In this case study, we’re working with an enterprise Software As A Service (SaaS) company with a proven B2B product. As this client continued to scale the business, their accounting needs were outgrowing their internal expertise. One of their founders was spending much of his valuable time managing their accounting processes, which represented a huge opportunity cost – especially in terms of potential sales. After they enlisted kept.pro for support, our fractional accounting team also uncovered some key revenue recognition errors that could have turned disastrous if left unaddressed.
Finding The Inconsistencies
Once we explored the company’s books, it was clear that their accounting processes had failed to evolve with their growing revenue streams. This SaaS business has a complex operation, with multiple revenue streams related to subscriptions and services. However, their stakeholder reporting was predominately curated outside of the system of record, resulting in potentially embarrassing inconsistencies from quarter to quarter. We also discovered that their revenue recognition was not in compliance with Generally Accepted Accounting Principle (GAAP) standards, specifically ASC 606, with their in-licensing expenses being recognized in a different period than the corresponding revenue. These oversights opened them up to potential cash flow issues in the present and credibility issues in any future capital raises.
Implementing Processes That Work
To address these issues, our fractional accounting team designed and implemented new processes tailored to the company’s specific needs. First, we built out a revenue recognition policy, along with corresponding workflows for each revenue stream, to ensure all revenue was properly recorded. We also created much-needed balance sheet schedules to support these revenue recognition processes and other accrual accounts. In the process, we discovered that revenue had actually been understated; and corrected the issue. These critical changes ensured that the SaaS company is now ASC 606 compliant – and has accurate numbers on which to base important business decisions.
Results: Right-Sized Accounting & Valuable Time Savings
Once these new processes were rolled out, our client quickly saw results. The co-founder who had been handling the accounting was immediately able to invest his time and energy back into sales and product development. Within 90 days, we provided complete and accurate accrual-based financial reporting for a board meeting. We have continued to provide those reports on a quarterly basis. The chart of accounts has been modified and is now the appropriate size and type for this business, giving them monthly visibility into key financial performance metrics directly from the system of record. And their payroll is now correctly tracked, which will enable them to easily apply for their R&D tax credit and reduce the potential for errors at the end of the tax year.
At kept.pro, we understand the challenges faced by growing businesses. Our fractional accounting team will work with you to create a plan to address your unique pain points – and help you scale effectively. Set up a free call with our experts today.
Nicki Heck
https://www.linkedin.com/in/nicolejheck/Nicki Heck is an Intuit QuickBooks Elite Pro Advisor who holds advanced certifications in QuickBooks Online, BILL, Expensify, Gusto, and other platforms in the QuickBooks Online ecosystem. She has more than 10 years experience integrating and configuring QuickBooks Online with third party platforms for hundreds of small and medium businesses. She studied business management at The University of Lethbridge, where she earned her BA.
