CPAs Need New Metrics to Understand Digital Business Models
Researchers from the CPA Ontario Centre for Sustainability Reporting and Performance Management (previously the CPA Ontario Centre for Performance Management Research and Education) at the University of Waterloo quizzed executives from software as a service (SaaS) firms about how they measure and manage company performance.
The authors found that outside of tax filing, generally approved accounting principles are seen as largely irrelevant in the SaaS world.
Key takeaways from the paper
The accounting discipline needs to master SaaS to stay relevant
Traditional accounting has lost touch with today’s business models and the performance metrics that are derived from these models. To stay relevant and competitive in a global economy, the profession needs to understand these increasingly important business models.
There is a disconnect between the needs of SaaS firms for guidance and the ability of CPAs to provide it
Executives and investors in SaaS firms find contemporary accounting necessary for compliance but less useful in supporting decision-making for managers and investors.
Accounting education should teach SaaS models and metrics
CFOs could add more value to businesses if they encountered SaaS metrics early in their education. Educators and the CPA Competency map could take this onboard to help future CPAs give relevant performance-management information to businesses using new models.
Maintaining data integrity is crucial for SaaS businesses
High-quality data is necessary to ensure that the metrics SaaS-based companies report on and analyze are accurate and comprehensive. SaaS companies should minimize manual entry, ensure the data is complete, and keep data consolidated.