Running an audit firm can be challenging. There are so many considerations: client satisfaction, hiring and retaining competent employees, HR issues—oh, and there’s the whole profitability thing too! After all, there’s no need to worry about operational troubles unless the firm is making enough money to continue as a going concern.
A huge limitation of revenue generation at a firm is that one of the largest income-producing activities is audit engagements, and these engagements are largely constrained by the availability of hours in the day for auditors. So what can be done to beef up the income of a firm without increasing headcount or working on Saturdays? Let me introduce you to recurring revenue through Software as a Service (SaaS) reseller partnerships.
How does a reseller partnership work?
As the name suggests, a reseller partnership is when a company coordinates with one of its vendors to sell that vendor’s software service to end-users. To make this work, the vendor provides some sort of incentive for the company to sell the service (think bulk discounts). When a company purchases the software in large quantities, it gets a discount from the vendor. That creates the ability to sell the product to clients at a markup and generate a little revenue for the company. Given the software-subscription model, this revenue will keep flowing for as long as the end-user uses the software tool.
Lease accounting software example
Let’s look at the steps and benefits associated with generating recurring revenue through a lease-accounting software solution.
Identify the right software provider
Multiple options exist for almost any software solution. Be sure to find a vendor who provides a solution that is well-versed in solving your specific needs as an auditor and the needs of your clients. Of course, you should also be sure that reselling the software is an option for the vendor you select.
Offer client discounts
Once the right vendor has been chosen, it’s time to dig into the pricing model. Some vendors will allow flexibility in the pricing you can offer to end users. For example, a software vendor could sell you the product for 50% of the market price. You then have the option to sell that product to your clients at full price and pocket the difference. Alternatively, the full 50% discount could be passed directly to clients if no markup is made. Or you could find a price somewhere between 50 and 100% of market price that offers some discount to clients and some revenue to you.
Diversified income
If you’re like me, you are probably fairly risk-averse. That aversion to risk means you will love the idea of a diversified income. Instead of putting all your eggs in the audit-fee basket, toss a few into the SaaS basket. When the software is sold to the end user, payments could flow your direction for the entirety of the subscription. If the software is a valuable tool to your clients, that subscription revenue could last for quite a while with very little effort on your part.
Efficient audits
Finally, reselling software of your choosing provides you with clearer expectations when you are planning an audit. Imagine having to learn a unique lease-accounting solution for each of your clients. This could turn into quite a nightmare of navigating a dozen different user interfaces instead of just one familiar system for leases. If you’ve read my post about audit efficiency, you know I’m always on the lookout for win-win situations. Reselling a single-lease software solution puts you in that desired spot—more efficient audits where you only deal with one software tool and recurring revenue from clients using your software of choice.
Bottom line
Recurring revenue through lease-accounting software can be easy and beneficial for audit firms. Some software providers allow, and even promote, reselling to your audit clients. Capitalizing on this opportunity can create smooth audits, keep things simple for your clients as they face the ASC 842 adoption mandate and pump up the bottom line through recurring revenue.
