Looking to elevate your SAAS bookkeeping?
Running a SAAS business without having proper bookkeeping can break you.
My name is Connor Gillivan. I’ve been an Entrepreneur since 2009. I’ve built 8+ companies to 6, 7, and 8 figures with an exit in 2019.
Today, I run AccountsBalance, EcomBalance, and Outsource School.
I’ve worked with 100’s of SAAS companies and I’ve seen how bad SAAS bookkeeping can bring a business down.
In this article, we’ll dive into 9 common bookkeeping mistakes that SAAS companies run into and how to avoid them.
Here’s what we’ll cover:
- Mistake #1: Mixing Business With Personal Expenses
- Mistake #2: Not Having Monthly Bookkeeping
- Mistake #3: Procrastinating Until the End of the Year
- Mistake #4: Not Reviewing Your Financials Monthly
- Mistake #5: Using Excel Instead of an Accounting Software
- Mistake #6: Failing to Calculate MRR, ARR, LTV, and CAC
- Mistake #7: Relying On Your Accountant For Everything
- Mistake #8: Poorly Managing Subscription Payments
- Mistake #9: Not Having a Clear Picture of your Expenses
9 SAAS Bookkeeping Mistakes & How to Avoid Them
The 9 mistakes will cost your business sales, profits, and much more.
Get to know these intimately and make sure to set up systems so that you can avoid them as you grow your SAAS business.
Mistake #1: Mixing Business With Personal Expenses
One of the most common bookkeeping mistakes we’ve noticed among new SaaS and agency owners is mixing personal and business expenses.
This can make it difficult to keep track of business expenses and may result in tax penalties.
If you’re doing this still, it’s time to stop.
How to Avoid It
Create a separate bank account exclusively for your business transactions. By doing so, you can quickly track your business expenses and identify potential tax deductions.
Maintain a systematic bookkeeping approach and keep detailed records of your business expenses, including receipts and invoices, and categorize them correctly.
Proper categorization can help you identify significant expenses and make informed financial decisions.
By separating your personal and business expenses, you can maintain a clear financial picture and avoid bookkeeping blunders.
Mistake #2: Not Having Monthly Bookkeeping
Another bookkeeping mistake that we’ve noticed among SaaS and agency owners is not having monthly bookkeeping.
It’s essential to maintain up-to-date financial records to understand the financial health of your business and make informed decisions.
How can you make smart decisions for your business’s growth if you don’t know how the business is actually performing?
How to Avoid It
Set up a consistent bookkeeping system and maintain it monthly.
Hire a professional bookkeeper or accountant to help you set up your financial system and maintain it regularly.
You can tap into a monthly bookkeeping service like AccountsBalance that specializes for SAAS companies.
If you want to do it yourself, set up a good system that gets completed by the 15th of each month so that you and your co-founders can review the books and make smart decisions for the business.
Mistake #3: Procrastinating Until the End of the Year
Another bookkeeping mistake that we often see among SaaS and agency owners is procrastinating until the end of the year to review their finances.
This can lead to a last-minute scramble to gather and organize financial records, causing unnecessary stress and mistakes.
How to Avoid It
Develop a regular schedule for reviewing your finances. Set aside time each month to reconcile your accounts, review your financial statements, and assess your cash flow.
Here’s a free Monthly Finance Meeting Agenda that you can use to get it started.
Consider hiring a bookkeeper or accountant to help you stay on track and provide professional guidance. Again, check out AccountsBalance for an affordable monthly bookkeeping service specialized for SAAS companies.
By maintaining a regular schedule, you can identify any financial issues early on, make informed financial decisions, and avoid last-minute stress at the end of the year.
Additionally, use accounting software to automate and simplify your bookkeeping tasks. Accounting software can help you manage your finances more efficiently and accurately, providing real-time insights into your financial performance. By using technology, you can streamline your bookkeeping process and stay on top of your finances throughout the year.
Mistake #4: Not Reviewing Your Financials Monthly
Similar to mistake #3, another is not reviewing your finances each month.
When you don’t know how your business is performing and you’re going off of bank account amounts, you’re bound to get into a tough situation.
How to Avoid It
Download this free Monthly Finance Meeting Agenda.
Schedule a time into your calendar so that you always have a time to review your bookkeeping each month.
Get into a habit of taking notes, looking at revenue, gross profits, expenses, and net profits.
Your goal should be to increase your net profit every year.
Mistake #5: Using Excel Instead of an Accounting Software
Using the right tools is essential. Another common bookkeeping mistake for SAAS owners is relying on Excel spreadsheets instead of using an accounting software, like Quickbooks Online or Xero.
While Excel can be useful for organizing data, it has limitations when it comes to accounting and financial management.
How to Avoid It
Consider investing in an accounting software that can automate and simplify your bookkeeping tasks. Accounting software can help you keep track of your expenses, categorize your transactions, and generate financial reports.
Using an accounting software can also reduce the risk of errors, as it automates many of the bookkeeping processes, such as bank reconciliation and invoicing. By doing so, you can save time and reduce the risk of errors.
There are many accounting software options available, so it’s important to research and choose one that meets your business needs. Some popular options include QuickBooks, Xero, and FreshBooks. By using the right accounting software, you can streamline your bookkeeping process and focus on growing your business.
For more information about SAAS accounting tools, check this video out:
Mistake #6: Failing to Calculate MRR, ARR, LTV, and CAC
For SaaS and agency owners, tracking metrics such as Monthly Recurring Revenue (MRR), Annual Recurring Revenue (ARR), Customer Lifetime Value (LTV), and Customer Acquisition Cost (CAC) is crucial for understanding the financial health of your business.
Unfortunately, many business owners make the mistake of failing to calculate these critical metrics.
How to Avoid It
To avoid this mistake, make it a priority to track and calculate these metrics regularly.
MRR and ARR can help you track your recurring revenue, which is vital for forecasting and budgeting.
LTV can help you understand the long-term value of your customers, while CAC can help you evaluate the cost-effectiveness of your marketing efforts.
By tracking these metrics, you can make informed decisions about your pricing, marketing, and customer retention strategies. Consider using a CRM or marketing automation software to help you track these metrics and evaluate their effectiveness.
Mistake #7: Relying On Your Accountant For Everything
While having an accountant is essential for managing your business’s finances, relying on them for everything can be a costly bookkeeping mistake.
Many SaaS and agency owners make the mistake of delegating too much responsibility to their accountant, which can result in missed opportunities for financial growth and a lack of understanding of their business’s finances.
How to Avoid It
To avoid this mistake, it’s essential to take an active role in your business’s financial management.
This includes regularly reviewing and understanding your financial statements, tracking your revenue and expenses, and staying up to date on changes to tax laws and regulations.
By doing so, you can make informed decisions about your business’s finances and ensure that you’re not overspending or missing out on financial opportunities.
It’s also important to communicate regularly with your accountant and work together to ensure that your financial statements are accurate and up to date.
You can also complement your Accountant with a Bookkeeper that will handle your month-to-month bookkeeping while your Accountant handles your end of year taxes.
Mistake #8: Poorly Managing Subscription Payments
For SaaS and agency owners, subscription payments are a critical source of revenue.
However, poorly managing these payments can lead to a host of bookkeeping mistakes and financial problems.
One common mistake is failing to track and reconcile subscription payments properly. This can result in overcharging or undercharging customers, missed payments, and inaccurate financial statements. It’s essential to have a system in place to track and reconcile these payments regularly.
Another mistake is failing to manage cancellations and refunds effectively. It’s important to have clear policies in place for cancellations and refunds, and to communicate these policies clearly to your customers. This can help prevent disputes and chargebacks and ensure that your financial records are accurate.
Additionally, it’s essential to ensure that your subscription payment system is secure and compliant with industry regulations, such as PCI compliance. This can help protect your customers’ payment information and prevent costly data breaches.
How to Avoid It
To avoid these mistakes, consider using a subscription management platform that can help you track and reconcile payments, manage cancellations and refunds, and ensure compliance with industry regulations.
Some popular options include Chargify, Recurly, and Stripe.
Mistake #9: Not Having a Clear Picture of your Expenses
Understanding your SAAS business’s expenses is critical for making informed decisions and maintaining a healthy financial position.
Unfortunately, many business owners make the mistake of not having a clear picture of their expenses.
This can result in overspending, missed opportunities for cost savings, and a lack of understanding of your business’s financial health.
How to Avoid It
Have a system in place to track and categorize your expenses accurately.
Consider using accounting software to help you track your expenses and generate reports that provide a clear picture of your business’s financial health. It’s also important to review your expenses regularly and identify areas where you can cut costs, such as unnecessary subscriptions or excess employee expenses.
Another helpful strategy is to create a budget for your business and regularly compare your actual expenses to your budgeted expenses. This can help you identify areas where you may be overspending and adjust your spending accordingly.
What Is AccountsBalance?
AccountsBalance is a monthly bookkeeping service specialized for agencies & SAAS companies.
We take monthly bookkeeping off your plate and deliver you your financial statements by the 15th or 20th of each month.
You’ll have your Profit and Loss Statement, Balance Sheet, and Cash Flow Statement ready for analysis each month so you and your business partners can make better business decisions.
Interested in learning more? Schedule a call with our CEO, Nathan Hirsch.
And here’s some free resources:
In Summary
SAAS bookkeeping isn’t easy.
To grow a SAAS business to 6, 7, and 8 figures annually, you need to be on top of your bookkeeping.
- Understand your financial statements (P and L, Balance Sheet, and Cash Flow Statement)
- Review your books monthly
- Delegate the bookkeeping work to a Bookkeeper or Bookkeeping service
- Use accounting and SAAS software to track everything
The more insight you have into your financials, the better you’ll be able to grow your business and profits.
If we can help your SAAS business with its bookkeeping, let us know. Reach out to us at [email protected].
