Thinking you can manage revenue recognition with spreadsheets is a common pitfall for many SaaS companies. It's born of the belief that your business can manage complex revenue recognition with just excel formulas, pivot tables, or macros. Sometimes that’s true. But, more often than not, it isn't.
Especially, in the age of recurring revenue, hybrid-pricing models, complex contracts, and accrual-based accounting methods we can confirm one thing: managing SaaS revenue recognition needs special tech support. And that needs to go way beyond the humble spreadsheets.
Yet, 39% of SaaS companies continue to use spreadsheets for revenue recognition.
This means issues ranging from non-compliance to loss of funding opportunities – likely not the future you envision for your SaaS business.
When you're starting off your business, spreadsheets can come in real handy. But, over time, you will find that they cannot cope with the complexities of your revenue recognition workflows.
Spreadsheets are not dynamic enough, nor are they error-proof, or compliance friendly. And they do not automate the subscription revenue recognition workflow.
Subscription management solutions with built-in, integrated revenue recognition, are the remedy for most of the challenges mentioned above.
Here are some benefits of using a subscription management solution with integrated revenue recognition, like Younium, that is purpose-built for B2B SaaS over ordinary spreadsheets.
As you have just seen, the list of benefits offered by a subscription management solution with built-in revenue recognition is many vis-a-vis spreadsheets. The advanced technology and automated revenue recognition it offers have a large impact on streamlining your day-to-day operations.
Here is how it can help with specific situations that SaaS businesses commonly face:
Complex Charge and Billing Types: Many contracts involve a mix of one-time fees, subscription charges invoiced yearly, and additional charges invoiced quarterly. Managing these varied billing types is crucial for accurate revenue recognition. Appropriate rules are automatically applied based on contract terms, ensuring accuracy and compliance.
Proration and Offsets: Agreements often start mid-month or include charges that begin after specific milestones. This requires careful proration of charges, credits, and new charges to ensure compliance and accurate financial reporting. Revenue can be automatically scheduled and allocated according to the service period, adjusting for contract variations or prorations as needed.
Changes that impact prepaid services: For example, mid-term upsells—necessitate precise calculations for prorated charges, credits, and new invoicing structures. These complexities directly influence revenue recognition schedules and accounting entries. Adjustments to revenue recognition schedules occur automatically to reflect these changes, reducing the risk of errors.
Non-Standard Contracts: Sometimes you may have custom contracts featuring clauses that permit annual rate increases, special prices (in lieu of loyalty) that kick in after a period of time, revenue-sharing deal structures, and so on. This makes your subscription billing and revenue recognition quite variable year on year, something spreadsheets were never designed for. This is where subscription management solutions shine.
Use case: A SaaS company added to its contracts a 10% discount for customers who are loyal to them. The discount kicks in only in the third year of association. A good subscription management platform will build such non-standard contract terms into its algorithm so that changes are reflected in subscription billing and revenue recognition from the third year of renewals by the SaaS company.
Use case: The finance team of a SaaS business wanted revenue recognition reporting that is dynamic, automated, scalable, and flexible. So, they used a subscription management solution that offered a single source of truth for all subscription data, met automated monthly recurring revenue schedules, and offered bespoke reporting focused on unique products, customer cohorts, and other dimensions.
Here is how Younium’s integrated revenue recognition capabilities ensure stress-free and accurate revenue recognition:
In summary, relying on spreadsheets for revenue recognition is not just risky—it can jeopardize your financial integrity, lead to compliance failures, and ultimately affect your company's valuation. SaaS finance leaders must implement integrated revenue recognition systems that provide clarity and confidence in their financial reporting.
With Younium, you get fully integrated revenue recognition that automates complex workflows, keeps you compliant, and scales with your business as you grow. Request a demo to discover how our subscription management solution helps SaaS companies move beyond spreadsheets and streamline their operations.