Money Matters

Sprint ahead or fall behind: Automation via AI in SaaS finance

Get the financial results you need with SaaS finance AI. Are you sprinting ahead or falling behind?

As the SaaS industry continues to evolve, so does the role of the SaaS CFO–and with it, the tools CFOs count on. 

With financial performance and operational efficiency being top priorities, SaaS CFOs constantly seek ways to stay ahead of the competition. 

One of the key tools in your arsenal is automation through artificial intelligence (AI).

In this blog, we’ll explore 1) Why automation is essential for today’s SaaS CFOs, 2) The various risks of dragging your feet on AI adoption, and 3) How a robust tech stack strategy can save you time and money while surpassing legacy finance tools in effectiveness.

If you’ve ever wondered how AI can revolutionize your department, this post is for you.

AI has become essential for SaaS CFOs

Many SaaS CFOs have started to realize that AI has finally made the jump from a technological advantage to a technological necessity. 

What’s changed, exactly?

AI and financial strategy formation

For SaaS companies, the CFO function used to be primarily backward-looking and focused on historical transaction data. 

In recent years, however, SaaS CFOs have risen in strategic importance and are now seen as being key business leaders. 

You’re counted on to craft financial strategies to drive recurring revenue and customer loyalty. 

AI plays a central role in that because:

  • Automated financial reporting supplies real-time data to help you quickly achieve strategic return on investment (ROI).
  • Cloud accounting suites with AI are packed with all the SaaS metrics CFOs need for strategy formation.
  • Forecasts built with AI allow you to test different scenarios immediately instead of building a whole new forecast, which multiplies the effectiveness of your financial planning.

In short, automation paves the way for market-winning SaaS strategies. 

What else is AI vital for today’s finance leaders?

Automation and centralized collaboration

With the rise in your role’s strategic responsibilities comes another trend. 

Financial strategies aren’t built alone. They require you to work closely with other stakeholders and leaders at your company. 

If you’re helping your company’s marketing lead forecast the results of different pipeline adjustments, you’ll need data from them and vice versa. 

And that’s just one example among many.

Automation and centralized collaboration go hand in hand when it comes to optimizing SaaS finance operations. 

By centralizing their data, CFOs can foster a culture of collaboration within their finance teams, driving operational efficiency and improving overall productivity.

Automation eliminates manual, repetitive tasks, freeing up the finance team to focus on more valuable activities. 

With AI-powered tools, CFOs can automate tasks such as data entry, financial reporting, and cash flow management, reducing the risk of errors and improving efficiency.

Automated cloud accounting software lets finance teams work together seamlessly, regardless of their physical location. 

Team members can access and update financial data from anywhere, at any time–a crucial point in the age of remote work, often with employees spread around the globe.

Just as importantly, collaborative AI fosters a culture of transparency and accountability, driving operational efficiency and enabling better decision-making.

What else is driving the need for automation in SaaS finance?

SaaS billing is growing complex. Can your tools keep up?

The complexity of SaaS billing is a challenge that many CFOs face. 

With new pricing models such as usage-based billing and accompanying revenue recognition standards, it’s crucial for CFOs to have tools that can keep up with the changing landscape.

Legacy accounting tools and manual data entry processes are no longer sufficient to handle the intricacies of SaaS billing. 

These outdated systems often lead to billing errors that can cause voluntary and involuntary churn.

Automated billing tools offer a solution to this problem in two key ways.

1. AI helps companies manage transaction and invoice volume as they scale. 

For early stage SaaS, scaling your customer base can introduce billing problems. 

If you use legacy tools, you’ll eventually hit a point where your system can’t keep up, and you might even start to backslide until you upgrade. 

That won’t happen with an automated tech stack built to scale alongside you.

2. Automated tech stacks offer robust SaaS pricing and billing functionality 

As we mentioned above, one of your expanded responsibilities as a SaaS CFO involves strategic pricing. 

But unless you can pair your winning pricing model with accounting software that can handle the billing and invoicing side of things, your strategy won’t get off the ground. 

AI accounting suites offer touchless invoicing and automated billing for even the most complex pricing models.

Now you know why tech stack AI has become so essential, let’s review some risks of running your department manually.

Why is it risky to run your department in “manual mode?”

When such large strides are being made in SaaS finance tools, it’s even more critical to understand the risks you accept by using legacy software.

Let’s take a look.

Cash shortfalls due to lackluster reporting

Manual reporting processes often result in delays and inaccuracies, making it difficult to have an accurate and up-to-date view of your cash flow. 

Additionally, the risk of reporting errors increases dramatically when employees manually update the company’s key performance indicators (KPIs).

An automated SaaS metrics dash.

If you execute a financial strategy with faulty reporting data, you might run into a serious cash shortage because your initial assumptions were flawed. 

That’s a problem for any company but could be disastrous for an early stage SaaS organization.

Short-range, high-variance forecasts that hamper strategizing

Compared to what AI can produce, manual forecasts are known to be short-range and produce higher variance rates. 

As you might imagine, this can hinder the strategizing efforts of CFOs, making it challenging to accurately anticipate financial trends.

An automated SaaS forecast.

Trusting your forecasts to legacy software can cause you to:

  • Make costly missteps during a recession or downturn–headcount planning errors, a cash runway misjudgment, or something else.
  • Miss out on the perfect billing model for your company because your scenario planning wasn’t sufficient.
  • Set ineffective SaaS budgets that fail to meet stakeholders’ needs.

Why else should CFOs avoid legacy finance tools?

Inability to engage in efficient and innovative SaaS billing

SaaS billing and pricing models used to be fairly straightforward, involving a flat monthly subscription fee. 

However, this is no longer the case. 

SaaS customers have demanded increasingly innovative, flexible, and customizable billing structures.

CFOs play a crucial role in driving revenue growth by catering to that demand. 

Customer satisfaction and retention are important byproducts of optimized SaaS billing. 

This makes legacy finance and billing systems risky, as their ability to accommodate modern SaaS billing models–hybrid and usage billing, feature tiers, etc.–ranges from limited to non-existent.

At the very least, attempting more nuanced billing models with legacy software exposes you to a very high likelihood of manual billing errors—definitely a non-starter.

Fortunately, all it takes is a tech stack strategy to keep your financial operations and company performance moving in the right direction.

Plan ahead with a tech stack strategy

Simply put, a tech stack strategy asks, “What do we need in a tech stack?” 

That “we” is very important, because a SaaS organization’s needs will change somewhat across its company lifecycle.

As the CFO of an early stage SaaS business, what should your strategy include?

1. Automation

Financial process automation now has a firm foothold among many CFOs’ best practices. 

And it’s no secret why. 

As a finance leader in early stage SaaS, tech stack AI can help you:

  • Track your essential performance metrics, and display them for potential investors with the latest financial storytelling techniques.
  • Streamline the full range of your department’s business operations, allowing you to focus on strategy and scaling instead of busy work.
  • Forecast effective growth strategies in real time, bring maximum visibility to your cash management, keep track of deferred revenue, and more.
Deferred revenue waterfall data for a SaaS company.

Besides tech stack AI, what should you look for in your SaaS accounting software?

2. Integration

Alongside automation, SaaS finance leaders have come to realize the value of an integrated tech stack. 

A tech stack cobbled together from different legacy apps–sometimes called a homegrown stack–is more expensive and less reliable than a single-solution software product.

Aim for a tech stack with everything you need under the hood: automated reporting and forecasting, touchless invoicing and robust SaaS billing, AP and AR, rev rec, and the rest. 

An investment in software integration is an investment in your company’s efficiency and profitability.

3. Scalability

A growth-related bottleneck is one of the most common tech stack headaches for early stage SaaS. 

If you try scaling with legacy accounting software, you’ll eventually hit a point where your accounting suite can’t handle the size or complexity of your data load.

Cloud accounting software bypasses this limitation, allowing finance leaders to set aside scaling concerns. 

A cloud-based tech stack can seamlessly scale up as your transactional demands grow, or scale back down just as easily if times get tough.

Sage Ahead: The finance tech stack for early stage SaaS CFOs

For early stage SaaS finance leaders, the willingness to embrace technological innovation is even more important. 

You need every advantage you can get in carving out market share for your company, and tech stack automation is a huge piece of that.

Sage Ahead is a fully integrated and automated tech stack from Sage, the AICPA’s only preferred provider. 

Custom-built for early-stage SaaS, it features 500+ usage and subscription billing scenarios, 200+ real-time SaaS metrics, rev rec AI, a single platform to eliminate reconciliations, and much more.

To see what Sage Ahead can do for your company, check out our free product tour.