Money Matters

7 financial predictions for SaaS CFOs over the next 12 months

Here's a series of financial predictions for CFOs at SaaS businesses to consider, plus tips on how to take advantage of what's to come.

As a CFO at a Software as a Service (SaaS) business, there’s probably no better time than to revisit your company’s financial plans and set some new ones for the future, perhaps with an added dash of inflationary uncertainty.

What will the next 12 months look like for your business? What sort of trends do you need to be aware of?

What predictions will bring a smile to your face? What will drive a tingling of nervousness?

Researching what’s to come may help you plan and manage budgets and forecasts with optimism.

In this article, we highlight seven financial predictions that CFOs at SaaS businesses should consider, plus tips on what you can do to manage or take advantage of what’s to come.

Here’s what we cover:

1. Volatility and uncertainty will create opportunities for efficiency and growth

Whether it’s Brexit, trade disputes or war, world events can be severe challenges. If you build agility into your business, you have a greater chance of responding to changes.

Have a hard look at your business and work with the leadership team to pivot if necessary, which might require you to innovate and invest in digital transformation.

You could invest in automation, for example, and position your business to take advantage of market opportunities, such as acquisitions.

Look at automating payments and the accounts receivables process, too. It’s relatively simple and can yield significant savings.

Post-pandemic, it may have become more difficult for your business to employ the right people due to skills shortages and fewer European Union workers. It may be time to automate and digitalise essential functions in response to this talent shortage and avoid productivity gaps.

But remember that people are your most important resource.

Make sure they feel safe, supported and valued, no matter what’s going on in the world.

2. Digital networks will power the future of accounting

Accelerated by the pandemic, cloud and SaaS will continue to be critical drivers of innovation across all industries.

According to Aaron Harris, global chief technology officer at Sage, digital networks will comprise the next stage of technological advancement.

He believes digital networks are the new enabling architecture.

Aaron says: “You design SaaS for everyone in the business; you design digital networks for everyone in the business ecosystem.

“In SaaS, customers share computing resources; people share data and activity in digital networks.”

3. A greater focus on reporting will be required

Data and analytics will increasingly drive tomorrow’s companies.

As a CFO, you’ll have to use technological resources to provide real-time analysis of your company’s finances.

Communication skills will become more critical, so you can help shareholders and executives understand your action plans.

We’re shifting from quarterly or weekly reports to on-demand, where business data is readily accessible from a cloud-based system.

You’ll have to adjust to new practices surrounding the tracking and management of this financial data.

4. Converging data and analytics platforms will be a priority

Although data and analytics may have become a bigger priority for you over the past few years, you may have invested in a piecemeal fashion.

Often, finance teams adopt individual tools and systems that are incompatible. This leaves analytics capabilities siloed, making it more difficult to create comprehensive analysis to inform effective decision-making.

In the future, you’ll need to look at analytics, business intelligence and data science software less as individual tools.

Instead, visualise an ecosystem linking data analytics investments, practices, processes and critical business outcomes.

If data and analytics mature in this way, you can take advantage of greater resilience and have a more significant competitive advantage.

However, to capture these opportunities, you must tackle the fragmented state of your data and analytics networks.

To ensure a constructive convergence of analytics tools and governance, you’ll need to:

  • Expand analytical capabilities, roles and processes
  • Anticipate changes in products and practices
  • Plan for a convergence of data and analytics platforms and support collaboration across the business.

5. The pandemic recovery will offer more opportunities for IPOs

Many businesses are well along their journey to recovery after the pandemic turned the UK economy upside down.

You may be able to get more funding in the market as investors seek new, exciting ventures to support.

With capital available to businesses, more finance teams will begin to prepare for initial public offerings (IPOs)—and we’ll see a wave of public companies emerging as we recover from the economic downturn.

As a result, rather than navigating unknown territories in search of recovery, companies will be navigating the exciting pathway to IPO and seeking solutions to inform the nuanced strategy required for such a huge milestone—especially from an accounting perspective.

Mike Whitmire, co-founder and CEO of software company FloQast, says: “It’s easy to overlook the back-office work that needs to take place before an IPO because it’s not nearly as cool as ringing the bell.

“That leaves businesses vulnerable.

“Whether it’s instituting complex internal controls to support compliance, instituting a formalised financial reporting process, or ensuring a scalable effort for ensuring audit readiness—both pre- and post-IPO accounting teams will have a lot on their plates.

“The chances are that many companies don’t have the experience or skill set to go public and face a tough market for hiring talent.”

It would help if you understood that technology is the common thread that will impact the ability of your business to prepare for an IPO and successfully meet the demands of being a public company.

Mike adds: “At the end of the day, the IPO event itself is a small component—it’s what comes after you ring that bell that matters.”

Mike believes that from reporting, financial planning and analysis to cybersecurity, companies that go public will double down on technology resources to be efficient, run business, and give their accountants more time back

Newly public companies don’t want to blow up due to increased demands.

6. Accounts receivable and accounts payable will have to harmonise

Accounts receivable (AR) refers to outstanding invoices and money that customers owe you, while accounts payable (AP) concerns the outstanding bills you owe, typically to vendors and suppliers.

AR covers assets, while AP deals with liabilities, and financial teams tend to treat them as separate accounting functions.

Dan DeVall, VP of business development at spend management company Airbase, says: “Collecting revenue and purchasing from suppliers has historically been viewed as distinctly separate activities and workflows.

“It’s been a tug of war between these two departments with opposite incentives; collect money owed faster or delay payments due slower.”

Finance is changing, which means that this thinking is rapidly becoming a thing of the past. Increasingly, businesses realise the benefits of operating revenue collection and supplier purchasing in harmony.

Dan says: “We must operate collaboratively to understand the value of money within the network.

“The give-and-take relationship between AR and AP is now possible and quantifiable.

“The sooner buyers and suppliers learn to harmonise and articulate the value created between them, the sooner both departments may gain efficiencies and optimise their key performance indicators [KPIs].”

7. Consolidation of credit cards will happen

No, it’s not about consolidating credit debt.

This is about businesses sticking to one credit card type rather than mixing and matching cards depending on department and need.

Often, businesses hand out corporate credit cards depending on the department, employee, or purchasing type.

That’s changing.

Specific credit cards for travel and expenses, executives, department purchases, and one-off transactions, each managed by a different issuing card provider, are giving way to one card programmes.

Modern cards are software-enabled, which means you can automate workflows by which transactions are approved, captured, and reconciled.

Over the next 12 months, we could see more businesses roll out one software-enabled card programme, with a platform for all employees to interact with and manage these transactions.

Final thoughts: Review your plans and change course if required

Although you may have to sign off on final decisions, you need to speak to people across the business and understand what’s coming up in the future.

Managing your SaaS finances should be an ongoing and flexible process, so don’t put your financial planning in a folder.

Always make time to get away from fighting fires—assess your progress, see where you’re heading, and change course if necessary.