Best Practices for B2B SaaS Finance Operations in 2023

It’s that time of our lives again - when we find ourselves staring at a downturn. As companies brace for the funding winter and put all focus on sustainable growth, finance teams have a more important role to play than ever. Specifically for B2B SaaS enterprises, activities like cash flow management, financial analysis, and risk management are going to become critical in ensuring that companies see it to the end of the downturn.

In this article, we discuss some best practices that finance teams can employ to scale their Financial Operations in 2023, as they employ different strategies to provide more value to their companies.

First, let’s start off with the challenges that finance teams face today.

Collaboration

Stakeholders across the company, more than just the executive team, need access to financial metrics that relate directly to their responsibilities. Business teams like marketing and sales need to be able to plan and track their budgets and targets on an ongoing basis - with collaboration from all stakeholders involved. Without this data, they run the critical risk of being misaligned from the financial context of the company, and underachieving their targets or overshooting their budgets.

Tooling

Since data needs to be consumed across different stakeholders in the company, and core business metrics like MRR need to be almost self-serve across business teams - finance teams need to look for ways of providing these metrics to the entire organization.

The finance teams’ default mode of working is through Excel spreadsheets. However, spreadsheets are not able to support robust reporting and self-serve analytics, mainly because:

• Spreadsheets are limited in their ability to handle large amounts of data, putting a limit on scalability
• They don’t integrate easily with other systems (eg.: marketing ROI reports)
• They lack the ability to automate processes (eg.: ETL pipelines that fetch and transform data in the required format for preparing monthly finance reports)

These challenges usually combine to make spreadsheets an unviable solution for finance teams as they scale their operations.

Planning and Forecasting

Finance teams are the scorekeepers who assess whether the company is meeting its growth targets and whether it has enough resources to chase new ones. One of the most important jobs to be done in this regard is planning, forecasting, and assessment of key company metrics.

Finance teams should follow a cadence of sharing the financial snapshot of a company with the leadership team for this purpose, and in a downturn, the value of such information is ever increased.

In order to do this, however, finance teams first need to establish a way to accurately measure and report their revenue. For B2B SaaS enterprises, revenue recognition is the ideal way for achieving this. Revenue recognition is a form of accrual accounting done using the subscription model where customers are billed in advance for a set period of time. The revenue is then recognized over the period of time that the customer has access to the service.

There are several challenges while preparing these reports:

• Ensuring accurate calculations across different scenarios like changes, refunds, disputes, and prorations for mission-critical business metrics. This often leads to finance teams spending weeks just preparing reports and putting out numbers for the company
• Additionally, as companies grow, more streams of revenue create an increasingly complicated system for accurately calculating key business metrics like MRR and return on sales
• High effort and time are required for fetching, cleaning, and massaging data in order to prepare these reports

The Solution

All of these problems have one common thread. In order to get value out of data, finance teams currently have to employ manual reporting mechanisms that lead to a high amount of effort and time in operational tasks which can ideally be spent on analysis and planning.

At its core, this problem is related to how business teams interact with data and the lack of proper tools at their disposal for making their processes efficient.

The most common solution for providing the right data to enterprise finance teams is to implement ERP software like NetSuite or Microsoft Dynamics. However, these are not complete solutions.

• They move data away from the organization’s single source of truth - the warehouse and create a silo that makes cross-functional collaboration difficult (like ROI analysis across different marketing and sales teams)
• It does not solve the problem of ad-hoc and manual reporting that finance teams have to do in order to prepare their reports
• ERP solutions also do not integrate with SaaS solutions used by different teams across the product and business functions: this limits the ability of finance teams to analyze customer behavior and trends to inform pricing and product decisions

At Houseware, we believe that the future of data lies in extracting the best value from your data inside the warehouse, not out of it. By using your existing source of truth, the data warehouse, as the center of your operations, you can unlock new value:

• Reduce your costs by keeping your data in your own warehouse - giving you more transparency about the data you store and use
• Collaborate better with teams such as product and growth across the company, by providing them a better view of their financial targets and budgets, through data
• Use insights (like product usage, and sales performance) from other teams to guide pricing decisions and growth forecasts for the company