SaaS

What it means

SaaS is finished software run by the provider and reached through a browser for a recurring fee. The customer administers no server, no updates and no backups - they pay for use, not for an installation.

It is the top of the cloud ladder: IaaS gives you a machine, PaaS an environment, SaaS the application itself. Accounting software, CRM, e-mail and invoicing tools mostly work this way now.

What separates SaaS from buying a perpetual software licence is that when the subscription ends the customer is left with nothing: neither the application nor the right to use it. With a perpetual licence the program stays, at least in the last version paid for; with SaaS you pay for access, and access ends with the last payment.

How it works in practice

In the books it is a service: the monthly or annual fee is a cost, not an asset, and nothing is depreciated. An annual subscription paid up front belongs in accruals and deferrals.

For the provider it is a recurring revenue model measured through MRR and churn. For the customer it means a lower entry cost and a higher one over a long horizon.

Much SaaS comes from foreign providers and the invoice carries no VAT. A VAT payer accounts for the tax itself as the recipient of the service, and a non-payer has to register under § 7a because of such a purchase; that is why we check clients’ tool subscriptions at the first invoice, not at the year-end close.

What to watch out for

When choosing, ask about data export and what happens to the data when the subscription ends - without export, changing vendor is impossible. Where personal data is processed you need a data processing agreement and a clear answer on where the data sits.

Annual subscriptions often renew automatically, and the cancellation window closes well before the anniversary. Leave a change of provider to the last month and you pay for another year, and with per-user pricing the company also keeps paying for people whose access nobody removed during offboarding.