As a SaaS CFO, your skill at managing your company’s financial operations (FinOps) is the make-or-break factor in your professional performance.
If you’re still handling your company’s FinOps manually, you run a serious risk of losing market share. But we’re here to offer a better way forward: cloud FinOps with generative AI (GenAI).
In this blog, we’ll
1) Provide an overview of SaaS FinOps and its core principles,
2) Delve into your unique FinOps responsibilities as a SaaS CFO,
3) Introduce you to GenAI and discuss how it works, its benefits, and potential drawbacks,
4) Explore profitable use cases of GenAI for SaaS CFOs.
If you’re ready to revolutionize your accounting department, this post is for you.
Understanding SaaS FinOps
To successfully manage the finance and accounting operations of your SaaS business, it’s crucial to have a clear understanding of what FinOps entails and encompasses.
This knowledge allows you to implement best practices for these processes in your accounting department, ensuring continuous improvement and financial accountability.
FinOps refers to a variety of processes and workflows involved in managing your company’s transactions and cash flow.
Your FinOps team’s key tasks include:
- Financial reporting
- ASC 606 compliance
- Forecasting and model assembly
- Bookkeeping and data entry
- Pricing model optimization, and more.
Now that you know precisely what we mean by “SaaS FinOps,” let’s explore the three principles that should be the centerpieces of your FinOps philosophy and management style.
Your FinOps foundation: 3 core principles
To handle your company’s FinOps effectively, it’s not enough to know the processes involved. You also need to give yourself a set of leadership ideals that will help you stay at the top of your game and win your market.
Remember, the primary goal of FinOps is to generate cash flow through effective financial processes and promote financial visibility through reporting and forecasting.
To accomplish that, your core FinOps principles should include:
- 1. Process automation: In the age of AI, leveraging automation is practically the only way you can hope to keep up with your top-performing competitors. Let alone surpass them. Cloud accounting automates everything from your SaaS KPIs to your payables for superior financial performance.
- 2. Centralized visibility: For SaaS CFOs, financial visibility is paramount. And there’s no better way to achieve it than cloud-based centralization. Accounting software with a single source of truth (SSOT) eliminates data silos in SaaS organizations and promotes cross-functional conversation around key financial issues. As you can imagine, this is a huge time saver for ASC 606 compliance.
3. Continuous improvement: When you leverage automation for your FinOps activities, continuous improvement is built in. Take forecasting, for instance. Machine learning (ML) solutions become more effective over time as they deepen their understanding of your financial datasets and hone their segmentation and prediction capabilities.
Now let’s get into the nuts and bolts of GenAI. It offers much better features than spreadsheet-based solutions and truly showcases the value of the cloud for SaaS accounting.
Introduction to GenAI
GenAI is a subcategory of AI that aims to create original content. For you as a CFO, that encompasses reporting, financial forecasts, the creation of board packs and tax documents, and more.
Cloud resources equipped with GenAI are far more effective at FinOps workflows than their manual counterparts, and cloud costs also tend to be much lower.
How does GenAI work?
GenAI combines ML and language learning models (LLMs) to analyze and manipulate data at lightning speed. It’s helping business teams operate at new heights of efficiency and effectiveness and has caused a cultural shift in how companies operate.
To implement GenAI, you’ll need to train your chosen cloud accounting software on your company’s specific datasets. This is easier to do as your company reaches FinOps maturity since you’ll have a much larger data pool. But the business value of cloud tools is definitely present for smaller companies as well.
One of the biggest benefits of GenAI is that it’s code-free. On your end, at least. This makes it much easier to quickly reach your business objectives.
In case you’re still not sold on the importance of GenAI and cloud-based FinOps processes, let’s get into some use cases. They’ll help you see how these tools can create a FinOps culture of innovation at your company.
5 FinOps GenAI use cases for SaaS CFOs
GenAI enables the centralization and automation of key FinOps processes, eliminating data silos and promoting cross-functional organizations–a necessity in today’s fast-paced SaaS industry.
With its advanced capabilities and insights, GenAI empowers FinOps decision-makers to align business operations with their organization’s broader strategic goals.
So let’s answer the million-dollar question about GenAI and cloud computing: what’s in it for you and other FinOps practitioners at your company?
1. Centralized and automated financial reporting
Financial reporting is at the heart of any FinOps framework. But in a legacy accounting department that runs on manual spreadsheets, CFOs risk all kinds of issues:
- Manual data entry errors
- Siloed and inefficient data updates
- High amounts of lag time in reporting, impacting decision-making
None of these are a good thing, but taken together, they represent a significant roadblock to cross-functional teams and your company’s success.
Implementing a cloud accounting solution with centralized remote visibility and real-time reporting ensures that you and other stakeholders can always make effective and proactive decisions.
2. Dynamic “if-then” SaaS forecasting
Forecasts created with ML tech are dynamic rather than static, enabling them to adapt to changes in your financial environment. This offers a huge advantage in meeting your business goals.
Automated forecasts can help you gauge the effects of variable cost SaaS pricing models, understand the impact of budgeting and allocation choices, and more.
Dynamic forecasts created with GenAI offload multiple workloads from your employees at once: ongoing data assembly, model creation and updates, and others. This results in substantial cost savings.
GenAI even automatically generates all the necessary forecast creation and assumption documentation you’re required to maintain when using ML for financial forecasts.
3. Streamlined board reporting
Between prepping your board pack as effectively as possible–complete with financial storytelling techniques–and dealing with the high expectations that accompany board meetings, the board-CFO relationship benefits greatly from automation.
GenAI can help you:
- Present clear financial narratives to your board by creating detailed financial presentations and customizable role-based dashboards
- Give a crystal clear picture of how you’re meeting your performance obligations across the business lifecycle
- Automatically prepare and digitally distribute high-quality board packs so everyone arrives to the meeting on the same page
How else is GenAI helping SaaS CFOs get ahead in their markets?
4. Simplified multi-entity accounting
Multi-entity consolidation refers to the process by which a business with multiple subsidiaries, entities, or locations rolls up all its separate accounting data into a conveniently centralized format.
This process is essential for enabling key stakeholders in your SaaS organization to quickly digest the numerous layers of complex financial data involved in multi-entity accounting.
Accounting software equipped with GenAI can automate your consolidation accounting processes, enabling you to:
- Unlock a robust automated approvals architecture for all your multi-entity needs
- Effortlessly switch between currencies to match the locations of your various entities
- Automatically prepare consolidated financial statements that can strengthen your organization’s FP&A
Even if your company doesn’t have multi-entity accounting needs right now, it’s never too early to lay the groundwork for when it becomes a FinOps practice in your department..
5. Enhanced revenue recognition
Recurring revenue SaaS businesses are beholden to ASC 606. This legislation stipulates that subscription software companies report revenue as earned only once they’ve provided the services attached to it.
If a customer pays you $1,000 for an annual subscription, you’re required to recognize that revenue across the calendar year rather than immediately upon receipt.
At a conceptual level, it’s pretty simple. It’s just a way to keep SaaS companies from unfairly inflating their revenue. In practice, however, it’s much more nuanced.
Tracking service obligations against recognized revenue for one or even a handful of customers isn’t tricky. What about dozens? Hundreds? Thousands? Once you start scaling, ASC 606 is much better handled by GenAI than by employees.
Manual revenue recognition is a siloed process and quickly results in revenue leakage. But accounting software with cloud-based GenAI centralizes your revenue recognition for total accuracy. As a bonus, you’ll even get automatic alerts whenever a compliance update impacts your business.
As powerful a tool as it is, GenAI isn’t a magic bullet. Before wrapping up, we’ll briefly review a few potential issues you might run into during implementation and how you can address them.
GenAI for SaaS FinOps: potential issues and solutions
To achieve a smooth rollout with automated accounting software, you need to be aware of some of the roadblocks you might encounter during the implementation phase.
Below are some of the most common issues SaaS CFOs encounter and some tips for overcoming them.
Blind reliance is a dangerous business philosophy or cultural practice. Basically, it says: “Cloud usage and AI can solve all our problems, no matter how deeply rooted or ingrained in our organization’s habits and processes they might be.”
Well, we have news for you: this is just not true. The best way to reap the rewards of accounting software with GenAI is to follow a strategically phased rollout.
Your software rollout should include, at the least:
- A pre-implementation phase for planning and interfacing with stakeholders
- The implementation phase
- Your initial 90 days using GenAI
If you select a reputable software vendor, they’ll help you achieve success with each of those steps. What else should you watch out for?
Biased financial datasets
One thing to be aware of with GenAI is that its outputs are only as quality as the data you train it on.
Say you’re a newer SaaS company looking to use AI for forecasting, but your customer data is very limited and only represents a few user categories.
Working with this improperly weighted starting data will decrease the business value of your forecasts by drastically raising variance rates.
Before making the leap to automation or GenAI, you need to make sure that your data is well-maintained and you have quite a bit of it to train your software on.
Are you ready to see how GenAI can transform your FinOps?
Cloud accounting with GenAI can revolutionize your approach to financial management. Financial automation unlocks significant cost savings while boosting process efficiency and cash flow visibility for SaaS CFOs.
To see how cloud accounting software with GenAI can give your department a boost, check out our datasheet about automation and AP performance.