Money Matters
9 steps to how “One subscription system of record” helped create a unicorn
“Billionaire Robert F. Smith’s Vista Equity Partners has agreed to acquire a majority stake in Acquia Inc. in a transaction valuing the enterprise software company at close to $1 billion, including debt, according to people with knowledge of the matter.” What did Acquia, the leading provider of cloud-based, digital experience management solutions, do on the […]
“Billionaire Robert F. Smith’s Vista Equity Partners has agreed to acquire a majority stake in Acquia Inc. in a transaction valuing the enterprise software company at close to $1 billion, including debt, according to people with knowledge of the matter.”
What did Acquia, the leading provider of cloud-based, digital experience management solutions, do on the financial front to gain this kind of attention?
Let’s go back in time to several years. They were expanding internationally with a land-and-expand billing model, and every day the finance team was manually managing the complex MEA transactions with siloed billing, revenue in spreadsheets, and cash-based accounting. One day, they had to deploy ASC 606 at the same time as they managed over 1,600 customer contracts. In order to scale, they decided to deploy Sage Intacct to be the single source of financial truth for subscription billing and revenue management that automates forecasting on billings, cash, and revenue.
Since that day, with a single subscription system of record, they natively integrated the order from Salesforce directly to subscription billing in Sage Intacct, cutting order-to-bill processing time by 50%. This led to reducing DSO by 20% and reducing their deferred AR balance by one-third. All of this led to an operational cash flow increase of tens of millions of dollars.
To better inform decisions on directing this cash, they automated financial processes to the point that they reduced the financial close from 10 days to three days. They were able to able to deliver the budget to actuals to the business leaders 11 days after the monthly close and reduce their cash forecasting variance by 80%. They did all of this while adopting the strict reporting requirements of ASC 606.
These critical process improvements allowed them to drive big business value. For example, they now had the data, cash flow, forecasting, and confidence to accelerate investment in hiring for a new product line that would further support their customers’ digital experience goals. The new product line outflanked a competitor that had attempted to establish a niche in its customer base resulting in increased CLTV per customer and reduced churn.
The moral of the story is you can now have the confidence and cash flow to accelerate the growth of your subscription billing model with “one subscription system of record” from Sage Intacct. It is best captured by Emily Drahzal, Head of Revenue Operations at Acquia, who said, “We have brought predictability to our revenue.”
What steps led to that success?
From talks with 87 companies, a global survey of 500+ SaaS firms, feedback from industry analysts, and insights with the world’s top technology investors, an obvious pattern has emerged: having one master view of the customer subscription lifecycle increases cash flow, reduces churn, produces better forecasts, and enables teams to work better together. Companies of all industries and sizes are shifting their customer relationships from transactional to longer-term subscriptions. The benefits are proven—to attract more customers, create more predictability in revenue, and achieve higher customer lifetime value. Subscriptions require new capabilities beyond traditional enterprise resource planning (ERP) that legacy order-based financial systems can’t support. This shift requires the finance and revenue teams to work together and more efficiently on the key processes that deliver value for the company. These teams and their various roles include:- Sales ops—Create and book opportunities that adhere to sales policies
- Revenue operation—Shift from data entry to revenue analysis with automated billing, revenue, and item catalog sync
- Controller—Eliminate the need to manually validate orders and expenses to close faster
- FP&A—Get budget vs. actuals sooner, without reconciling systems
- CFO—Lead strategic planning with forecasts and visibility into growth levers
1. Automate everything from quotes to financial forecast
Starting from the initial sale all the way to the board and investors, Sage Intacct helps companies save hours of time and reduce errors by providing:- Prebuilt Salesforce integration to eliminate rekeying of sales contracts.
- Support for a variety of billing and revenue models, including subscription, services, perpetual, and usage billing.
- ASC 606 and IFRS-15 compliant revenue recognition.
- Fully integrated, intelligent general ledger.
- Out-of-box, real-time GAAP and SaaS metrics dashboard.
- Instant forecasting for revenue, billing, and cash.
2. Connect sales and accounting
Real-time, bi-directional synchronization between Salesforce Sales Cloud and Salesforce CPQ with Sage Intacct ensures Sales and Finance are always in sync and data is accurate whether you are looking at product pricing, customer invoices, or contact address information. This automates answering key questions for Sales such as how contract items are being billed (fixed price, usage, project time, and material) and what the billing and payment histories are for their customers. As sales close their deals, billing and revenue schedules are automatically generated for finance, and contracts are immediately available for billing.3. Onboard your promises for ASC 606 and IFRS-15
The Sage Intacct implementation utility automates the rebuilding of historical activity into your sub-ledger to set balances and enable billing and revenue recognition going forward. The utility can save weeks in your implementation, delivers retrospective reporting and insights at go-live, and speeds onboarding of future acquired companies.4. Adopt a modern, continuous close model
While order-based solutions require old record-to-report models that require month-end processes like reclassification, we support a continuous close model, providing:- Automated expense amortization, including commissions, over the life of the contract. No journal entries are required to adjust.
- Real-time reclassification of MEA on save, so your numbers are always up to date.
- Fully automated, real-time forecasting based on actuals.
- Fully automated, real-time SaaS metrics by dimension.
5. Reduce the exceptions that consume your time
Not only do we automate your routine revenue recognition and billing schedules across the customer lifecycle, but we’ve also added deep automation to eliminate the manual effort required for the less routine activities, including:- Backing out revenue and billing for cancellations.
- Pausing revenue, MEA, and billing schedules for contract holds.
- Recalculating revenue, MEA, and billing schedules after a contract amendment or resume after hold.
- Handling debooks and credits.
- Calculating and forecasting renewals.
6. Unify billing and avoid the “hodge podge” of billing solutions
As they grow, subscription companies often expand offerings to attract new customers, increase average sales prices, and retain existing customers. Sage Intacct supports unified billing across subscription pricing, usage billing, professional services, and perpetual licensing, giving our customers the flexibility to handle a variety of billing models.7. Generate real-time forecasting
With connections across CRM, CPQ, and financials via one subscription system of record, automatically generate forecasts, as well as re-forecast, in real-time. Sage Intacct provides one view of your customers (vs. disparate orders) across billing, revenue recognition (including unbilled), and cash over the contract term.8. Monitor metrics and drive decisions with real-time dashboards
Our customers implement the governance, reporting, and forecasting needed for a successful IPO by tracking successes instantly across metrics such as:- Cash flow (increasing up to 20%).
- Customer lifetime value (increasing up to 2X).
- Net dollar retention (increasing up to 120%).
- Cash forecast variance (reduced up to 80%).
- EBITDA (increasing up to 20%).
