A checklist of must-have features and capabilities for the ideal SaaS finance tech stack

Middle-aged woman operating a tab

“The best finance tech stack revolves around two things, a frictionless customer experience, and fast, complete reporting,” said David Appel, Head of the SaaS Vertical at Sage Intacct, at the third annual Sage Intacct Modern SaaS Finance Forum.

David Appel, along with speakers Andrew Dailey, Managing Director at MGI Research, and Ben Murray, Founder of TheSaaSCFO and TheSaaSAcademy hosted the popular kick-off session which included a checklist for SaaS companies intent on building their financial tech stack. Let’s drill into the checklist.

1. A rock- solid general ledger (GL)

As the foundation for revenue recognition, invoicing, and more, the accounting system housing your general ledger ultimately powers or hinders your growth. You want to get your accounting in order first and need a general ledger made for the SaaS industry.

What works today may not work next year. You will want an accounting system that grows with your business and is flexible and innovative. Whether you have a usage, consumption or subscription billing – your system should have built-in capabilities to handle SaaS industry recurring revenue nuances and unique compliance requirements. The key evolution in the GL revolves around three things. First, having the ability to handle changes to current contracts. Second, having the dimensions tagged on every journal entry to have data for the management team to make big decisions. And third, having the entire prospect-to-disclosure process all in one integrated system to shorten your close and simplify the process of generating flash and financial reports.

The panelists agreed, accounting and finance team members need all of the finance data in one place, they need it in real-time and they need visibility and access for analysis and reporting.

2. The ability to handle any combination of billing scenarios

Said another way, you want a flexible, scalable billing system that handles multiple use cases.

You need to have the systems in place to be able to respond to customer and competitive needs. Finance should not be telling sales they cannot sell the customer what they want because they cannot invoice it. “Billing and invoicing is the moment to delight or disappoint your customer,” according to Dailey.

Time, usage, services, subscriptions, consumption, changes and cancellations – all part of customer needs in a SaaS business model that make billing incredibly complex.

Your tech stack should enable Sales to respond to customer needs. They need to be able to create customized offers as part of a frictionless customer experience. Most importantly, the process of creating customized offers needs to be scalable. And, you need to be able to report on these offers, with a repeatable process that brings consistency to the results and trust in the numbers. A rapidly changing billing environment requires accurate and timely metrics.

“Finance has the opportunity to be a strategic partner to the business by helping the product team bring products to market quicker with adaptive billing,” according to Murray.

3. Automated revenue recognition

Revenue recognition can make or break a SaaS company. “Revenue recognition has to be bulletproof, your investors rely on this data,” said Appel.

You do not want to find yourself trying to catch up with Sales. Additionally, CEOs can use revenue recognition to impact results by determining when to pull in revenue. Your tech stack should automate revenue recognition for a consistent and standardized approach. Typically, when processes are automated, data flows where it is needed, making reporting incredibly easy, quick and consistent.

Finally, ASC 606, IFRS 15 AND GAAP requirements are less challenging when your accounting system is built to handle recurring revenue models. Such systems collect and report on the critical data automatically so that audit trails and reporting requirements are often met with the push of a button.

Here are three key insights to use when planning your revenue recognition scenarios for your tech stack:

Insight 1: Everything in reporting revolves around timing, amount, and uncertainty. An entity should recognize revenue to reflect the transfer or control of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services (Terms in parentheses added).

Insight 2: What IS a Performance Obligation? You promised goods and services: The right to use your software to accomplish a task (ex: payroll, expenses, social, etc.). Performance Obligations are explicitly stated in your Contract OR something not stated but common in your business processes. So, you really need to know what promises were stated. And what your business practices are (in what anyone in the company will do for the customer).

Insight 3: What IS a DISTINCT Performance Obligation? And how is it different in a recurring revenue model? The idea is you look at each distinct Performance Obligation not only to identify them, but to see how they individually and together help you keep and grow the customer relationship. When teams align on serving the customer, the overall customer experience is improved and becomes frictionless. The ideal tech stack fosters this alignment by supplying the structured framework and automating the processes needed to meet audit and reporting requirements.

4. One system of record across the customer lifecycle

Trust in data is based in great part on accuracy and transparency. Not only do you need to trust your data, your teams, customers, and investors do too. To scale, getting data should be an easy and repeatable process. Think about your workflows in a holistic manner across teams.

The source of your data impacts your monthly close, invoicing and more. Have one system of record to create agility. “You need visibility into the operations of your company and having everything in one system helps teams shift from gathering, entering, and reconciling data to analyzing and reporting on it,” said Murray.

The flow of the data is critical. This is where automation and manual data entry separate the surviving from the thriving. As the volume of data increases, the processes in place to capture, track and utilize the data impact everything from days sales outstanding to your entire set of SaaS metrics.

5. The ability to reduce exceptions in the selling process

As a startup, netting large, well-known, customers helps your reputation and brings you increased visibility. These large customers may have unique requirements and conditions to their purchase. Your tech stack needs to be able to handle these exceptions. Finance needs to be able to measure all the metrics associated with these customers. Sales needs visibility into when an upsell or cross-sell is appropriate. All of this visibility, adaptability and measurability should not break the backs of IT, finance, sales or any other team that needs access to real-time data. Your tech stack should be flexible to handle customer demands and the changes they request that will help you gain and retain them.

Dailey shared this statistic – “the average organization logs 30% of its support inquiries as billing related.” There is so much you don’t know in the early stages of proving your model, however, exceptions to your billing are what can cause delays and errors in creating the frictionless billing experience.

Finance works at solving transactional pain points and CFOs do not want to have tons of exceptions. Finance teams need to be able to handle all types of contract pricing and invoicing. According to Murray, “you want to stay adaptable in Finance.” Procurement teams and competitive pressures can push Sales into unusual scenarios. Having both the trust to work together through those, and the flexibility in the stack to address adjustments to the normal is key to a fast close and getting the data for reporting.

Exceptions will always be a part of the day to day. What is key is building your tech stack to be flexible to be able to adapt as your organization and customer needs change.

Conclusion: The Ideal SaaS Finance Tech Stack for the Road Ahead Centers on the Customer and the Data

Dailey, Murray, and Appel agreed that you cannot scale your financial organization by adding headcount. Technology is the enabler. Continuously analyze data and evaluate people, processes, and technology while keeping your customer at the heart of it all.

With these five capabilities, your SaaS finance tech stack will provide you with the regulatory and reporting framework you need, the data management and automation your teams need, and the flexibility and scalability your SaaS startup requires to prove your product market fit and land the next round of funding or go IPO.

The 2022 SaaS CFO Guide to FinOps Efficiency


People networking during conference