5 tips on preparing your SaaS business for a financial audit
Any consequences for a faulty audit will fall square on your company. It is, as such, your responsibility to ensure that everything proceeds smoothly. It entails overcoming the individual obstacles that make a SaaS company financial audit complicated. Here are some tips to get you prepared:
1. Have an effective accounting system
Everything hinges on the efficiency of your company's accounting system. The system should be fool-proof to avoid errors that will complicate accounting and cost you dearly down the line.
Invest in advanced accounting software capable of keeping up with the complexities of the SaaS industry; get customized software or, if possible, build one yourself. Integrate everything to ensure that nothing is left to chance.
It is also advisable to have a team of professional accountants to keep track of the numbers; don't rely absolutely on your accounting software, regardless of how impressive it may be. The team should also include people conversant with the law to ensure that you comply with the set regulations. Have someone that will see to it that you comply with all International Financial Reporting Standards (IFRS) or Generally Accepted Accounting Principles (GAAP), depending on which class applies to your company.
2. Organize and keep track of documents
Losing track of financial data and documents is one of the main causes of complications in performing a SaaS financial audit. It is recommended to have a central storage location for all your documents, including bank statements, contracts, Pos, and anything related to your company's finances. A backup of this data is also necessary.
Most SaaS companies, as you will agree, are too busy growing their businesses to keep track of all documents. If this describes you, then you should consider soliciting revenue recognition services. ProfitWell has a sophisticated revenue recognition program capable of managing thousands of spreadsheets in seconds.
3. Automate procedures
Every SaaS company knows to do this, but most don't prioritize it. It is essential and urgent as it will minimize errors and make accounting easier. Automation will also help streamline other aspects of the company's operations and, consequently, improve its overall efficiency.
4. Reconcile regularly
Other companies can afford to wait until the financial year-end to reconcile their documents, but you cannot. Remember: your revenue channels are scattered and inconsistent, so leaving the documents to pile up will only further entangle the web.
Reconcile your documents regularly; a monthly or quarter-yearly basis is recommended, depending on the size of your company. Your accounting system will catch errors and inconsistencies early, thus simplifying things for the auditors; alternatively, you can trust it to a ProfitWell's next-gen revenue recognition system. It will also save you a lot of time and money that you would need to spend to disentangle the proverbial web several months down the line.
5. Keep checklists
How do you know that you have everything covered before the audit, especially considering all the data and revenue streams? A simple way to ensure that nothing gets left to chance is by keeping a checklist. It should include everything, including bank reconciliations, adjustments to deferred revenue and accruals, among others. Go through the checklist whenever you are updating your financial reports and ensure that each box is checked.