Software Licensing vs. SaaS Accounting Software

The rules of accounting for SaaS accounting software are very different from the rules of the traditional software licensing companies. With web based accounting software on the rise, the revenue accounting rules for SaaS companies have just recently changed for the better. SaaS accounting software is gaining more acceptance with business owners recently, and more companies are looking at this option for their financial needs. There are, however, some key differences between traditional licensing and SaaS accounting software.

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Key Differences in SaaS Accounting Software

The main difference between a traditional accounting system and SaaS accounting software deals with cost recognition and the revenue involved. This is due to the fact that transactions with customers are viewed differently between the two systems. Software licensing is viewed for accounting purposes as a sale of a product, whereas a SaaS accounting software transaction is treated as a sale of a service provided over a period of time. In a software licensing arrangement, customers obtain the right to use the software on their own computers for a certain length of time. In a SaaS accounting software agreement, the customer buys the hosted service, but does not get a copy of the software to use on their own. It is very important to determine which type of accounting software will be necessary to your company’s operations before making transactions since the rules for both are different.

Cost of the SaaS Accounting Software

There are two different costs to keep in mind when looking at SaaS accounting software. The first is the cost to develop and maintain the software that your company will use, and the second is the direct cost to you as a customer related to your specific customers. Some of the developmental costs can be spread out over the life of the software, and some are received up front.

Depending on which software you’re using, determining the exact costs that will fall into each category is different. There are certain rules that companies have to follow when determining the costs for their services. Because of SaaS accounting rules, using SaaS software is pretty different from traditional accounting software systems, and it can sometimes be difficult for companies to price their products.

SaaS Accounting Software Conclusion

Understanding the accounting procedures can be very complex, but making the right decisions are key. Deciding whether or not to go with traditional accounting software or SaaS accounting software will be a deal breaker when it comes to your business decisions. Knowing the rules of both ways of accounting will be very beneficial to you and your company. Choosing the wrong accounting method can lead to headaches later, so making sure that you know the rules of each system, as well as knowing when to use which one, will mean smooth sailing for you and your company.

When you shop around, find out the licensing that each provider holds. Make sure they are compliant with all of the state rules and that their software is up to date and current. These things will lead to great gains in your company.