ASC 606 lives in a spreadsheet
Multi-element contracts, ramped pricing, mid-term upgrades, and usage overage produce schedules no accounting system this size handles — so they get built by hand, quarterly, by one person.
ERP by industry
Revenue recognition is the reason software companies leave QuickBooks, and it arrives on a deadline — a round, an acquisition, or an audit. ASC 606 schedules driven from contracts rather than spreadsheets, deferred revenue you can explain, and SaaS metrics that agree with the ledger.
Your size, your billing system, and your contract types. We will tell you where ASC 606 will break under diligence.
The problems
Multi-element contracts, ramped pricing, mid-term upgrades, and usage overage produce schedules no accounting system this size handles — so they get built by hand, quarterly, by one person.
ARR from the billing system, revenue from the GL, and bookings from the CRM produce three numbers. Reconciling them before every board meeting is a recurring tax.
The balance moves and nobody can explain the movement without rebuilding it. This is the first thing a diligence team pulls on, and the first place a deal slows down.
Fees, refunds, disputes, proration, and failed retries mean gross bookings in Stripe rarely equal revenue in the ledger, and the difference is reconciled manually.
Hosting, support salaries, customer success, and third-party APIs belong in COGS. Most software companies this size have them scattered across operating expense, so gross margin is fiction.
A funding round or an acquisition turns a working close into an urgent problem. Rev rec, deferred revenue, and controls are what get examined, in that order.
Where revenue goes
A representative growth-stage shape. The first two deductions are cost of revenue and belong in gross margin — which is why misclassifying them makes every SaaS benchmark you report meaningless.
Hosting, support, customer success, and third-party APIs consumed to deliver the product are cost of revenue. Where they sit in operating expense instead, reported gross margin is overstated by ten to twenty points — and an investor will find that in an afternoon.
Your stack
Benchmarks
From our engagements with software businesses between $5M and $60M ARR. The bar is a typical customer after two quarters; the marker is the segment median.
Almost every software company we work with arrives on a deadline. A term sheet is signed, a quality-of-earnings review is scheduled, or an auditor has asked for the revenue schedules — and the honest answer is that they live in a workbook that one person maintains and nobody else can reproduce.
That workbook is usually not wrong. It is unverifiable, which for diligence purposes is the same thing. A reviewer cannot tie the schedule to contracts, cannot see how a mid-term upgrade was handled, and cannot confirm the deferred balance rolls forward correctly — so they discount what they cannot verify, and the conversation about multiple becomes a conversation about risk.
ARR, bookings, and recognised revenue measure different things and should never be identical — but they should be reconcilable, and in most companies this size they are not. Because contracts, invoices, payments, and schedules are objects on one graph here, the bridge between them is computed rather than assembled: bookings to ARR to recognised revenue to cash, with each step explainable.
The practical effect is that the board pack stops being a two-day assembly exercise, and that the numbers in it survive being questioned.
Companies with heavy international entity structures and local statutory filing across many jurisdictions should look at NetSuite. Very early companies under roughly $3M ARR with simple annual contracts genuinely do not need this yet, and we will say so.
Questions
Before a diligence team does. Send your contract types and a billing export and we will tell you what will not survive review.