SaaS CFOs - how to recession-proof your tech stack

David Appel Profile picture for user David.Appel May 16, 2023
CFOs, prepare yourself - Sage Intacct's David Appel reveals the opportunities that can protect your finance tech stack in a recession.

Business woman with laptop, calculator, money stack and lightbulb, finance CFO skills © mrmohock - shutterstock
(© mrmohock - shutterstock)

Even in the best of economic circumstances, building an enduring SaaS business is hard work. Amid conflicting signals about the performance of the economy, many SaaS CFOs are hoping for the best in their models – but preparing for the worst in their forecasts.

As a SaaS CFO, you bear the responsibility to do everything you can to ensure your company survives – and even thrives – despite challenging economic conditions. While your previous efforts and strategies focused on growth, today, the emphasis is on durability, survivability, and profitability.

Whether you’re a Series A or pre-IPO firm, recession-proofing your SaaS finance tech stack before a recession hits — or worsens — is one of the best moves you can make. These steps can help you remain calm and confident – even during a recession. Here are some ideal opportunities in your finance tech stack to achieve outside value during a recession.

The foundation of your finance tech stack – invoicing and reporting

If you’re relying on manual processes in your finance operations, it can be challenging to quickly pivot to automation when a downturn strikes. Even if broader financial conditions look rosy, you don’t want to wait to automate your SaaS finance tech stack. Although automation offers a compelling opportunity to harden your ability to withstand adversity and generate outsized value, the process evolution still takes a little time to implement and adopt.

While there are numerous opportunities to gain value through automation, many companies like to start with the fundamentals like invoicing and reporting before moving on to subscription billing models, forecasting, revenue recognition, and dimensional reporting and SaaS metrics. The best place to start? The basics:

  • Invoicing – This is a vital piece of your SaaS finance tech stack, given the complexities of subscription billing, revenue recognition, and changing pricing models. Manual invoicing can affect accounts receivable and thus, operational cash flow. You can’t afford that during a recession.
  • Reporting – Tough times mean your board will put you and other company leaders under greater scrutiny than ever. Prepare to give them every detail they need about your company’s financial performance and its products. With timely and accurate cloud-based reporting and dashboards, you can give your board the insights and SaaS metrics they need to make better decisions about product investments, hiring, acquisitions, churn strategies, and more.

Billing flexibility – a key response to recession

Automated and flexible billing is another strategy for recession-proofing your finance tech stack. Whether it’s pay-as-you-go, time-based, thresholds, flat rates, overages, or rollovers, if a market downturn arrives, you’ll need the flexibility to support different pricing campaigns and strategies and estimate how your plans might play out. At a minimum, your tech stack should seamlessly support these billing models and pricing strategies, which can be useful in a downturn:

  • Hybrid billing – When customer churn climbs and revenue falls, hybrid billing can be an excellent response. This model charges a fixed fee for a set amount of product usage, followed by additional billing for excess time or service usage.
  • Usage billing – Customers pay only for the precise amount of your service they consume. It’s critical to ensure your finance tech stack can handle this billing method, since it’s popular with customers. During a recession, it can help generate greater cash flow than a fixed price model.
  • Discounted annual billing – Many SaaS companies offer customers a discount for upfront annual payments to generate extra cash flow. Cloud-based accounting software helps you set up the perfect discounted billing plan to maximize cash flow and annual revenue.
  • Feature tiers – Like usage-based billing, support for feature tiers should be a central part of your SaaS finance tech stack. When times get tough, feature tiers help customers justify continuing their use of your product because they only pay for the parts of your service they engage with.

Forecasting – plan ahead with your SaaS finance tech stack

In the current economic climate, a recession could arrive at almost any time. That’s why forward-thinking CFOs are configuring their operations with that possibility in mind. We’re finding that the following components of the SaaS finance tech stack can help recession-proof your company:

  • Long-range multi-factor forecasting – If the markets turn, accurate and automated forecasting can be one of the most valuable capabilities you have. Add cloud-based accounting software to your finance tech stack to run robust “if-then” forecasts for a full range of billing and revenue scenarios.
  • Create a “first to go” list – Once you’ve optimized your SaaS finance tech stack, use automated forecasting to create important contingency plans. Decide in advance which projects and future hires to scale back if the market gets turbulent. Forecast the cost of projects and hires and decide which to delay if necessary.
  • Have a “course correction” list – This is a predetermined series of moves – discount campaigns, free-trial extensions, and others – to maximize customer retention in a recession. Forecast the impact of these strategies and determine under what conditions you want to trigger them. “When we lose X customers, we initiate Y campaign, which we’ve predetermined nets us Z result.”

Remember the importance of revenue recognition 

For nearly 40% of SaaS firms, spreadsheets are the dominant tool for revenue recognition – a clear indication of great potential to improve efficiency and accuracy. When it comes to the complexities of revenue recognition, however, many firms are turning away from their spreadsheet addictions. They using the built-in rev-rec capabilities of cloud accounting software or third-party solutions that offer significant improvements and efficiencies.

Don’t forget data migration and application integration 

Many SaaS firms rely on Salesforce or HubSpot for their CRM platform. To be successful, however, the key is not merely to use CRM, but to integrate it with your core accounting system to streamline and accelerate the order-to-cash cycle and improve reporting and SaaS metrics. Effective integration makes finance and accounting so much more efficient.

Also, be sure to have a thoughtful plan to migrate legacy data to any new system. Think through the decisions you want to make from that data in a new environment. This decision-making is often overlooked, yet it should be a well-defined target to make the most of a new platform.

A transformational impact

For Springbuk, a leading health-data analytics firm in Indianapolis, cloud-based accounting automation has had a transformational impact. Previously hampered by spreadsheets and manual processes for billing, revenue recognition, reporting, and more, the company transitioned to cloud-based accounting, achieving significant benefits. Automated invoicing helped the company cope with 400% growth with automated renewals and upsells and seven percent lower churn. DSO dropped 50%, accelerating operating cash flow by $1 million. Financial reports are created in minutes, not days. Springbuk cut closing time by 73% and achieved 12-month visibility on revenue, billings, and cash.

Expect the unexpected

An automated finops platform will enable you to seamlessly apply these strategies in a recession, helping you generate extra cash flow, minimize costs, and maximize recurring revenue. The economy will always ebb and flow, of course, and there will always be periods of relative prosperity and economic difficulty. What’s important is ensuring your SaaS finance tech stack leaves you ready for anything that comes your way.

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