Money Matters

Understanding SaaS compliance: Best practices for accounting and reporting

Are you a small business owner or part of your company’s IT, Software Asset Management, or Procurement team? Learn what SaaS compliance means and discover best practices to strengthen your accounting and reporting processes.

If your business uses Software-as-a-Service (SaaS) solutions, understanding SaaS compliance is essential, especially for accounting and reporting teams.

Compliance directly impacts your financial controls, data security, and how confidently you can report your company’s performance to stakeholders.

For even the most diligent SaaS CFOs and finance leaders, the question “How are we doing on our SaaS compliance?” is never far from mind. With new accounting laws and regulations emerging every year, staying compliant can feel overwhelming.

Yet compliance with government accounting standards and industry-specific regulations can have consequences that ripple through every level of your organization.

This article breaks down what SaaS compliance means, why it matters to finance and accounting teams, and explores best practices designed to keep your SaaS environment audit-ready and secure.

You’ll learn how to:

• Use automation to stay compliant, reducing reliance on manual processes that can lead to errors or missed regulations.

• Eliminate the “rushed and worried” mindset by optimizing processes so your team can work confidently and accurately.

• Pass every compliance audit with flying colors by leveraging cloud-based accounting software and robust security controls that help prove transactional security under standards like ASC 606.

Dive in and learn practical strategies to manage SaaS compliance effectively, so you can stay confident and in control every step of the way.

What is SaaS compliance?

SaaS compliance refers to the process of making sure software delivered as a service adheres to relevant regulatory standards, industry best practices, and internal controls. Unlike traditional software installed on-premises, SaaS runs in the cloud, which means compliance also involves how data is handled, stored, and secured across networks and jurisdictions.

At its core, SaaS compliance intersects three main areas:

• Financial controls: ensuring that revenue, expenses, and other financial data tracked through SaaS platforms follow accounting standards and regulations.

• Data privacy: protecting personal and sensitive information in line with laws such as GDPR, HIPAA, and CCPA.

• Security regulations: maintaining robust security measures that meet standards like SOC 2, ISO 27001, and PCI DSS.

Keeping SaaS compliant means aligning your software use with these financial, privacy, and security rules to reduce risk and ensure reliable operations.

Here’s what we’ll cover:

Why SaaS compliance matters for finance and accounting

As finance and accounting professionals managing software solutions, SaaS compliance directly impacts your ability to:

• Recognize revenue accurately: compliance frameworks such as ASC 606 provide clear guidance on when and how to recognize subscription and SaaS revenue. Following these standards makes sure your financial statements are precise and reflect the proper financial health of your business.

• Prepare for audits: internal and external audits require transparent and accurate records. Maintaining SaaS compliance guarantees that your data, processes, and controls can withstand rigorous scrutiny, making audits smoother and less stressful.

• Meet regulatory filings: whether reporting to the SEC, tax authorities, or other regulators, SaaS compliance helps ensure your financial reporting aligns with accepted accounting principles like GAAP or IFRS, reducing the risk of regulatory penalties or restatements.

• Maintain trust with stakeholders: investors, customers, and business partners expect transparency and robust security around financial and personal data. Demonstrating compliance shows that your business takes its responsibilities seriously and safeguards sensitive information.

Ignoring SaaS compliance can result in financial misstatements, costly fines, reputational damage, and lost customer confidence—risks that no finance team can afford to take lightly. Prioritizing compliance protects your organization’s integrity and supports sustainable growth.

Key SaaS compliance frameworks

Understanding SaaS compliance frameworks is essential for your finance, IT, and compliance teams to prepare effectively and meet all obligations. These frameworks generally fall into three key categories:

Financial compliance standards

1. ASC 606

The ASC 606 compliance guidelines were developed by the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) in 2014 and went into effect in 2018 for public companies and in 2019 for private businesses. Officially titled Revenue from Contracts with Customers (Topic 606), the purpose of these standards is to standardize when and how entities recognize revenue.

The FASB and IASB outlined five steps that organizations must follow to achieve ASC 606 compliance:

• Ensure transparency around contract terms and collectability thresholds.
• Define performance obligations clearly for consistency.
• Identify any variable pricing terms.
• Allocate a portion of the transaction price to performance obligations.
• Recognize revenue appropriately based on these allocations.

2. GAAP / IFRS

Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS) serve as the foundation for financial reporting and disclosure. Compliance with these standards ensures your financial statements are consistent, transparent, and comparable, helping to meet both domestic and international reporting requirements.

3. SOX (Sarbanes-Oxley Act)

Sarbanes-Oxley (SOX) compliance is mandatory for public companies, but several key provisions also apply to accountants, auditors, and executives at small and medium-sized businesses. SOX requires companies to implement sufficient internal controls to protect against potential risks, such as fraud and financial misstatements.

Even if your organization isn’t required to comply with SOX, many of its provisions are considered best practices that benefit all businesses. These practices help ensure financial statement accuracy, safeguard against lawsuits and fraud, and protect your business and its stakeholders from cyberattacks and other risks.

Security compliance standards

• SOC 2: a widely recognized audit standard that evaluates the security, availability, processing integrity, confidentiality, and privacy of customer data within your SaaS environment, making it a critical component of SaaS security compliance.
• ISO/IEC 27001: an international standard for implementing and managing robust information security management systems, helping protect your data assets systematically.
• NIST: provides comprehensive cybersecurity framework guidance to help you secure your systems, manage risks, and respond to threats effectively.
• PCI DSS: the Payment Card Industry Data Security Standard applies if your SaaS handles payment card information, ensuring that transactions are processed securely.

Data protection regulations

• GDPR: the European Union’s General Data Protection Regulation sets out strict requirements for handling and protecting personal data. This regulation impacts SaaS companies that have customers in the EU, requiring them to ensure data privacy and secure processing practices.
• HIPAA: this U.S. law is designed to protect the privacy and security of medical data, making it crucial for SaaS companies that process Protected Health Information (PHI) or serve healthcare clients. To comply with HIPAA, your financial system must include the necessary compliance tools, certifications, and safeguards to protect PHI. Additionally, you must have the ability to track who has accessed PHI and when, ensuring that all access is properly monitored and logged. It’s also important to confirm that your technology partners have the appropriate certifications and controls in place to maintain the security and privacy of PHI.
• CCPA: the California Consumer Privacy Act enforces data privacy rights for California residents, affecting SaaS companies that collect or manage data from users in California. Compliance with CCPA includes ensuring that consumers can access, delete, and opt-out of the sale of their personal information.

Each of these frameworks has specific requirements and implications. Since SaaS companies often operate globally and manage a wide variety of data, you will likely need to comply with multiple standards simultaneously. Being well-versed in these frameworks will enable your teams to implement the necessary controls and maintain compliance across financial, security, and privacy domains.

Why SaaS compliance is complex

Managing SaaS compliance can be challenging for finance, IT, and compliance teams because of different factors, including:

• Constantly evolving regulations: accounting laws, security standards, and data privacy rules are frequently updated, requiring continuous monitoring and adaptation to stay compliant.
• Varied product offerings: different SaaS modules or services may have unique compliance requirements, making it necessary to tailor controls and processes for each offering.
• Multi-jurisdiction operations: if your SaaS serves customers across different countries or states, you must navigate a patchwork of legal frameworks and regulatory obligations.
• Fast-paced growth: rapid scaling of your SaaS business can easily outpace existing compliance processes, increasing the risk of gaps or oversights.

These complexities highlight the need for a proactive and well-structured compliance strategy to help your organization stay ahead in compliance, adapt to evolving requirements, and reduce operational risks.

Best practices for SaaS compliance management

To help your finance and accounting teams manage SaaS compliance effectively, consider these best practices:

1. Build compliance checklists

Clear communication is crucial in financial and accounting processes to avoid costly mistakes. Cloud-based accounting software can help by providing detailed checklists for key workflows, ensuring no steps are overlooked. This is particularly useful for tracking compliance with frameworks like SOX.

2. Automate financial controls and reporting

Manual processes are prone to errors and delays. Automating key controls, such as revenue recognition, expense tracking, and financial reporting, enhances accuracy and efficiency, ensuring timely compliance and reporting.

3. Migrate documentation to the cloud

Using spreadsheets to track important data can lead to potential loss or corruption of information, especially during audits. Storing documentation securely in the cloud reduces this risk and helps maintain compliance readiness.

4. Implement strong security controls

Protect sensitive financial and customer data with robust security measures such as encryption, multi-factor authentication, and regular vulnerability assessments. This safeguards data and supports overall compliance.

5. Integrate audit-ready SaaS compliance software

Choose software specifically designed with compliance in mind, offering built-in audit trails, real-time monitoring, and detailed compliance reporting features. This helps streamline audits and ensure transparency throughout the process.

6. Document processes and policies clearly

Keep accessible, up-to-date documentation of all compliance policies and procedures. This ensures your team understands responsibilities and makes audits more efficient by providing clear guidelines for operations.

7. Monitor access to protected data

Track and log access to sensitive financial and personal data to detect unauthorized activities. This ensures data integrity and helps maintain compliance with privacy regulations.

8. Set up incident management processes

Establish a clear plan for identifying, responding to, and resolving security or compliance incidents. A rapid, well-coordinated response minimizes disruption and ensures continued compliance.

9. Keep up with changes in compliance laws

Designate resources or use tools to stay informed about evolving regulations that impact your SaaS operations. Staying current with legal requirements is essential for maintaining ongoing compliance.

10. Provide regular employee training

Regular training ensures your staff stays up to date on compliance requirements, company policies, and industry best practices. This fosters a compliance-aware culture within your organization.

11. Perform periodic internal audits

Regular internal audits help evaluate the effectiveness of compliance controls, identify gaps, and prepare for external audits. This proactive approach ensures your business remains compliant and ready for scrutiny.

SaaS compliance checklist

Here’s an actionable checklist to guide your SaaS compliance efforts:

Identify applicable regulations

Determine which financial, security, and data privacy laws apply to your SaaS usage. These could include industry-specific regulations like HIPAA, GDPR, and ASC 606, depending on the nature of your business and your geographic reach.

Assess the risk landscape

Analyze where compliance risks exist in your processes and systems, considering various domains such as:

• Compliance risks: regulatory changes or non-compliance with industry standards.
• Security risks: data breaches, unauthorized access, or insufficient data protection measures.
• Operational risks: system downtime, process failures, or inefficiencies in workflows.
• Financial risks: misreporting, revenue misalignment, or inaccuracies in financial data.

A thorough risk analysis helps you make sure that all potential vulnerabilities are identified and addressed.

Map data flows

Understand how data moves through your SaaS platforms, including what data is collected, processed, and stored. It’s crucial to track who has access to sensitive data and when, helping to ensure compliance with privacy regulations such as GDPR and CCPA.

Establish internal controls

Implement checks and balances to enforce compliance and prevent errors. This could involve segregation of duties, access controls, and validation processes to reduce the risk of financial misstatements and ensure accurate reporting.

Carry out compliance readiness reviews

Regularly evaluate your compliance status and preparedness. These reviews help identify any gaps in your compliance program and ensure that your organization is prepared for both scheduled and unscheduled audits.

Set up a compliance strategy

Define clear goals, roles, and timelines for maintaining compliance across your organization. A structured strategy ensures that everyone understands their responsibilities and that compliance efforts are coordinated and effectively executed.

Automate audit trails

Ensure your software automatically logs all relevant activities for easy auditing. Automated audit trails provide a detailed, tamper-proof record of all actions taken within your SaaS environment, making it easier to track and review compliance-related activities.

Conduct regular risk assessments

Continuously monitor and evaluate new and emerging risks. By conducting periodic risk assessments, you can address any vulnerabilities proactively and adapt to changes in the regulatory or threat landscape.

Train staff on compliance protocols

Make sure your team understands their role in maintaining compliance. Regular training helps staff stay informed about current regulations, internal policies, and best practices, fostering a compliance-aware culture within your organization.

Choosing the right SaaS compliance software

Ready to automate your compliance processes? When selecting SaaS compliance software, look for these key features:

• Financial reporting automation: tools that automate revenue recognition and generate reports compliant with relevant accounting standards.
• Security monitoring: real-time alerts to detect and respond promptly to potential security threats.
• User access controls: detailed permission settings that limit data access based on roles, reducing exposure risks.
• Real-time dashboards: intuitive visual summaries that provide up-to-date insights into your compliance status.
• Built-in audit logs: automatically recorded activity logs that support thorough audits and investigations.

How Sage streamlines accounting compliance for SaaS businesses

Accounting compliance in action

Accounting compliance procedures can be complex, even when automation is in place. Finance managers typically document their team’s practices and procedures during onboarding. Sage Intacct simplifies this by enabling you to easily store, access, and update compliance documents as needed.

Errors from prior close cycles can negatively impact audit results. With the automated cloud accounting software from Sage, you can avoid these issues.

Continuous close technology ensures your books are automatically adjusted with each transaction, eliminating the need for a singular closing process and enhancing your compliance outcomes.

Sage Intacct also offers detailed audit trails, allowing you—or your auditor—to drill down into the specifics of any transaction, tracking its lifecycle from initiation to completion.

This level of visibility ensures transparency and facilitates easier compliance with regulations. All essential compliance data is securely stored in the cloud, just a click away.

Compliance you can count on

As accounting laws and regulations become more complex, it’s essential not to leave your SaaS company’s accounting compliance to chance. Sage Intacct offers an automated solution to manage these complexities with confidence.

Sage Intacct is built with compliance in mind. The platform includes a Compliance Workbench that helps you efficiently manage controls and risks. Its functionality simplifies adherence to financial, security, and data privacy regulations, reducing the effort required during audits.

Additionally, Sage Intacct enables you to implement business practices and controls that ensure the accuracy of your financial statements while protecting your organization and stakeholders from risks such as lawsuits, fraud, and cyber-attacks.

By leveraging accounting and subscription management software for SaaS, you can confidently navigate the evolving compliance landscape and focus on growing your business.

Final thoughts

SaaS compliance is essential for your finance and accounting team to ensure accurate financial reporting, meet regulatory requirements, and maintain the trust of investors, customers, and partners. While navigating the complex compliance landscape can be challenging, adopting best practices and investing in the right tools can make managing these requirements practical and scalable.

SaaS compliance FAQs

1. How can my SaaS business stay compliant when working with third-party vendors?

Start with thorough due diligence by verifying that your vendors hold necessary certifications like SOC 2 or ISO 27001. Clearly outline compliance responsibilities, data handling, and incident management in contracts. Regularly audit and monitor vendor compliance to identify and address gaps promptly, helping you maintain compliance standards.

2. How can I stay up-to-date on changes to SaaS regulations?

Stay informed by subscribing to industry newsletters, following regulatory agencies, and engaging with SaaS or finance-focused professional groups. Designate a compliance officer or team to track regulatory changes and update policies. Compliance management software with automated alerts can help you keep pace with evolving requirements.

3. What trends should I watch for in the future of SaaS compliance?

Expect a growing focus on data privacy, cross-border regulations, and stronger cybersecurity standards. Compliance frameworks will increasingly demand transparency in financial reporting and greater automation. Additionally, the use of AI in compliance management will rise, helping to streamline processes, detect anomalies, and ensure adherence to regulations in real-time. Staying agile through scalable compliance solutions, AI-driven tools, and ongoing employee training will be essential for adapting to these developments.

Editors note: This article was first published in January 2023 and has since been updated for relevance.