Strategy, Legal & Operations

How to recession-proof your SaaS tech stack: Top tips for CFOs

Recession-proof your SaaS tech stack with our tips for CFOs. Can your finance tools help you navigate a downturn?

As a SaaS finance leader, you’re probably well aware that recessions and market downturns are simply a fact of life. 

They happen, and it’s not a matter of personal choice. 

What you can choose, though, is how you prepare for them.

In this blog, we’ll be examining 1) How SaaS CFOs and their tools help software companies navigate recessions and protect cash flow and revenue growth, 2) How finance leaders can recession-proof their tech stacks to ensure financial performance and organizational health, and 3) Why early action is crucial for SaaS companies seeking to recession-proof their tech stack.

Keep reading if you’re ready to learn how to help your SaaS organization thrive during tough economic times.

The role of a SaaS CFO in business resilience

In the past, if a recession hit, you wouldn’t have had much to do on the strategic management end of things. That was mostly left to the CEO. 

But times have changed drastically.

As a modern CFO, you have a key role to play when a recession rears its head.

During a recession, the CFO and finance team are responsible for:

  • Generating new customers through growth strategies while balancing budget realities in a down market.
  • Ensuring operational efficiency and making sure valuable time isn’t lost to legacy workflows.
  • Running due diligence forecasts on different pricing models to gauge their impact on retention and profitability.
  • Optimizing cash management and extending the company’s cash runway.
  • Making sure your tools can accommodate modern SaaS billing models.

What does a startup’s finance tech stack have to do with all this?

Legacy tools make recessions even tougher to deal with

We just discussed your financial responsibilities in a recession, but what about the tools you use? 

In a downturn, your ability to respond swiftly and successfully to what’s happening around you largely depends on your tech stack. 

One common problem with legacy finance tools is they don’t feature integration with SaaS metrics that business leaders need for tracking company health. 

Incomplete or lag-prone financial reporting can spell disaster for your strategic business operations.

Strategy is everything in an economic crisis, so you need data that’s completely trustworthy. 

Legacy tools also lack robust scenario planning, which is a big issue in a recession. 

You need to be able to quickly and easily forecast pricing adjustments, sales and promotions, churn levels, and much more. 

Additionally, legacy tools make strategic collaboration between departments difficult, which is a big problem. 

For instance, if the CMO has questions about funnel performance or marketing campaigns, they need that data ASAP in order to use it profitably. 

Reporting lag and the lack of a single source of truth make real-time data sharing impossible. 

What should your strategy be for avoiding these pitfalls and recession-proofing your tech stack?

Hard times call for a tech stack strategy

Now we’ve reviewed the CFO’s role in generating recession resilience, let’s discuss the tools that can help you achieve it. 

What are the secret ingredients to a recession-proof tech stack? 

1. Finance tech stack integration

Integration, including multiple finance functions in one software solution, is crucial to recession-proofing your tech stack.

During a recession, you’ll want to do everything you can to extend your cash runway and minimize expenses. 

Piecemeal tech stacks are known to be more expensive than single-app solutions due to their lack of scalability and the consistent need to upgrade or replace individual components.

You’re also paying for multiple subscriptions or licenses, which isn’t the case with an integrated stack.

Not only are integrated tech stacks less expensive, they’re also more accurate and efficient. 

That’s only natural because you and your employees aren’t jumping between several different pieces of software to do your work. 

Financial SaaS data on an automated dash.

Most important of all, though, is the fact that integration frees you up for strategy formation. 

During a recession, you don’t have the luxury of wasting time on tech stack assembly and troubleshooting. 

You need to spend your time generating revenue and shoring up retention rates.

2. Touchless invoicing and subscription management AI

In tough economic conditions, billing mistakes or payment gateway errors that trigger involuntary churn are even more problematic than usual. 

During a recession, your customers will probably feel the same financial stresses you are. 

This means users will be thinking very carefully about where their money goes and will be less likely to forgive a billing or subscription error. 

Cloud accounting software with billing AI and touchless invoicing eliminates those risks entirely.

3. Real-time reporting with role-based dashboards

In a recession, reporting speed and accuracy are central to a SaaS company’s strategic success. 

Unlike traditional companies, software organizations rely on a wide range of specialized metrics such as annual and monthly recurring revenue, customer acquisition cost, lifetime value, churn, and dozens of others.

Cloud accounting suites provide CFOs with role-based dashboards showing real-time updates on all their financial data. 

A recession is no time to let reporting lag interfere with your strategic planning.

And remember to select an accounting suite with real-time expense tracking for optimal burn rate management.

4. Algorithmic scenario planning and SaaS forecasting

During a downturn, your SaaS forecasting capabilities become more critical than ever. 

Cloud-based forecasts created with machine learning algorithms present numerous advantages over legacy forecasts, including:

  • Real-time forecasting and scenario planning: Unlike tedious legacy forecast assembly, machine learning (ML)-generated forecasts just require your initial data inputs followed by a mouse click or two. This allows you and your team to rapidly test different financial strategies to find the best moves during hard times.
An automated SaaS forecast.
  • Longer forecast range and lower variance rates: The further out and the more accurately you can forecast, the better prepared you’ll be to manage a recession. Long-range forecast clarity is important for churn management, expense tracking, budgeting, and everything else that helps a SaaS organization weather financial storms.
  • Advanced forecast models for modern SaaS billing: SaaS pricing and billing have become more complex in recent years as customers demand convenience and companies seek to generate recurring revenue in novel ways. Cloud-based accounting suites with ML forecasting can help you easily compare the effects of different pricing structures–such as usage or hybrid billing models–on your bottom line.

What else has a place in your tech stack strategy?

5. Robust SaaS billing model flexibility

We just discussed the importance of being able to quickly forecast different billing scenarios and the value of invoice automation. Both of those are key advantages in a recession. 

But there’s another variable in the equation: billing model flexibility.

Can your tech stack handle complex billing scenarios at scale? 

Can you account for billing variables among hundreds or thousands of users? 

For instance, depending on your SaaS billing model, you might have to bill hundreds or eventually thousands of users for different usage levels, feature tiers, and other billing variables.

You need a system with the backend functionality to handle that. 

Billing flexibility is crucial to maintaining your subscriber base during a recession. 

People are naturally more conscious of how they spend their money, and pricing models such as usage or hybrid billing could make them more willing to try your product.

6. Revenue recognition automation and deferred revenue visibility

No discussion of tech stack recession-proofing could be complete without mentioning revenue recognition and your ability to track deferred subscription revenue.

Automated revenue recognition is central to recession management because:

  • You don’t want to risk compliance fines in a downturn.
  • AI eliminates manual revenue recognition errors and revenue leakage.
  • Cloud accounting software features automatic updates on regulatory changes.

In addition to handling ASC 606 requirements, your tech stack should provide crystal-clear visibility into the size and timing of your deferred revenue waterfalls. 

This is a key element of recession budgeting and cash runway management.

SaaS revenue recognition data.

There’s one more strategic element we need to cover. 

Don’t wait on your tech stack strategy

Apart from cloud financial management and its advantages–what you could call the “nuts and bolts” of your tech stack strategy–there’s the critical issue of timing.

SaaS CFOs who wait until a recession hits to retool their tech stacks will be disadvantaged. 

Cloud accounting tools are extremely effective in good times and bad, but they’re not a magic bullet. 

You can expect about 60 days for deployment, and then you have to train the software on your data, and train your team on using the software.

In other words, if you wait until a downturn to revamp your tech stack, it may be too late. 

Or, at the very least, you’ll find yourself playing catch-up instead of quickly pivoting to match the economic conditions you’re in.

Sage Ahead: Thrive in any market

For SaaS CFOs, times have changed. 

Your professional and strategic responsibilities have multiplied, and you’re not just a back-office role any longer.

In a recession, it’s largely up to you to lead your organization to the other side financially intact–or, ideally, even better off than before.

When a downturn hits, companies that have recession-proofed their finance tools tend to experience a “soft landing” compared to organizations using legacy tech. 

That’s because they have the technological infrastructure to work with real-time data, test different ideas, and quickly pivot to a strategy that’s ideal for the new conditions they find themselves in. 

Sage Ahead can help you do just that.

Sage Ahead is an automated cloud accounting suite built to help modern SaaS CFOs thrive in good times and bad. 

It’s a streamlined solution complete with 200+ real-time SaaS metrics, 500+ subscription and usage pricing scenarios, touchless invoicing, rev rec AI, and much more.

Unlike legacy finance tools, there’s zero tech stack assembly required, and the software is completely scalable. 

With easy upgrades and add-ons, it can take you from seed to IPO and beyond. 

Especially in a recession, you don’t have time to waste on piecing together a tech stack and hoping it works. 

To see what Sage Ahead can do for your organization, take a free product tour today