Questions

How do most SaaS platforms track revenue? Realized revenue vs. sales.

Counting sales as revenue doesn't work in GAAP but do VC's care that sales and revenue are different and do they use revenue and sales interchangeably?

4answers

In my experience, VC's always want to know GAAP revenue because it's a way to compare apples to apples. We both know it's not perfect in that regard, and that cash is king, and they know that too, but that's the primary, standard metric.

The good ones want to see both, so they really understand the mechanics of the business.


Answered 5 years ago

Actually this is an accounting issue commonly referred to as "revenue recognition". How you recognize and record sales is dictated by both the tax regulations and corporate policy.

Go to the website of your national government tax agency and input "revenue recognition".

As long as you comply with generally accepted accounting principles (GAAP) most likely be fine. But FYI, we recommend our portfolio companies track revenue as money in the bank and sales as part of the sales funnel.


Answered 5 years ago

This is a very interesting topic. You are right that GAAP doesn't work and that more detail information is needed.

I have found this post very helpful.

https://medium.com/@DanielleMorrill/is-my-startup-burn-rate-normal-882b2bd20f02

You should also read everything on SaaS of Tom Tunguz
http://tomtunguz.com/saas-revenue-growth-rates/


Answered 5 years ago

I see Sales and Revenue as the same thing. I think when you say Sales you are referring to Bookings? We track bookings (signed contracts) and GAAP revenue by customer. I think it is important to track both and you will be asked for your average ARR or MRR per customer and even a waterfall of GAAP revenue by customer.


Answered 3 years ago

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