Embedded Accounting Software For SaaS Companies
Before the age of digital technology, many companies relied on manual accounting practices to manage their finances. They maintained basic general ledgers, juggled data across various spreadsheets, and spent an inordinate amount of time on gathering redundant reports from different departments. With the progress of digital technology, traditional methods began to hinder rather than help.
Today, accounting solutions offer cost-effective ways to manage and automate complex financial and operational processes. Embedded accounting software is the most advanced technology to date. An embedded accounting module is an in-built part of a multifunctional, tailored solution. It integrates all financial accounting functions into a multi-purpose platform adapted to your business needs.
As a result, you no longer need to maintain separate records for various accounting purposes or transfer data from various applications. From point-of-sale terminals to stock facilities, an embedded accounting module easily connects reporting activities across your business.
In this article, we'll explore the advantages and key features of embedded accounting software modules with particular emphasis on rapidly growing SaaS businesses.
What is embedded accounting software?
Embedded accounting software is an upgraded version of traditional accounting software. It brings all your major financial functions into an already existing multi-purpose application and eliminates the need to keep different books and records for things like ordering or costing.
This software works in real time, which means it constantly updates data from other accounting programs you might be using. This means that you won’t need to transfer data or reconcile ledgers manually.
Integrated accounting solutions can also tell you the cost of each product or operation and provide insights into your organization's overall profit or loss, marginal costs, or variances. Certain advanced systems can also help with job costs, track employee hours for payroll, manage inventory, and send invoices and statements.
For SaaS (Software as a Service) companies, embedded accounting software can have a dual purpose. First, it can be used by the company's management to optimize their own financial operations. Second, and equally important, you can offer a SaaS accounting system as a part of a SaaS solution to third-party clients.
In a nutshell, embedded accounting software is the all-in-one solution that simplifies your financial management and keeps your business running smoothly.
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Why should you use embedded accounting software?
Accounting software for SaaS companies offers a multitude of remarkable advantages.
When it comes to business finances, relying on pen-and-paper or spreadsheets may work for a while, but the real insight comes with accounting software. It centralizes and organizes your financial data for real-time access. This means you can get a comprehensive view of your business's financial performance at any moment and take prompt action.
Accounting software uses automation to speed up tasks. Invoices, quotes, and financial sheets are often pre-filled, which reduces the need for manual data entry. You can set up recurring invoices, send reminders, and even accept digital payments directly through your invoices. This time-saving boost can positively impact your company's productivity.
Higher quality accounting
Accounting is prone to errors. Accidental typos, data misplacements, and other common blunders can wreak havoc on your financial records. Accounting software accurately records transactions, which reduces the likelihood of errors in your balance sheet. Furthermore, centralized financial data makes life easier for your accountant. SaaS accounting software can offer accountants free access to the platform, which improves accuracy and saves time on gathering documents.
Clear audit trails
Audit trails are detailed, chronological records found in accounting software. Audit trails are often needed for compliance, but they are also considered a business best practice. These trails are important for the verification and tracking of transactions, trades in brokerage accounts, project details, and more. Oftentimes, accounting software may not let you turn off these audit trails – they're a built-in feature. These trails provide you with a complete history of all software transactions, including when and who was involved, which ensures the integrity and security of your financial data.
Improved analysis and forecasting
Accounting software isn't just about tracking past transactions. Integrated accounting software connects with and collects data from POS, CRM, and other applications you’ve got. With robust reporting tools, you can gain a profound understanding of your business's performance. But top-notch accounting systems take it a step further. They leverage historical and current data to make more accurate predictions about your company's future revenues, expenses, and profitability.
Increased functionality and decreased complexity
Many businesses encounter challenges with their current accounting software, as it often lacks the necessary features. For instance, their CRM systems might provide contact information for invoicing but cannot perform ledger analysis. Similarly, older or open-source accounting systems may fall short in delivering real-time insights due to their outdated capabilities. With an embedded accounting module, you can just add accounting features to an existing system instead of developing new software from scratch. A significant advantage is the reduced learning curve when compared to the development of a separate application. Performing accounting tasks within a single, familiar system is much easier for your employees.
Features of embedded accounting software
Integrated accounting software offers all the features of a standalone accounting application without being resource-demanding.
What is double-entry accounting? It’s a method used to track a company's financial standing by recording each transaction twice: once as a debit and once as a credit. This approach helps to prevent errors and provides a more accurate representation of a company's financial position.
Accounting for SaaS companies can’t be effective without double-entry accounting. It empowers you to have an up-to-the-minute understanding of your financial health.
However, as SaaS firms expand, management of transactions within the double-entry bookkeeping framework can become challenging. A double-entry accounting system automatically collects financial data, such as expenses and revenue, into the appropriate accounts, and then creates corresponding journal entries. This simplifies the bookkeeping process and reduces the time you spend on preparing accounting statements.
The balance sheet is a snapshot of your business's financial status at a particular moment. This document delineates your company's assets on the left side and its liabilities and equity on the right. Essentially, the balance sheet provides a concise overview of your business's financial health, its assets, liabilities, and equity at a specific point in time. With accounting software, you can access detailed breakdowns on your assets and liabilities, which improves your financial insights and decision-making capabilities.
Accounts Payable and Receivable
Accounts Receivable deals with handling payments received from customers, whereas Accounts Payable manages the company's payments to its suppliers. You need these to project the company's cash flow requirements. With integrated accounting software, you can forecast expected cash inflows and outflows over specific periods. Embedded accounting software can also notify you about early payment discounts from vendors, which ultimately reduces procurement costs.
General ledgers (GL) are used by accountants to prepare financial statements and reconcile cash flows. For small start-ups, a basic general ledger might suffice. But if you are a SaaS business, you often have to manage numerous contracts. As a result, you need to maintain separate ledgers for tracking of expenses, overhead, and budgets for each project. When it’s time to enter the data into the central general ledger, problems can arise. Without integration, accounting for SaaS can become a lengthy, prone to mistakes, and tiring process of separating specific expenses and revenues among projects.
SaaS accounting software can connect your general ledger with project-specific ledgers through a central database. This makes creating GL easier, reduces the manual workload for accountants, and frees up time for more strategic financial planning and analysis.
Profit and Loss Report
The Profit and Loss (P&L) statement is a document that compiles information on a company's revenues, costs, and expenses during a specific time frame, often a quarter or fiscal year. You need it to assess your company's capacity to generate profits through revenue growth, cost reduction, or a combination of both. P&L statements can be presented on either a cash or accrual basis and serve as a valuable tool for both company management and investors.
With embedded accounting software, you can easily understand your income, expenses, and net profit. The P&L statement offers a detailed breakdown of income and expense data, and you can quickly access this vital financial information by simply selecting a relevant timeframe.
SaaS accounting software: a case study
The client. A. Anthony Corp, led by founder Anthony Serdula, is an experienced facility management company. With over 20 years of industry expertise and a growing range of services, the company's primary focus is optimization of building operations, which allows their clients to concentrate on their core competencies.
The solution. We developed an enterprise facility management app for A. Anthony Corp. This software transforms the way clients of A. Anthony manage their internal operations and helps them overcome challenges related to building operations. This B2B facility management app automates workflows between organizations and service providers, simplifies maintenance, and enhances overall efficiency.
Accounting module: After exploring existing options such as Xero, the company recognized the need for a more flexible and tailored accounting solution. In the process of SaaS accounting solution development, the Apiko team created an accounting module that allows businesses to accurately process customer and supplier invoices. It also provides the flexibility to create customized reports beyond the constraints of off-the-shelf solutions.
Features of integrated accounting module:
- Chart of accounts
- Client sales report
- Double entry accounting
- Profit & loss (P&L) report
- Balance sheet
- General ledger (including ledger entries)
- Accounts payable
- Accounts receivable
- Work in progress report
- Financial year closing
Embedded accounting software is a new generation of solutions designed to simplify accounting processes and keep your finances in check. It brings all major financial functions into an already existing single application without an increase in complexity for users.
If you're considering using software engineering services to develop an integrated accounting solution, Apiko is your ideal partner. With a wealth of experience in SaaS app development, we can help you achieve financial clarity and success. Contact us today to get started with your facility management or manufacturing digital transformation!