Running a SaaS startup means wearing a dozen hats—coding, shipping features, answering support tickets, and yes, trying to make sense of financial stuff too.
If you've never heard of ASC 606, you're not alone. But it's one of those things that becomes a huge problem later if you ignore it now—especially when it comes to revenue recognition.
I didn’t come from an accounting background either, but I’ve learned (the hard way) how much revenue timing affects everything from investor trust to forecasting growth.
Here’s a breakdown of what I wish I knew earlier about ASC 606—from a developer/founder’s point of view.
What is ASC 606?
ASC 606 is an accounting standard that tells businesses when to recognize revenue. And in SaaS, that's trickier than it sounds.
You don’t recognize revenue when someone pays you. You recognize it when you've delivered value.
If you sell a subscription, onboarding services, or usage-based plans, you need to report revenue in a way that matches how you fulfill those obligations—not just when Stripe sends you money.
The 5 Steps of ASC 606 (Simplified for SaaS)
Identify the contract
Every subscription or payment plan needs to be a real agreement. Terms accepted on a signup page count.List the performance obligations
Software access? Onboarding help? Analytics add-on? You have to separate them and treat them differently in your books.Determine the transaction price
That includes discounts, credits, usage estimates—basically what the customer’s expected to pay over the contract.Allocate the price to each obligation
You need to split revenue across your services based on what each part is worth individually.Recognize revenue when value is delivered
Month-by-month for subscriptions, immediately for one-time services, and as-it-happens for usage-based billing.
Common Pitfalls in Early SaaS
- Booking annual payments all at once
- Ignoring mid-cycle changes like upgrades/cancellations
- Not adjusting for discounts or refundability
- Logging onboarding fees upfront (when they're bundled)
- Trying to track all of this manually in spreadsheets
All of these can lead to distorted revenue metrics, messy audits, and awkward conversations with investors.
Tips for Developer-Led Teams
- Use standardized contract terms so obligations are clear
- Sync often between sales, product, and finance (even if it's just you wearing all hats)
- Monitor deferred revenue — money you’ve collected but haven’t earned yet
- Consider automating revenue schedules once you have real traction (manual tracking doesn’t scale)
There’s a longer breakdown with examples, common mistakes, and actionable tips here: ASC 606 for SaaS Startups
Hope this helps someone out there avoid the “founder’s accounting headache” I went through. If you’ve dealt with ASC 606 or revenue timing in your startup, I’d love to hear how you handled it.
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