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TLDR: The process of recognizing revenue from a SaaS agreement involves managing deferred revenue and subscription revenue to accurately reflect cash receipts and earned income over the contract period. 00:00 📊 A customer signs a three-year SaaS agreement for $36,000, invoiced annually at $12,000, starting from April 1st after signing on March 15th. 00:52 💰 Debit accounts receivable and credit deferred revenue for $12,000, reflecting unearned revenue on the balance sheet. 01:11 💰 One month into a $12,000 subscription, $1,000 is recognized as revenue by debiting deferred revenue and crediting subscription revenue. 01:46 💰 Customer payment of $12,000 increases cash and decreases accounts receivable by the same amount. 02:22 📊 Recognizing revenue monthly from a software contract involves debiting deferred revenue and crediting subscription revenue, illustrating the distinction between cash receipts and actual revenue recognition.

TLDR: Revenue recognition in SaaS is governed by ASC 606, requiring companies to recognize revenue only when earned through a structured five-step process, which includes managing deferred revenue and understanding contract obligations. 00:00 📊 Revenue recognition in SaaS requires recording revenue only when earned, guided by the new framework of ASC 606 and a five-step process. 01:26 📊 Revenue recognition in SaaS involves determining transaction prices based on contract obligations, allocating those prices to performance obligations, and recognizing revenue as each obligation is fulfilled. 02:43 💰 Deferred revenue represents customer payments for future goods or services, crucial in the invoicing and revenue recognition process for SaaS companies. 03:38 💰 Deferred revenue is recorded as a liability when a company invoices customers in advance, reflecting the obligation to deliver software and services over time. 04:34 💰 Invoicing a customer for a one-year subscription creates deferred revenue, which must be recognized ratably over the contract's duration rather than all at once. 05:46 📊 Revenue from a SaaS subscription is recognized monthly by debiting deferred revenue and crediting the income statement as the service is delivered. 07:07 💰 Recognizing SaaS revenue involves debiting deferred revenue and crediting subscription revenue as payments are received and accounting periods close. 08:02 💰 Revenue recognition in SaaS involves understanding the distinction between contracts, bookings, invoicing, and cash receipts, necessitating consultation with a knowledgeable CPA for accurate accounting.

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TLDR: Churn in SaaS involves the loss of customers and revenue due to cancellations and downgrades, necessitating precise internal definitions to effectively measure retention metrics. 00:00 📉 Churn in SaaS refers to the loss of customers, resulting in a complete loss of associated revenue. 00:26 📉 Churn in SaaS includes both customers completely leaving and those downgrading their subscriptions, impacting overall revenue. 00:58 📉 Churn in SaaS includes both customer departures and revenue downgrades, with CFOs tracking it in the month revenue changes occur. 01:37 📉 Churn in SaaS encompasses both customer cancellations and downgrades, requiring clear internal definitions to accurately reflect retention metrics.

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New to the channel - found this last night! Was interested to learn more about Abstract Security as they just announced their Series A $15M. Looking forward to checking out lots of your other episodes.

TLDR: Accurate financial forecasting in a SaaS model requires careful management of revenue inputs, employee costs, and operational expenses, along with effective use of formulas and assumptions to ensure precise projections. 00:00 📊 Two revenue input tabs are essential for accurately forecasting financials in a SaaS model, especially when dealing with multiple products or varying price points. 00:31 📊 Duplicate revenue tabs to streamline linking to the summary, ensuring the P&L tab automatically updates without needing frequent changes. 01:23 💼 Accurate headcount management is crucial for software companies to ensure correct gross margin and operational expenses by detailing employee roles, wages, and benefits. 02:08 💰 This financial plan outlines employee costs, taxes, and non-wage operating expenses, organized by department, with a focus on forecasting essential expenses like hosting. 02:37 📈 Easily adjust formulas to scale expenses based on customer growth for accurate financial forecasting. 02:59 📊 The spread amount formula distributes a specified amount over given dates, while the spread evenly formula forecasts it across an entire year, allowing for easy annual repetition and row copying in financial planning. 03:28 📊 Enter your monthly expenses by department and set key global assumptions like company name and tax rate in the controls tab before reviewing the summary. 03:48 📊 To forecast tax cash expenses and new ARR in a SaaS financial plan, focus on sales and marketing expenses, key metrics, and ensure accuracy in bookings, revenue, and operating expenses.

TLDR: Light has raised $13 million to develop a modern accounting platform that simplifies financial management for SaaS and tech service companies, leveraging AI and integration with major banks to enhance efficiency and reporting. 00:00 🚀 Light, co-founded by Jonathan Sanders, has raised $13M to create a modern accounting platform that simplifies financial management and integrates globally, addressing gaps in traditional ERP systems. 04:17 💰 A new financial platform has raised $13M to automate accounting processes, integrating with major banks and systems while focusing on core ledger functions and AI-driven solutions. 08:00 💡 Light is launching a modern accounting platform for SaaS and tech service companies, simplifying financial processes with quick implementation and tailored support. 11:37 🚀 Light, a modern accounting platform founded in 2022, has raised $13M to help companies transition from basic software to advanced solutions with rapid onboarding and consolidated reporting. 16:47 💰 $13 million was raised to create a scalable modern accounting platform that addresses the complexities of growing companies beyond basic invoicing. 19:52 🚀 Founders in complex fields should seek capital and expert partnerships to strategically navigate product development and market entry challenges. 22:50 🚀 Light aims to streamline month-end closing to under one hour using AI for efficient financial reporting and strategic focus. 25:24 🚀 A new product, Light Command Interface, simplifies ERP and financial operations through natural language and keyboard commands.

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Thanks for the breakdown! A bit off-topic, but I wanted to ask: My OKX wallet holds some USDT, and I have the seed phrase. (alarm fetch churn bridge exercise tape speak race clerk couch crater letter). How should I go about transferring them to Binance?

Impressive insights, thanks! Your thoughts on this are really eye-opening for the crypto community. For those wanting more insights, check out my bio. Can’t wait for the next update!

Very helpful & Amazing. I loved it.

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Right. helpful video

Really very helpful content. Thanks Ben Murray 🙌🙌

Amazing And Very helpful video 😇👋

This is really helpful, thanks. When you say you need a “managed services cost center”, what normally goes in that bucket? Is that the hours spent by an employee in servicing the managed services revenue, times the per-hour cost of the employee? What if an employee does some managed services work but also some professional services? Or does some managed services work but also some customer support work? Would be interested if you’ve seen examples of this

Looking at the second example's first journal entry (5:55), why does our A/R increase by $12,000 when the customer is invoiced? As the company, we haven't delivered a product or service to have earned the revenue yet. I understand that D-rev increases because it's a liability and we've received cash for a service that hasn't been delivered yet.

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How do you split CAC into new / upsell allocations if you don't have clear and separate teams doing one function vs the other? We don't have specific hunters/farmers or 'upsell marketing campaigns' so how do you think about that?

Thank you for having me! :)

Congratulations. This is going to be the breakthrough technology in AI. Its so important to have the right output given the loads n loads of data available today and this technology will fill in that important gap.

Great work. AI is next gen. But we need something like this to get the right output.

Very good keep it up

👏

so sales commission / salary is not involved in CoGS?

Thanks for sharing this

Thanks for sharing the Cloverleaf story on your platform, Ben! Great conversation!

hi you should optimize your video a little bit more.,,put a proper title and use the title keywords in description and use some good low competition long tail keywords in tags . i hope you can see results in 3 months..

Hello Sir. Do you need a professional TH-cam thumbnail designer?

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I find such situations in most of my clients. One issue that constantly surprises me, though is the lack of a cash flow and balance sheet forecast. A lot of these companies only use a P&L forecast.

Looks interesting

Oh, that was a much more interesting take and topic than I anticipated!

Loved the insights on hosting, software, security, and staffing costs. Crucial for financial management.

Great podcast and initiative. Really informative from a business perspective. Nice job Ben.👏

Do you think rev recs rules applies the same way for Saas cogs as others or need to be treated differently?

Interesting. I’ve never tried to calculate the cost of discounts to the company.

Hi im trying to estimate the COGS for a prospective app and im trying to figure out how im supposed to find out the related costs. I've looked on websites and it says that for an app these would be the sections of Application hosting and monitoring costs, Data communication expenses, Software licence fees , Website development and support costs, Subscription costs, Hosting costs. Anyway, I'm not an expert in computer science or anything close to it so understanding what each of these costs encompass is very complicated not to mention finding the relevant info. I only need to write around 300 words on this section and I'm wondering if you know how I could find the relevant info? BTW this is for a college assignment

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Why are we dividing the annualized revenue by the quarter instead of comparing similar time periods?

thanks for having me on Ben! - Cole :)

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