An important step in an emerging technology company’s growth is choosing the right accounting and financial management platform for its current and future needs.
Relying on a basic accounting program designed for small businesses can hinder an emerging company’s growth. Basic tools require manual work that diverts attention and fail to provide insights that help the company’s management understand the factors driving its financial and operational performance.
Shifting to accounting software like Sage Intacct can help technology companies get a better handle on their revenue and increase their ability to recognize revenue properly under ASC 606, Revenue From Contracts with Customers.
Benefits of an Accounting System Unique for Technology Companies
The primary benefits of an industry-focused accounting software to growing technology companies include:
- Tracking detailed metrics about performance and opportunities
- Reducing manual effort and reliance on spreadsheets
- Understanding revenue by customer segments
- Identifying customer churn rates
- Aligning business development activities to market demand
- Providing more detailed information to board members and investors
Importance of Providing Detailed Metrics for Funding
If a technology company is seeking latter-stage funding, or considering a public offering, it will need to provide detailed metrics to potential investors about its current performance and expected growth rates. Failing to do so will likely disqualify a company from attracting sophisticated investors.
Improving Revenue Recognition
Industry-focused accounting software can also help technology companies comply more easily with the revenue recognition requirements of ASC 606.
For instance, SaaS companies typically have revenue from a variety of sources within a given customer contract. These often include the underlying software, with revenue that must be recognized over the life of the agreement, but also related services such as training, maintenance, and technical support. Trying to allocate these elements monthly using spreadsheets can be challenging and often frustrating, but they can be tracked automatically in Sage Intacct.
Similarly, cloud software contracts with usage-based billing can be difficult to monitor manually, often resulting in billing and revenue-tracking errors.
Improving Revenue Forecasting
Manual revenue calculations also hinder the ability of technology companies to develop more than a basic understanding of their financial performance. They may be having more success, for instance, in reaching customers within specific industry verticals or company sizes. However, they won’t be able to quantify that success if they’re wasting time reconciling data listed in separate spreadsheet files.
An industry-focused accounting platform enables management to analyze revenue trends and develop forecasts based on data, rather than intuition and optimism. Being able to understand and trust their financial and operational data enables technology companies to improve efficiency and better align management strategy with their business development efforts.
What Accounting Software Is Right for Your Tech Company?
As an emerging tech company, it’s critical to take control of finances and streamline your accounting processes. Don’t let the burden of manual bookkeeping and reporting hold you back. By selecting the right accounting software, you can automate your financial tasks, ensure accurate record-keeping, and gain valuable insights into your company’s financial health.
Selecting the right software for you can be challenging. Contact us to learn more about how Sage Intacct can help your technology company understand its performance and opportunities.
