by Sharai Lavoie | Apr 14, 2026 | Software
The Timing Decision That Determines Whether Your Income Statement Reflects Reality or Assumptions
The Scenario That Creates the Problem
Your engineering team is twelve months into a major SaaS implementation. The contract includes $400,000 in implementation fees covering both standard setup work and platform-specific development that modifies the source code. The go-live date is still three months away.
Your accounting team is recognizing all implementation revenue over time using a cost-to-cost method. Progress looks steady. The income statement looks healthy.
The problem: half of that implementation work is not distinct from the SaaS subscription. That revenue should be sitting on the balance sheet, not flowing through the income statement.
Two Buckets, Two Timelines
Implementation services in a SaaS arrangement fall into two categories. Non-complex services that provide standalone value to the customer are recognized over time as they are delivered. Complex services that modify the platform’s source code are not distinct from the SaaS and must be combined into a single performance obligation.
The timing implications are significant:
Non-complex services (Group A): Revenue begins immediately. As the team completes gap analysis, data conversion, system architecture, and training, the customer is consuming and benefiting from those activities. Recognition follows a measure of progress, typically a cost-to-cost or labor hours method.
Complex services (Group B): Revenue is deferred. Because these activities are inputs to the SaaS itself, their value is not transferred until the product goes live. The implementation fees attributable to Group B sit as deferred revenue on the balance sheet until the go-live date, then amortize over the remaining contract term alongside the SaaS subscription.
The Allocation Challenge
Splitting a single implementation fee between Group A and Group B requires determining the standalone selling price of each set of services. For many software companies, this is the hardest part.
Non-complex services often have observable pricing, such as gap analysis, training, or data migration services, or the services may be available from third-party providers at known rates. Complex services, by contrast, are rarely sold independently. Their value is embedded in the SaaS subscription.
The result: companies frequently need to estimate the standalone selling price using either an adjusted market assessment approach or an expected cost plus margin approach. The methodology must be documented and applied consistently across contracts.
Subcontractor Costs Follow the Same Split
When third-party development partners or subcontractors provide services during the implementation period, their costs must be bifurcated between Group A and Group B activities, and between the pre-go-live and post-go-live periods.
Consider a security monitoring subcontractor that provides services throughout both the development period and the post-go-live operational period. The portion of their costs attributable to the pre-go-live development work is allocated to Group B and deferred. The portion attributable to the post-go-live period is recognized as a cost of revenue alongside the SaaS subscription revenue.
This cost bifurcation ensures that cost recognition matches revenue recognition, a fundamental principle that many software companies overlook when they treat subcontractor invoices as period expenses.
The Materiality Consideration
ASC 606 permits a practical expedient: if a performance obligation is immaterial in the context of the contract, the entity is not required to account for it separately. Some companies use this to simplify the allocation.
For smaller implementation engagements, where the total implementation fee is modest relative to the overall contract value, a company may conclude that the implementation fees are immaterial and defer the entire amount until go-live. This is a defensible position when properly documented, and it simplifies the accounting without materially affecting the financial statements.
The key is documentation. The materiality assessment must consider both quantitative and qualitative factors, and the conclusion must be applied consistently.
Real-World Application
A software company with a proprietary platform signs a five-year SaaS contract with a total implementation value of $6,000. The contract includes both non-complex deliverables and complex source code modifications.
Management evaluates the implementation fees and determines they are immaterial in the context of the overall contract. Rather than splitting the fees between Group A and Group B, the company defers the entire implementation amount until the go-live date, at which point it begins recognition over the remaining contract life.
This approach is simpler, defensible, and produces financial statements that accurately reflect the economic substance of the arrangement. The company documents its materiality assessment and applies the same methodology to similar contracts.
The Bottom Line
Implementation revenue timing is not a single decision. It is a series of interconnected determinations: which services are distinct, what their standalone selling prices are, when the customer receives value, and whether the amounts are material enough to warrant separate treatment.
The companies that get this right build their revenue models contract by contract, with documentation that supports each classification. The companies that get it wrong are building income statements that will eventually need to be corrected.
At Lavoie CPA, we work with software and SaaS companies that need their implementation revenue to reflect how value is actually delivered to customers.
Start the Conversation Today
by Tara Fusco | Oct 29, 2020 | Accounting, Analytics, Blog, Budgeting, Business Intelligence, CFO, CPA, Entrepreneurs, Growth, Intacct, Planning, SaaS, SMBs, Software, Startups, Technology
How Healthy Is Your SaaS Business? These 6 Metrics Will Help You Figure That Out
As a Sage Intacct certified accounting and implementation firm, Lavoie CPA is excited to share the latest findings for SaaS businesses to become successful in 2021.
From startups to organizations ready to scale each one of these indicators is an invaluable piece of information to evaluate your company’s overall health — not to mention prep you for that looming board meeting in the near future.
In this infographic we will dive into why each of these metrics is the difference between getting your next round of funding, scaling year over year, or hitting the wall.
Get the infographic and learn why you should care, how to calculate, and an interesting fact about the following KPIs:
- CARR (Committed Annual Recurring Revenue)
- CAC (Customer Acquisition Cost)
- CLTV (Customer Lifetime Value)
- Churn
- Free Cash Flow
- CCS (Cash Conversion Score)
by Tara Fusco | Sep 22, 2020 | Blog, CFO, Community, Corporate Social Responsibility, Entrepreneurs, Growth, Mentor, Planning, SMBs, Software, Startups, Technology
As the election season draws closer and the concerns of small businesses continue to grow in the wake of the pandemic, SMB’s are joining forces to make sure their voices are heard in congress. According to a Goldman Sachs survey released on September 8, 88% of small business owners have exhausted their PPP loan funding; with 43% of Black small business owners depleting their cash reserves by the end of the year.
To help amplify US small business needs, Goldman Sachs is using its 10,000 Small Businesses (10KSB) Initiative to serve as a policy platform and community resource center. However, prior to the COVID-19 crisis, the 10KSB alumni collectively represented $12 billion in revenues and employed 175,000 people. More notably, 44% of these businesses are family-owned and 66% are minority and women-owned businesses.
“The 10,000 Small Businesses Voices initiative is designed to help small business owners in the United States advocate for policy changes that will help their businesses, their employees, and their communities,” according to Goldmansachs.com. “We provide the 10,000 Small Businesses Voices community with the tools, resources, and training needed to make their voices heard and drive tangible impact against real issues.”
Among the many tools to assist small businesses, the program includes surveys, open letters to congress, and ongoing virtual events to help guide owners through ongoing challenges and the most recent policy changes.
One of these events was the Virtual Capitol Hill Day held on June 9th -11th. Over three days, 2,100 small business owners connected with Members of Congress through 434 online meetings across all 50 states, Washington D.C. and Puerto Rico. Lavoie CEO, Sharai Lavoie, was named a NC Hill Week Captain and lead discussions with congressional leaders and small businesses across the state.
Lavoie led three discussions one of which was with Congresswoman Alma Adams, representing North Carolina’s 12th District. Discussion topics included:
“I was thrilled to participate in this initiative,” says Lavoie CEO, Sharai Lavoie. “It’s programs like these that will give SMBs a fighting chance and help promote policies that positively impact the everyday American business owner.”
To learn more about the 10,000 Small Business Voice initiative, check out the website to access resources or participate in the many surveys to inform congress of US business owners’ ongoing needs.
by Tara Fusco | Aug 31, 2020 | Blog, CFO, Community, Corporate Social Responsibility, Entrepreneurs, Growth, Mentor, Planning, SMBs, Software, Startups, Technology
Charlotte Business Leader Sharai Lavoie joins Jerrold Kinney, De’Marcus Miller, and DeAndrae Watson for a discussion on race and the role the youth sports clubs and sports industry can play in creating positive change within the business community. This captivating conversation explores systemic racism and the vital dialogue that should exist between equality advocates and business leaders.
Watch the full video below, and check out a few of the highlights!
Key Takeaways
Simply put, we as a society are at the crossroads of cultural advancement and organizational ineptitude. The topic of systemic racism, workplace inequality, and homogenous decision-making can no longer be ignored. However, the definition of the “talk” changes from colleague to colleague as do the continuous actions that need to follow.
Over the years, sports professionals have championed those difficult conversations (“talks”) and been at the nexus of sustainable change and political progress. And now, with unparalleled access to recorded footage of police brutality and the confluence of back-to-back violence on black men and women, professionals and companies have an obligation to drive national momentum and activate the diversity conversation.
Here are some very real tips on how to move the equality needle from our Race Talks in Sports panelists:
Are you an athlete or a professional in the sports industry? Here’s how you can influence or participate in sustainable change:
- Continue to be active in your communities… every day
- Have your beliefs front and center… literally wear them where the cameras will see
- Always participate in the conversation… no matter where you are
- Get over your anxiety and fears surrounding communication… no matter what environment you’re in, someone can learn from your experiences
- Bring your full, authentic self to the workplace… the court, the field, or the office
A company’s commitment to diversity
How to do more than just check the box
Unfortunately, most organizations check the diversity and inclusion box by creating an internal group, announcing it on social media, and that’s it. Committing to diversity means providing your employees the opportunity to be mentored and propelled into their desired industry or professional stature. Companies need to rethink how they can use these diversity and inclusion groups to present goals to leadership, and, over time, show what has actually been accomplished. This allows for true accountability and a way to track how quickly programs are progressing and identify ways to continuously improve.
Start improving your diversity and inclusion initiative by focusing on these 5 areas:
- Evaluate Your Organization & Find The Right Skills That Can Lead Change
- Build A Community With Accessible Communication Channels & Resources
- Educate Everyone In The Company From Leadership to Interns
- Create Transparent Goals That Can Be Shared & Tracked
- Drive Accountability That Can Be Analyzed On A Consistent Basis
Ways to Get Involved
Join the Charlotte Sports + Business Networking Group
Charlotte Sports+Business is a free networking group connecting sports marketing and sports industry executives in the Queen City.
Join the Racial Equity Institute
A Greensboro based organization, the Racial Equality, Institute helps individuals and organizations develop the tools they need to challenge patterns and grow equity within their communities.
Watch Uncomfortable Conversations With A Black Man
Emmanuel Acho sits down to have an “uncomfortable conversation” with white America in order to educate and inform on racism, system racism, social injustice, rioting & the hurt African Americans are feeling today.
Moderator
Sharai Lavoie
CEO
Lavoie CPA
Participants
DeAndrae Watson
Vice President
Octagon
De’Marcus Miller
Senior Marketer
Jerrold Kinney
Senior Marketing & Strategy Professional
by Madeleine Wallmon | Aug 2, 2017 | Analytics, Big Data, Finance, Planning, Software
FP&A Teams Have the Wrong Focus
According to a recent report by Adaptive Insights, CFOs want their employees to spend less time on collecting and preparing data and more time on forecasting and analysis. The survey revealed that financial planning and analysis (FP&A) teams are currently spending 53% of their time on reporting and data gathering alone.
“Reporting, whether it’s on actuals or forecast or planning should be quick. We shouldn’t be spending a lot of time on that,” says Jim Johnson, CFO of Adaptive Insights. “We should be spending much more time on the model that’s supporting it. The predictive analysis, the key performance indicators and the stuff that is really important for the company.”
There is a good reason why employees should spend more time on analytics. Oracle found that businesses who were effective at integrating financial and operating data, using analytics in processes and utilizing predictive analytics outranked their peers by 70% on profit and revenue.
How Can You Improve Your FP&A Process?
Implement a Dynamic Planning Process
First of all, your business need to incorporate a FP&A process that allow for flexibility. Rolling forecasts, for example, is one way to ensure you are adapting to market forces. Since rolling forecasts ultimately is an approach where you add or drop data on a rolling basis, you consequently have real-time insights to your performance against your predictions. APQC reported that an organization can save a median of 25 days on the annual budgeting cycle by using rolling forecasts.
“It makes no sense to use a 19th-century tool to manage 21st-century company in a volatile global economy,” argues Steve Player, a program director at the Beyond Budgeting Roundtable. “In the old days, the CFO sat in the back of the ship recording what happened. Now, the CFO stands on the bridge looking forward and adjusting for variables.” With Lavoie CPA, you can tap into the expertise of our experienced outsourced CFO services, which bring a wealth of knowledge and industry-specific insights to guide your financial decision-making.
Traditional annual budgets have limits. They often take too long to prepare, and when completed the data is already out of date. Rolling forecasts offer continuous updates to your data and a longer horizon with data up to 12-18 months ahead. Thus, you have much more accurate data and reliable insights. This, as a result, allows you to take more strategic decisions about your business.
Make it Easy for Employees to Collaborate
Collaboration among employees and management is crucial for your business. First, they help you realize your goals, but they can also aid in reducing hidden costs. According to research by CEB, hidden budgeting and forecasting costs may prevent companies from realizing their full potential of investments in FP&A improvements.
How do businesses encourage collaboration? There’s one simple answer. Leverage technology. Cloud-based accounting software is a great solution for companies that have data that needs to be shared and aggregated by more than one employee. In addition, cloud software also allows for employees to access the same data from virtually anywhere. Finally, most cloud-based software providers offers integration with other enterprise systems, which allows you to have one source for your performance management.
Conclusion
While you may think your business is doing well enough, your competitors are advancing by implementing better FP&A processes like the ones discussed above. Don’t wait, instead, invest in FP&A processes that will help your business achieve outstanding results and reduce hidden costs.
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