Speaking as an SaaS vendor and ex- (now reformed!) accountant, you can make a case for a wide range of recognition policies for SaaS revenues.
For example, most companies stick by the "generally accepted" concept of recognising revenues over the period of the contact. That sounds as though it makes sense, but the business reality is that 90% of the work, and therefore the cost, in delivering that service is done before the customer actually signs, both in developing the product and then in the cost of pre-sale. Once the customer is up and running, post 30 day evaluation during which all the work gets done, the ongoing cost is pretty minimal. We are often in the position that we?ve invoiced the customer, been paid and have the cash but will not have recognised any revenue at all.
I?m not saying that we should change the generally accepted accounting policies, and to be frank the current policy suits us fine, (we?d have to pay way more corporation tax if we recognised early!), but as with many industries to have to know what is behind the figures to form a "true and fair" view of what the business is really worth.
John Paterson
www.reallysimplesystems.com
contrarythinking.wordpress.com
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