What is SaaS Accounting?

04/08/2025 04:44 PM - By Opsey

You remember how traditional businesses often purchase accounting software, install it on their computers, and then await licence renewals or data backups?

SaaS accounting is the complete opposite.

What is SaaS Accounting Software?

SaaS accounting is the use of cloud-based software to manage a business’s finances without any installation on a computer. The term "SaaS" stands for Software-as-a-Service, and it means you’re accessing powerful accounting tools over the internet.

Instead of buying a licence upfront or downloading bulky desktop programs, SaaS accounting platforms run on the cloud. You log in through a browser or app, and all your data is synced in real-time.

But here’s the twist: SaaS accounting isn’t just about cloud-based accounting platforms. It’s so much more than that.

With the right SaaS accounting tool, you can:

Track cash flow and inventory in real-time
Send invoices that get you paid faster
Monitor your taxes without hiring three different consultants
Access your data across multiple devices
Work with remote teams or your accountant from anywhere

Difference between SaaS accounting and traditional accounting

Features	Traditional Accounting	SaaS Accounting
Access	Installed on one computer	Access from any device
Updates	Manual	Automatic in the background
Collaboration	Limited	Multi-user in real-time
Backup	Manual or local	Automated cloud backups
Cost	One-time licence	Subscription-based
Integration	Rare or custom	Easily integration with other tools using API

What accounting is unique to the SaaS industry?

While SaaS accounting software can serve any kind of business, accounting for SaaS businesses (like a subscription-based CRM or project management tool) has its own unique financial dynamics.

Here are three key differences:

1. Recurring Revenue and Subscriptions: SaaS businesses don’t sell one-time products. They sell subscriptions, which are usually monthly or annually. This introduces Monthly Recurring Revenue (MRR) and Annual Recurring Revenue (ARR) into the mix. Accounting must reflect how revenue flows in overtime.

2. Revenue Recognition Rules: If a customer pays ₦1.2 million for a yearly subscription in January, you can’t record it all as revenue immediately. It must be recognized monthly, as the service is delivered. This is where accrual accounting and deferred revenue concepts come into play.

3. Customer Acquisition Costs (CAC): SaaS businesses often spend money upfront to acquire a customer (ads, onboarding, discounts) and only earn it back over time. So accounting must track metrics like Customer Lifetime Value (CLTV) and CAC Payback Period to monitor profitability.

In summary, SaaS accounting is deeply tied to customer behaviour, retention, and recurring value.

Common examples of SaaS accounting software in the Nigerian market

The Nigerian business landscape is catching up fast with cloud technologies. If you're exploring SaaS accounting software in Nigeria, here are some popular platforms you should know:

1. Zoho Books is a great fit for SMEs and startups. It offers features like automated bank feeds, client portals, multi-currency billing, and inventory tracking. Plus, it’s compliant with VAT and Withholding Tax regulations in Nigeria.

2. QuickBooks Online is widely used in Nigeria for its user-friendly interface and smart reporting tools. It integrates well with many Nigerian banks and supports payroll and invoicing, which makes it ideal for small to medium-sized businesses.

3. Sage Business Cloud offers strong features for growing businesses that need more detailed controls, especially those in service, distribution, or retail. It also supports multiple users and offers analytics dashboards for better decision-making.

4. Xero, though not as popular as the others locally, it is also preferred for its clean UI and deep integrations.

These tools help Nigerian businesses manage cash flow, track expenses, automate tax calculations, and collaborate with accountants without being tied to an office.

SaaS accounting standards

Accounting for SaaS companies must follow specific industry standards, especially if they plan to scale, raise funds, or report to regulators.

Here are a few essential ones:

1. IFRS 15 – Revenue from contracts with customers: This is the most important standard for SaaS companies. IFRS 15 lays out how you should recognize revenue when dealing with subscriptions, discounts, bundled services, and multiple-year contracts. It ensures you're not over-reporting income in one month and under-reporting in the next.

2. GAAP – Generally Accepted Accounting Principles: If you're dealing with U.S. investors or clients, you might also need to follow GAAP. While similar to IFRS, GAAP has slightly different rules for recognizing revenue, especially when it comes to costs incurred to acquire a customer (like commissions or onboarding fees).

3. Nigeria’s Financial Reporting Standards (NFRS): If you’re operating in Nigeria and filing official statements locally, ensure that your SaaS accounting software aligns with NFRS, which is largely modelled after IFRS but tailored for Nigerian compliance.

Why SaaS accounting is the future

The financial world is moving to the cloud.

SaaS accounting gives modern businesses the tools they need to stay agile, compliant, and financially healthy.

You’ll save time, reduce errors, and gain real-time insight into your business’s performance for a predictable monthly cost.

Droidedge Consulting helps businesses set up, customize, and integrate tools like Zoho Books, QuickBooks Online, Sage Business Cloud, and more.

Let’s talk about how to simplify your financial operations.

What is SaaS Accounting?