Technology & Innovation

How SaaS CFOs can spend intelligently in rough markets

During a market downturn, SaaS CFOs must intelligently prioritize spend to maximize budget and performance. We look at how to address these FP&A issues to increase forecast accuracy.

people in office

Knowing how to spend effectively in turbulent markets is an art and a science. Accounting software can automate the “scientific” aspects for maximum speed, accuracy, and effectiveness. 

But there will always be the more human side of the question as well, which requires you to ask and answer tough questions about: 

  • Benefits vs. costs: Many spending ideas seem attractive and logical at first glance but carry hidden costs. Whatever ideas you’re considering, look at them from every angle before making a move.
  • Balancing strategic offense and defense: Finding your footing around strategy in turbulent markets can be complicated. You’ll have to chart the best course forward in the face of uncertainty and then lead your team in whatever direction you’ve chosen. 

Let’s dive deeper into how and where these financial planning and analysis (FP&A) issues will likely be relevant for you in the coming weeks and months.

Take a second look at your hiring plans

The recent market slowdown has thrown a massive wrench into the hiring agendas of many SaaS companies. It’s also forced many layoffs, which hopefully you’ve been able to avoid so far.  

If your company has plans to onboard new employees soon, be very careful about analyzing and implementing your next steps. You’ll want to be especially mindful of the following points: 

  • Leverage automated reporting and forecasting: SaaS accounting software equipped with automation will allow you to create accurate reports and robust forecasts around your key metrics. Any new hiring decisions are presumably made to improve your metrics, so this offers an essential element of certainty in backing up hiring decisions.
  • Assess your cash burn rate: Your cash burn rate (CBR) is an essential SaaS metric to watch during a recession. As the name implies, your CBR measures the rate at which you’re burning through your cash. It’s measured in months. I.e., “Given our current liabilities, we have a CBR of 10 months before we run out of money.”
  • Formulate “if-then” hiring propositions: Hiring aimlessly is never a good idea. But when the market turns against you, every new hire must significantly contribute to the company’s success. Create highly specific “if-then” statements about what you’re hoping to achieve with each hiring decision as you map out your plans.

After you’ve done all that, it’s time to put your company’s services and products under the microscope.

Analyze current services and upcoming launches

As a SaaS CFO, it’s your responsibility to be fiercely realistic about which products simply aren’t cutting it, based on the financial data. But you’re much more than a number-cruncher, and you’ll be expected to assist with the qualitative end of “recession management” as well.

Here are a couple of the best ways to do that:

  • See if a “small pivot” will help: If a product has at least been performing decently in the marketplace, it has what it takes to gain attention and get some traction. Sometimes even some minor finetuning around customer demographics or product features can take a product from lukewarm performance to burning hot success. And because it was only a tiny product pivot, you didn’t need to sink endless resources and hours into it.  
  • Run a risk-benefit analysis or two: This tip applies more to planned and upcoming launches rather than existing products. During a recession, you must be able to justify any expenditures on new products with laser focus and pinpoint accuracy. Your board of directors will want hard evidence of what’s behind your decision-making, so be sure you’re prepared to give it to them.

Sometimes though, spending is the right move even if you’re in a bear market.

Know when to spend more aggressively

Some business strategies make intuitive and complete sense, regardless of what’s going on in the broader financial market. Automation is a prime example.

Automation will allow you to save significant amounts of cash and time simultaneously (the “magic formula” for recessions). SaaS companies who have the strategic foresight to adopt automation unlock a wealth of benefits: 

Role-based dashboards: We’ve all been there: sending endless emails across three different departments to gather the data you need for the week. With role-based dashboards customized for CFOs, Controllers, and other accounting roles, you’ll have all the info you need centralized into one screen.

Continuous closing: When you tackle it manually, the monthly close turns into a monthly headache. Accounting software from Sage Intacct closes your books on a transaction-by-transaction basis, so you never have to worry about closing errors.

ASC 606 or IFRS 15 assistance: The current regulatory landscape is a complicated web of laws, and one wrong move could land you in hot water. Our accounting SaaS can transform ASC 606 from a complex web of regulations into the clear and helpful transactional roadmap it was meant to be. (See our related story in which we cover the 5 steps to recognizing revenue under ASC 606.)

And that’s only the beginning of what makes automation so incredible.

Peace of mind in all markets

Once your accounting team has access to our advanced automation suite, you’ll be well-equipped for success in sluggish markets or meteoric ones.

For even more advice for SaaS CFOs, check out our recent ebook about predictive KPIs for SaaS companies.