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SaaS Company Accounting Pitfalls to Avoid

SaaS companies are a unique bunch. Traditional enterprises enjoy the benefits of having customers pay up front for the cost of server software installation. On the other hand, SaaS companies must convince customers to rent software that’s cloud-hosted. The system operates on a pay-as-you-go setup.

SaaS Upfront Money Lost

accounting pitfalls image 1It’s the nature of SaaS to spend money upfront for customer acquisition. The goal, hopefully, is to make it up in the long run. Revenue from a multi-million dollar contract won up front can only be realized month-to-month. Often, there’s a blurred line between revenue and expense. This leads to an attitude of “faking it until making it.”

This mentality can cause entrepreneurs, and even seasoned marketers, to spend cash on frivolous activities before their product is completely developed. More than any other modern business model, SaaS places the responsibility of execution squarely on the shoulders of a business owner. It’s a challenge of earning customer trust and respect every day, month, and year. Clients are always in a hurry to pull the plug if results are obscure or difficult to measure.


SaaS companies have the challenge of earning customer trust and respect every day, month, and year. Clients are always in a hurry to pull the plug if results are obscure or difficult to measure.

Getting the Company Off the Ground

Any marketer or business owner will admit the difficulties in getting their business up and running. It’s especially difficult for SaaS companies. The “product” is actually quality service delivered over time.

SaaS companies are encouraged to spend quality time introducing their team and organizational players as industry thought leaders. This means developing your product and creating the content strategy to convey your expertise. It may involve blogging five times a week and creating a number of premium content offers each month.

Build a strong content base on your website, and engage with top industry leaders. Your mission, and you have no other choice but to accept it, is to cause your organization to stand head and shoulders above the crowd. You can establish yourself as the established, or new, SaaS company that has answers and solutions. Your content creation can help establish an air of authority that provides leads from which to draw upon once your product is ready to release.

Emphasizing Service over Software

The world continues to embrace the truth that customer service is king. Your contract is likely attractive. Not because of a user interface or dashboard, but because your company offers a particular service, along with the results those services claim to deliver. Your SaaS marketing plan should have this truth written in stone somewhere.

saas accounting pitfalls 3Existing Customers Matter

SaaS companies typically use a subscription model to attract customers. Giving your customers an incentive to become “product promoters” to their friends and associates, and to remain loyal, is essential for survival.

The reality is your customers may not start delivering revenue until they have been with your company for a while. Continue to offer services and content that addresses their needs and concerns. Help them stay around long enough to make it profitable for your company. These are the customers that can energize others into looking at your company for SaaS solutions.

Continue to offer services and content that addresses your customers' needs and concerns. Help them stay around long enough to make it profitable for your company. These are the customers that can energize others into looking at your company for SaaS solutions.

 

Reduce the Cost of Customer Acquisition (CoCA)

Accounting problems can start with the amount of money your organization spends to acquire each new customer. This accounting number always takes into consideration things like product sales, marketing costs, operating expenses, and even research. Minimizing CoCA is difficult for most when also trying to grow customer lifetime value (LTV).

As a marketer or business owner, invest in strategies that allow for a hands-on approach. Keep your marketing automated, and think completely through your lead-nurturing campaigns. Patience is key because such campaigns take time to implement. However, once in place, they can turn a subscriber into a qualified lead. You will have spent less effort than you may have imagined.

Choose Your Customers Wisely

saas accounting pitfalls 2The nature of SaaS means that customers must remain with your organization for a specified number of months. Keeping customers engaged and happy is the key to a sound ROI.  Be selective. Not every customer that comes your way is one that will remain loyal. As a provider, you have to balance customer service with knowing who will remain and benefit the most from your services. These are the ones who will impact your bottom line. These are the ones who will provide the greatest lifetime value. These are the ones worth nurturing.


Keeping customers engaged and happy is the key to a sound ROI. Be selective. Not every customer that comes your way is one that will remain loyal.

Valuable Tips to Keep SaaS Customers

No business wants to lose customers. Losing customers in the SaaS business is called “churn rate.” We’d like to offer a few helpful tips to help you avoid it.

#1. Keep your customers engaged. An engaged customer is one who realizes value from using your SaaS. It’s only common sense that customers who are not engaged are the ones least likely to continue using the service. If your customers aren’t engaged, it’s simple, they’ll stop paying. To prevent distrust, you’ll need to measure their engagement. Measure usage data. There’s no need to worry about those customers who continually use your product. If their usage level has dropped off, find out why.

#2. Track expired or canceled credit cards. If your SaaS system uses recurring credit card billing, it can be a way of tracking engagement. Most credit cards expire every three years. As a result, roughly three percent of credit card subscriptions will expire during any given month. This means you run the very real risk of having credit cards expire on a fairly regular basis. Put a plan in place that will notify customers their credit cards are about to expire before it actually happens. Send an email or take the time to make a courtesy phone call.

#3. Never stop selling. “Always be selling” is still a marketing incentive to abide by. Your SaaS company should always be engaged in the act of acquiring new customers. Make quick deployment and rapid configuration second nature. Most SaaS cycles are short, which is what customers really want to experience. Execute flawlessly, and operate in ways that business operations remain uninterrupted.

saas accounting pitfalls 4 Your SaaS company should be engaged in the act of acquiring new customers. Most SaaS cycles are short, which is what customers really want to experience.

#4. Remain scalable. Nothing is as appreciated by a customer than for their SaaS service provider to grow with their business. Don’t get in the habit of reinventing the sales wheel when your customer’s business is experiencing growth and needs to add increased functionality.

#5. Keep the upgrades simple and easy. “Upselling” is an excellent way to keep selling. Every SaaS company knows that upselling is one of the fastest and best ways to fuel their business growth. A burning desire to help your customer succeed is the most important element on the pathway to success. The downfall starts the exact moment you let selling efforts fall by the way.

# 6. Keep improving features that matter to customers. There will always be features that are more important to customers than others. Once those features are clear, keep watch over them and improve them at every opportunity. Make every effort to improve their quality and power. This will inspire loyal customers.

saas accounting pitfalls 5 Make every effort to continually improve your SaaS features quality and power. This will inspire loyal customers.

#7. Keep upgrading the customer experience. Your customers are not in it for only the software provided. They’re in it for the experience. Your software can be experienced through its cost, speed, functionality, features, renewal process, and the level of correspondence attached to it. All of these things can be a “customer experience.”

#8. Include rewards, upgrades, and random discounts. Create a sense of built-in surprise for your customers. This is but another way to inspire loyalty. Experiment after experiment suggests that customers appreciate some type of small giveaway. It can be those surprises that leave your customers eager to tell others about their experience.

#9. Remain Transparent. If you aren’t already, make an effort to get there. Every customer wants to know where their hard-earned cash is going. Many customers are skeptical in nature, and won’t hesitate to raise an eyebrow. Make your security commitments crystal clear, and remove any opaque language from the contract.

In Conclusion

There have been enough recent mishaps to make customers skeptical about companies in general; especially when it comes to data and security. They can be concerned about their private information being just a single click away from unauthorized access.

If there’s downtime, notify your customers. If there are pricing or contract changes, notify them immediately. Answer all questions and address concerns in a timely manner. Make it easy for customers to cancel their service. That may be a hard pill to swallow, but it is the one thing that can make your company appear “suspect.” The moment you reach this tipping point of transparency, your customers will gain immediate respect.

Let us know if there's anything we missed or if you have further tips on how to avoid SaaS accounting pitfalls.

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Gene Krause

Gene has been consulting businesses of all sizes for 18 years and providing them with strategic payments and gateway integrations.

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