INDUSTRIES / IT & SOFTWARE
IT & softwareKnow which contracts
actually pay
Software and IT businesses look profitable in aggregate and often aren't at the contract level. Fixed-price work that overran, retainers that expanded quietly, subcontractors billed at the wrong rate — none of it shows in a company-wide P&L.
Revenue that arrives
at the wrong time
The defining accounting question in this sector is when revenue belongs to you. An annual SaaS subscription paid upfront is cash today and revenue spread across twelve months. Recognise it all on receipt and your growth chart is fiction — a great January followed by eleven flat months, repeated every year until it becomes impossible to plan against.
The same applies to implementation fees, multi-year contracts and anything paid in advance. Deferred revenue is a liability, and treating it as income makes a business look healthier and more volatile than it is.
Project profitability is the second gap. Agencies and consultancies bill time, but very few track the true cost of delivering it — salary plus taxes plus benefits plus the non-billable hours that person also worked. Without that, a fixed-price project that overran by forty percent looks the same in the accounts as one that came in clean.
Contractor payments matter more here than in most sectors, because so much of the delivery is subcontracted. Misclassification exposure is real, 1099 obligations are real, and offshore contractor payments carry their own reporting questions.
Finally, R&D. A great deal of ordinary software development qualifies for the R&D tax credit, and a great many small software businesses never claim it because their books don't separate qualifying activity from everything else.
What usually goes wrong
- Subscription revenue recognised on receipt rather than over the term
- Deferred revenue not tracked as a liability
- No cost or margin visibility at project or contract level
- Fully loaded employee cost unknown, so pricing is guesswork
- Contractor classification never reviewed
- R&D credit missed because activity isn't separated
- Non-billable time invisible, so utilisation is a guess
Bookkeeping from $299/month · Cleanup from $200 per month behind
Built for recurring revenue
and project delivery
The two things this sector runs on, handled properly rather than approximately.
Revenue recognition
Subscriptions, implementation fees and multi-year contracts recognised over the right period, with deferred revenue tracked as the liability it is.
Project profitability
True delivered cost against contract value, per project. Find the fixed-price work that quietly lost money.
Utilisation reporting
Billable versus total hours by person and team, so capacity decisions rest on data rather than impression.
Contractor payments
Domestic and offshore subcontractors paid and reported correctly, with classification reviewed before it becomes a problem.
R&D credit support
Qualifying development activity separated and documented through the year, so the credit is claimable rather than theoretical.
SaaS metrics
MRR, ARR, churn and customer acquisition cost derived from the books rather than maintained in a separate spreadsheet nobody trusts.
You'll recognise this if...
None of these mean anything is broken. They mean the books were set up to satisfy a tax return rather than to run a business, which is the normal starting point.
Lumpy revenue
Your monthly revenue swings with billing dates rather than with the work you actually delivered.
Fixed price fear
You quote fixed-price work nervously because you've been burned and can't say by how much.
No true cost
You couldn't state today what an hour of a senior developer's time actually costs the business.
R&D unclaimed
You build software daily and have never claimed the R&D credit, or aren't sure whether you qualify.
What changes once
the numbers are right
Revenue smooths out and starts reflecting delivery rather than invoicing. That single change makes every other number more useful, because month-to-month comparisons finally mean something.
Project-level margin exposes the pattern most agencies suspect but can't prove: a particular type of work, or a particular client, consistently costs more to deliver than it returns. Once it's visible, you can reprice it or stop selling it.
Utilisation becomes a real figure rather than an impression, which changes hiring decisions. Most firms we work with discover they had more capacity than they thought, or considerably less.
And if you qualify for the R&D credit, that's often a five-figure difference for a business of modest size. It requires the bookkeeping to separate qualifying work during the year — reconstructing it afterwards rarely holds up.
BOOK A FREE CALLEvery client gets
- Replies within 48 hours, guaranteed
- Books closed by the 15th, every month
- Flat monthly pricing, no hourly billing
- A plain-English summary with every report
- The same team every single month
- Cancel any time, files handed over cleanly
IT & software accounting questions
Depends on your size and who reads your accounts. Investors, acquirers and lenders will expect it. A ten-person agency with no external reporting usually needs the principle applied sensibly rather than the full standard. We'll tell you which you're in.
Yes, derived from the accounting records rather than kept in a parallel spreadsheet. That matters because investor-facing metrics that don't reconcile to the financials cause problems in diligence.
Paid and recorded correctly with the appropriate reporting. Offshore arrangements carry different documentation requirements than domestic 1099 contractors, and it's worth getting right before a payment volume builds up.
More than most founders expect — developing new functionality, improving performance, and technical work with genuine uncertainty in the approach. Routine maintenance and cosmetic changes don't. The key is separating the two as you go.
Yes, arguably more so. Clean books and a clear runway figure matter enormously at the next raise, and fixing historical bookkeeping during diligence is a bad time to discover problems.
Yes. Separate books per entity with consolidated reporting on top, which is the usual requirement once there's a holding company or a separate development entity.
Find out which work
is actually profitable
Thirty minutes, no pitch. We'll look at how revenue and project costs are recorded, and quote you a flat monthly price.
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