP Certifications (FICO) & provide Functional Support Services. There is always a demand for FICO Consultants in the likes of the Multinationals Companies using SAP as their ERP – Enterprise Resource Planning System.

Top SAAS Companies

Deferred revenue:

In real world when your Company is selling Software/ services it may be collecting money upfront (advances) in which case it will have to defer the revenue until it has provided the service it signed the contract for (performance obligation IFRS 15).

Accrued revenue:

This is when you have provided the service you agreed to provide as per the contract. However due to some internal issues you’re unable to invoice the customer. In this case you would ‘accrue the revenue; to ensure the revenue is correctly reported.

Unallocated cash

This is when you have received the cash from the customer however you are now unable to allocate it to a particular open item / invoices. If not dealt with consistently unallocated cash can lead to material misstatements in the accounts.

Cash in transit:

CIT – occurs when your customer has paid you however the funds have not reached your bank account yet. This is referred to as cash in transit. Normally individuals preparing the bank reconciliations or accounts receivable reconciliations will come across this item. As they will be checking the AR balances regularly.

Credit control:

In order to manage the working capital of a Company the job of credit controller is imperative. Often in service-based Companies there tends to be scenarios whereby the customer may not be happy with the services & decides to delay the payment or outrightly do not pay.

Conclusion:

Given the dynamic business nature of the SAAS Companies; Revenue accounting & reporting is challenging. Understanding the customer contracts & end-to-end revenue process is crucial in order to correctly & consistently account for revenue else the revenue numbers may be distorted & the decision making can be flawed.