SaaS (Software as a Service) companies build and sell software on a subscription basis. SaaS companies need their accounting system to track their revenues (subscription payments) and expenses (hosting, staffing, etc.), and to manage their finances. The company might also want to use the accounting system to gain insights into the business’s financial health. This article compares popular accounting software: Zoho Books, QuickBooks, Xero, NetSuite, FreshBooks and Wave to see which accounting software is best suited for SaaS companies.
Table of Contents
1. Zoho Books
Overview
The Zoho Books accounting system is designed for small to medium-sized businesses, offering features for tracking financial transactions, creating invoices, and managing expenses. Zoho Books is part of a wider suite of products from Zoho that all integrate and function as a single system. This holistic suite of business applications is designed for companies of all sizes and spans various industries, including SaaS. By leveraging the interconnectedness of tools like Zoho CRM, Zoho Projects, and Zoho Books, SaaS companies can benefit from a seamless workflow covering customer management, project tracking, and financial transactions. This ecosystem is particularly valuable in the SaaS domain, where client relationships, project timelines, and financial operations are intertwined.
Modules and Features in Zoho Suited for SaaS Companies
SaaS companies can benefit from the following modules and features offered by Zoho Books and other products in the Zoho suite:
- Zoho Books: Offers invoicing, automate billing with recurring invoices, automated workflows, expense tracking, and a client portal.
- Zoho Subscriptions: The subscription management module is particularly aligned with the SaaS subscription-based billing model.
- Zoho CRM: Manages leads, prospects, and customer interactions, ensuring seamless communication throughout the customer journey.
- Zoho Projects: Allows SaaS companies to track development timelines, allocate resources, and maintain collaborative workspaces.
- Zoho Inventory: Although SaaS companies typically aren’t product-based, this feature might be handy for those offering physical products or swag alongside their software.
- Banking: Connect bank and credit card accounts to track and categorize transactions automatically.
- Expense Tracking: Scan and upload receipts or auto-scan them through email. This is ideal for tracking expenses like hosting, staffing, and other operational costs.
- Client Portal: Allows clients to view their invoices, recent transactions, and make online payments.
- Financial Reports: Generates profit and loss, balance sheet, cash flow statements, and more. This is instrumental in gaining insights into the financial health of a SaaS company.
- Automated Workflows: Automate routine tasks, like sending invoice reminders or thank-you notes, to save time and reduce human error.
- Customization: You can create new modules in Zoho using a What-You-See-Is-What-You-Get (WYSIWYG) Module Editor. You can create custom apps using Zoho Creator, a low-code tool. Custom scripts can be created using Deluge, Zoho’s proprietary programming language.
Pros of Using Zoho Books for SaaS Companies
- Affordability: As a bundled solution, Zoho can offer cost benefits when compared to purchasing disparate tools from different vendors.
- Integration: Apart from native Zoho product integrations, the platform also supports a multitude of third-party applications, broadening its functionality scope.
- Tailored Features: Modules like subscription management are a direct fit for SaaS business models.
- Affordability: Compared to some high-end accounting solutions, Zoho Books provides a cost-effective option.
- Comprehensive Ecosystem: The Zoho suite, with its interconnected tools, ensures consistent data flow, eliminating the need for repetitive data entry across platforms.
- User-friendly Interface: Its intuitive design ensures that non-accountants can still navigate and use the software efficiently.
- Automation: Offers automation of recurring transactions and payment reminders.
- Customization: The Zoho suite provides a high level of customization, ensuring tools align with specific business operations and workflows.
Cons of Using Zoho Books for SaaS Companies
- Customization Complexity: While Zoho offers lots of customization options, this can be quite complex to set up and maintain.
- Customer Support: With such a large and growing customer base, some users have reported delays in customer service response times or resolution.
Recommendation
Zoho Books is an excellent solution for mid- to larg-sized SaaS companies that are looking for an affordable, user-friendly accounting system with features tailored to their business model. Its subscription management and automated workflow features will especially benefit these businesses. The options for customisation are also quite extensive. Smaller SaaS companies might find the large number of Zoho applications and how they interact with one another confusing.
2. QuickBooks
Overview
QuickBooks, developed by Intuit, is one of the most widely recognized names in accounting software. It’s available in both a desktop version and an online version. While QuickBooks Desktop is a software package that you install on your computer, QuickBooks Online is a cloud-based solution, making it accessible from anywhere with an internet connection. Intuit heavily promote QuickBooks Online over QuickBooks Desktop and eventually the online product will probably replace the desktop one. Over the years, QuickBooks has refined its features to cater to a wide array of businesses, including SaaS companies.
Modules and Features in QuickBooks Suited for SaaS Companies
SaaS companies can benefit from the following modules and features offered by QuickBooks:
- Invoicing: Create professional invoices, automate billing cycles for subscription models, and even accept online payments.
- Banking Integration: Sync with bank and credit card accounts to automatically import and categorize transactions.
- Expense Management: Capture receipts digitally, and track expenses pertinent to SaaS like hosting and personnel costs.
- Time Tracking: Useful for SaaS companies that bill based on time or those that want to keep tabs on employee hours.
- Inventory Management: While more geared towards physical goods businesses, it could be useful for SaaS companies that might have auxiliary tangible products.
- Financial Reporting: Deep insights with reports like balance sheet, profit & loss, and more, crucial for understanding financial health.
- Sales Tax Automation: Calculate sales tax automatically, which can be a boon if dealing with different tax regulations across states or countries.
- Payroll: If a SaaS company has employees, QuickBooks can handle payroll, including tax computations.
- Multi-user Access: Different team members can have access levels tailored to their roles, promoting collaboration.
Pros of Using QuickBooks for SaaS Companies
- Versatility: Whether you’re a startup or an established company, QuickBooks offers a solution, be it Desktop for those wanting more control or Online for those valuing accessibility.
- Integrations: With a vast ecosystem, QuickBooks can integrate with numerous third-party tools and software.
- Reliability: Having been in the market for decades, QuickBooks is a trusted name in the accounting space.
- Comprehensive Reporting: Detailed financial reporting is a strength of QuickBooks.
Cons of Using QuickBooks for SaaS Companies
- Learning Curve: While feature-rich, new users might find QuickBooks a bit challenging to navigate initially.
- Cost: Especially for the online version, as you add more features or users, the pricing can become relatively high.
- Customizability: Whilst QuickBooks allows for customizable reports and dashboards, customizing the UI and workflows is very limited.
Recommendation
QuickBooks is a solid choice for SaaS companies of almost any size – from startups to well-established enterprises. For both small and large SaaS businesses that value ease of access and are okay with a subscription pricing model, QuickBooks Online would be the ideal pick. Those who prefer a one-time software purchase might lean towards QuickBooks Desktop. However, that product appears to have a limited time left in the market. QuickBooks’s vast array of features ensures that, irrespective of the choice between Desktop or Online, the essential accounting needs of SaaS companies will be comprehensively addressed.
3. Xero
Overview
Originating from New Zealand, Xero is a fairly new cloud-based accounting software that has rapidly grown in popularity, especially among small to medium-sized businesses. Known for its user-friendly interface, real-time data access, and robust feature set, Xero is designed to make accounting accessible and manageable for both accounting professionals and business owners with limited accounting experience.
Modules and Features in Xero Suited for SaaS Companies
SaaS companies can benefit from the following modules and features offered by Xero:
- Dashboard: A real-time view of your financial situation, allowing for quick insights and overviews.
- Invoicing: Customizable and professional invoices that support recurring billing – ideal for subscription-based SaaS models.
- Bank Connections: Automatically imports transactions from bank accounts, making reconciliation straightforward.
- Expense Claims: Capture costs on the go, track expenses, and manage reimbursement processes.
- Inventory: Manage stock and track value, useful for SaaS companies that might also deal with tangible goods or hardware.
- Projects: Track time and costs to monitor project profitability.
- Multi-currency: Deals with multiple currencies smoothly, perfect for SaaS businesses with a global customer base.
- Financial Reporting: Comprehensive reporting tools offering insights into profit and loss, balance sheets, cash flow, and more.
- Contacts: Maintain detailed records of customers and suppliers, improving relationship management.
- Payroll: Integrated payroll module that takes care of wage calculations, time off, and tax computations.
Pros of Using Xero for SaaS Companies
- User Experience: Known for its clean and intuitive design, making it easy even for non-accountants to navigate.
- App Store & Integrations: Xero’s App Store and API allows it to integrate smoothly with a broad range of third-party apps and platforms.
- Accessibility: Being cloud-based, it’s accessible from anywhere, making remote work and on-the-go checks possible.
- Collaboration: Facilitates real-time data access and collaboration among multiple users.
- Regular Updates: Xero frequently rolls out software updates, often based on user feedback, ensuring the platform remains current and optimized.
Cons of Using Xero for SaaS Companies
- Limited Volumes: Xero themselves say that their platform was designed for businesses with 200 employees, up to 2,000 bank transactions per month, up to 1,000 sales invoices a month, and up to 1,000 vendor invoices a month. Businesses with volumes larger than this might experience slow response times in the Xero system.
- Advanced Features: While robust for many businesses, very large enterprises might find it lacks some of the more advanced features available in heavier accounting software.
- Pricing: Depending on the needs and the number of users, subscription costs can add up for growing businesses.
- Customization: While it has many features, tweaking them to fit very specific needs might be limited compared to some other platforms.
Recommendation
Xero is a superb choice for small to medium-sized SaaS companies seeking an intuitive, cloud-based accounting solution. Its emphasis on user experience and a broad feature set makes it suitable for SaaS firms that may not have dedicated accounting teams but need comprehensive financial management tools. Larger SaaS businesses with more intricate needs might need to evaluate if Xero’s features align with their requirements. Overall, for its ease of use, accessibility, and focus on modern business needs, Xero stands out as a strong contender in the accounting software arena for smaller SaaS businesses.
4. NetSuite
Overview
NetSuite, owned by Oracle, is a comprehensive cloud-based Enterprise Resource Planning (ERP) software that not only offers accounting solutions but also encompasses CRM, E-commerce, and inventory management functionalities. Originally designed for mid-sized and larger enterprises, NetSuite has extended its functionalities to cater to a broader range of business sizes and types. For SaaS companies looking for an all-in-one solution that goes beyond just accounting, NetSuite might be a compelling option.
Modules and Features in NetSuite Suited for SaaS Companies
SaaS companies can benefit from the following modules and features offered by NetSuite:
- Financial Management: A complete suite that covers financial planning, accounting, revenue recognition, and financial reporting.
- Billing: Handles complex billing requirements, including subscription models prevalent in SaaS businesses.
- Revenue Recognition: Deals with complex revenue recognition requirements, especially useful for SaaS companies with deferred revenue considerations.
- CRM: Inbuilt Customer Relationship Management for tracking sales, customer service, and marketing operations.
- Advanced Revenue Management: Automates revenue forecasting, allocation, recognition, reclassification, and auditing through a rule-based event handling framework.
- Project Management: Complete project tracking, from resources to tasks and profitability.
- Inventory Management: Though more SaaS companies are virtual-product based, if there’s a tangible aspect, this module becomes handy.
- Business Intelligence: Real-time dashboards, reporting, and analytics to gain business insights.
- Multi-currency & Tax Management: Deals with various currencies, tax rates, and regulations seamlessly.
Pros of Using NetSuite for SaaS Companies
- Comprehensive Solution: Beyond just accounting, NetSuite offers an entire business management suite that provides extensive features and modules for varied business processes.
- Scalability: Designed to grow with businesses, making it suitable for both mid-sized and large enterprises.
- Customizability: A highly flexible platform that can be tailored to fit unique business needs.
- Cloud-Based: Accessible from anywhere, promoting remote work capabilities.
Cons of Using NetSuite for SaaS Companies
- Pricing: A comprehensive solution comes with a hefty price tag, making it potentially prohibitive for startups or smaller SaaS companies.
- Complexity: With its vast range of features, there’s a significant learning curve involved.
- Implementation Time: Setting up NetSuite to match a company’s processes can take time, especially given its customizable nature.
- Staffing: Generally, running NetSuite requires an in-house person / team to manage the system. Alternatively, an outside service provider can also be used.
Recommendation
NetSuite is ideally suited for medium to large SaaS companies that are looking for a robust, all-encompassing business management software. Its capabilities go beyond just accounting, making it a one-stop solution for those wanting to integrate different facets of their business into one platform. Smaller SaaS startups or companies on a tighter budget might find NetSuite overwhelming and expensive. However, for those with the resources and a need for its extensive features, NetSuite’s long-term benefits could well justify the investment.
5. FreshBooks
Overview
FreshBooks is a cloud-based accounting software primarily tailored for small to medium-sized businesses. Known for its user-friendly design, it simplifies the complexities of accounting to make it more approachable for business owners without a financial background. It focuses primarily on invoicing and expense tracking. Over the years, FreshBooks has carved a niche for itself, especially among service-based businesses and freelancers.
Modules and Features in FreshBooks Suited for SaaS Companies
SaaS companies can benefit from the following modules and features offered by FreshBooks :
- Invoicing: Generate professional-looking invoices with ease, including options for recurring invoices perfect for SaaS subscription models.
- Expense Tracking: Capture and organize expenses, making it simple to bill clients or monitor operational costs.
- Time Tracking: Ideal for SaaS companies that offer consulting or support services, allowing billing for hourly work.
- Projects: Manage project timelines, assign tasks, and collaborate with team members.
- Payments: Accept credit card payments online, facilitating faster receipt of subscription payments.
- Financial Reports: Generate comprehensive reports such as profit & loss, balance sheets, and expense reports to gain insights into the business’s financial health.
- Client Portal: A dedicated space for clients to view invoices, estimates, and leave comments.
- Recurring Payments: Automate billing for regular clients, suitable for subscription-based services.
Pros of Using FreshBooks for SaaS Companies
- User Interface: Designed with simplicity and ease of use in mind, FreshBooks has one of the most intuitive interfaces in the accounting software market.
- Efficiency: Automations, from invoicing to follow-ups, save valuable time.
- Integration: Compatible with a multitude of third-party apps, extending its functionality.
- Customer Support: Known for its responsive and helpful customer service.
Cons of Using FreshBooks for SaaS Companies
- Scalability: As businesses grow, they might outgrow some of the features and need more complex solutions.
- Inventory Features: Not as robust for businesses that have extensive inventory needs.
- Advanced Features: Larger enterprises might find it lacking in some advanced financial analysis tools.
Recommendation
FreshBooks is an excellent choice for small to medium-sized SaaS startups or companies that are in the early to mid-stages of growth. Its simplicity and ease of use make it a valuable tool for businesses that might not have a dedicated accounting team but need to stay on top of their finances. As the business scales and accounting requirements become more intricate, companies might need to consider a more comprehensive solution. In essence, for smaller SaaS companies valuing simplicity, efficiency, and a hands-on approach to financial management, FreshBooks is a compelling option.
6. Wave
Overview
Wave is a free, cloud-based accounting software tailored predominantly for freelancers, solo entrepreneurs, and small businesses. Its primary appeal is its set of strong financial management features at no cost, though there are charges for certain premium services like payments and payroll. Wave provides an intuitive interface and essential tools needed for basic accounting tasks without overwhelming features.
Modules and Features in Wave Suited for SaaS Companies
SaaS companies can benefit from the following modules and features offered by FreshBooks :
- Invoicing: Customizable invoices, with the ability to set up recurring bills, perfect for regular subscription models.
- Expense Tracking: Connect bank accounts to track and categorize expenses automatically, essential for monitoring operational costs.
- Receipt Scanning: Upload receipts via mobile or desktop, which can then be linked to transactions in Wave.
- Financial Reports: Produce critical reports like balance sheets, profit & loss statements, cash flow, and more.
- Payments: Accept credit card payments and bank transfers directly from invoices, ensuring ease for customers and quick payment for businesses.
- Payroll: For those in supported countries, Wave offers a payroll service to manage employee payments.
- Transactions: View and manage all financial transactions, with the ability to edit details for accuracy.
Pros of Using Wave for SaaS Companies
- Cost: One of the most compelling features is that it’s free for the essential accounting functions.
- Usability: User-friendly interface tailored for those without an accounting background.
- Integration: Allows integration with with a variety of tools and third-party applications for enhanced functionality.
- No Limits: Unlike some platforms, Wave doesn’t limit the number of invoices, clients, or transactions.
Cons of Using Wave for SaaS Companies
- Limited features: As businesses grow, they might outgrow Wave’s features, necessitating a shift to a more complex platform.
- Ads: The free version comes with ads, which might be distracting to some users.
- Customization: Limited in terms of invoice design and financial reporting customization.
Recommendation
Wave is a good solution for early-stage SaaS startups, freelancers and solopreneurs in the SaaS space, or small SaaS businesses with straightforward accounting needs. Its zero-cost appeal and foundational accounting tools can be a boon for those just starting out and needing to minimize operational expenses. However, as the company scales, with more intricate financial requirements or a need for in-depth analytics, transitioning to a more robust software might be necessary. In summary, for SaaS businesses on extremely tight budgets yet wanting an efficient and reliable accounting tool should consider Wave.
Summary of Accounting Software for SaaS Companies
The accounting needs of SaaS companies are unique given their subscription-based revenue model, recurring billing mechanisms, and, often, rapid scalability. As such, finding the right accounting software is paramount to ensure streamlined financial management.
- Zoho Books offers a suite of features tailored for businesses, including subscription management, which fits the SaaS model. Its affordability makes it particularly appealing to small to mid-sized companies.
- QuickBooks, both in its Desktop and Online versions, is a versatile tool. While the online version caters to those valuing accessibility, the desktop version provides more control. It’s suitable for a broad range of SaaS businesses, from startups to established enterprises.
- Xero stands out for its clean design and intuitive interface, making it ideal for small to medium-sized SaaS businesses that prioritize a user-friendly experience.
- NetSuite, with its comprehensive ERP solution, caters to medium to large SaaS companies. Its extensive features, beyond just accounting, make it suitable for businesses looking for an all-in-one business management solution.
- FreshBooks is excellent for startups and early to mid-stage SaaS companies. Its emphasis on simplicity and user experience makes financial management less daunting for non-accountants.
- Wave, being free, is a compelling option for early-stage startups and solo SaaS entrepreneurs. Its basic, yet robust features ensure that small businesses can manage their finances without a hefty price tag.
Overall Recommendations
- Early-stage SaaS startups, SaaS solopreneurs, or SaaS businesses on a tight budget, should look to Wave which offers a robust, cost-effective solution.
- Small to mid-sized SaaS companies would benefit most from Zoho Books, QuickBooks, FreshBooks, or Xero due to their ease of use, tailored features, and affordability.
- Medium to larger enterprises that require comprehensive features, scalability, and a more holistic business solution might find Zoho and NetSuite to be the most fitting solutions.
Ultimately, the best accounting software for a SaaS company depends on the company’s size, budget, growth trajectory, and specific financial needs. As the business landscape and company requirements evolve, it’s essential to reassess these tools to ensure they remain the best fit.