SaaS CFOs’ strategic imperative: tech-enabled finance for growth
In the rapidly evolving software as a service (SaaS) landscape, the role of the chief financial officer is transforming. Today’s CFOs are not just financial gatekeepers but also strategic partners, tasked with guiding their organizations towards profitable scaling and long-term growth.
However, the “grow-at-all-costs” mentality that once dominated the SaaS industry during the zero interest rate policy (ZIRP) period is no longer the prevailing mindset. While the SaaS sector is recovering from a down market and interest rates remain at historic heights, CFOs now face the imperative to guide their business toward efficient and profitable growth. This approach aims to create a durable business that can withstand any macroeconomic headwinds.
One of the key enablers of efficient and profitable growth is the early adoption of finance and accounting technologies – a process that can be as complicated as it is critical.
Laying a solid foundation
The journey of a successful SaaS business is typically characterized by rapid growth and scaling. To manage this effectively, it’s crucial to lay a solid financial foundation early on. Adopting finance technologies at the outset provides a robust infrastructure that can support the organization’s growth trajectory. It enables versatility in go-to-market (GTM) strategies, efficient financial operations, accurate forecasting and strategic decision-making – all of which are critical for the profitable scaling of a SaaS business.
But what does laying a solid foundation mean in practical terms? It means implementing systems that can handle complex financial transactions, streamline billing and invoicing, automate revenue recognition and provide real-time financial and operational insights. It means choosing technologies that can scale with the business, accommodating increasing volumes of transactions and data without compromising on performance or accuracy. It also means avoiding the technical debt that plagues so many organizations that are too slow to modernize their finance technology stack.
In short, it means ensuring that your organization’s finance function and its related technologies is a conduit, not a hindrance, to organizational growth.
Flexibility in contracting and billing
In the SaaS business model, flexibility in contracting and billing is paramount. Customers demand a variety of pricing, packaging and payment options and the ability to change their subscriptions as their needs evolve. Finance technologies that offer flexibility and versatility in contracting and billing are therefore essential. They allow SaaS businesses to align their go-to-market strategies with customer demands, enhancing client satisfaction and retention.
This flexibility extends to various aspects of contracting and billing. For instance, it allows for the creation of customized pricing plans and discount structures, supports multiple billing cycles and payment methods and enables dynamic changes to subscriptions. It also facilitates the management of prorations, refunds and credits, ensuring a smooth and positive customer experience.
SaaS contracts can be complex, with elements like variable pricing, usage-based billing and multi-year contracts. Managing revenue accounting for such contracts can be challenging. Finance technologies with deep capabilities in this area can automate revenue recognition, ensuring compliance with standards like ASC 606 and IFRS 15, and freeing up the finance team to focus on strategic tasks.
These technologies can handle the intricacies of revenue recognition for SaaS businesses, such as recognizing revenue over the contract term, accounting for contract modifications and dealing with multi-element arrangements. They also provide comprehensive audit trails and reporting capabilities, aiding in financial transparency and compliance.
Tracking key SaaS metrics
In the SaaS world, traditional financial metrics are often not enough. Tracking SaaS-specific metrics like annual recurring revenue (ARR) is crucial, but can be complicated to understand and often mismanaged – and it could be costing you. Other metrics such as net revenue retention (NRR), customer acquisition cost (CAC) and lifetime value (LTV) provide a deeper understanding of the unit economics of the customers and are vital indicators of overall business health. Finance technologies that support tracking of these key SaaS metrics (and others) empower the finance team to provide real-time insights to leadership, helping the organization measure and control the core levers of their business, and increasing their fundability, as noted in Bessemer Venture Partners' 2023 State of the Cloud report [1].
These technologies provide dashboards and reports that present SaaS metrics in an easy-to-understand manner, enabling CFOs and other stakeholders to make informed decisions and create an organizational data culture. They also support scenario analysis and forecasting, allowing the finance team to anticipate future trends and challenges.
Of course, not all SaaS metrics tracking and business intelligence solutions are built the same. The greatest value comes from solutions like Baker Tilly’s SaaS Intelligence , which offers more than just data. Powered by its sophisticated and purpose-built intelligence engine, SaaS Intelligence provides a clear path to transforming your financial strategy and driving accelerated growth.
Preparing your business for success
For SaaS CFOs, the early adoption of finance technologies is not just a strategic move, but a competitive necessity. It lays a solid foundation for profitable scaling, supports flexibility in contracting and billing, manages revenue accounting for complex contracts and tracks key SaaS metrics. In short, it empowers the finance team to drive the organization’s growth and profitability.
Remember, the right finance technology is not just a tool, but a strategic advantage for an organization. Not all finance management systems are built to handle the vast set of use cases that growing SaaS companies will need. The future of your SaaS business depends on the decisions you make today. Choose wisely, adopt early and reap the benefits as your SaaS business scales and grows.
As the number one cloud accounting and financial solution for B2B subscription billing and revenue management on G2, Sage Intacct offers the breadth and depth of functionality necessary for SaaS growth. Paired with SaaS Intelligence, which offers a variety of key benefits that help businesses make data-driven decisions, financial leaders are armed with the tools to drive strategic decisions and gain a competitive edge in the market. To learn more about how Sage Intacct and SaaS Intelligence can guide your business along its path to durable growth and financial maturity, schedule a demo today.
