Increasing Recession Cash Flow with AI and Predictive Analytics

During a recession, your priorities as a SaaS CFO shift somewhat. 

In more abundant markets you’re freer to balance exploration and preservation. While some blend of those two is always needed in financial leadership, recessions call for a heightened emphasis on cash flow. 

Specifically on lengthening your cash runway by eliminating resource drains, managing churn, and automating financial processes. In this post, we’ll discuss how you can use AI and predictive analytics to thrive despite poor market trends. 

SaaS recession performance: Manual accounting vs. AI

In modern SaaS accounting, finance leaders’ choice of technology has a far-reaching impact on firms’ recession performance. 

Let’s take a quick look at two different approaches to recession management: manual accounting and cloud-based automation. 

Manual recession management 

As we mentioned at the outset of this post, cash is king during a recession. You want to do everything in your power to preserve and increase cash flow and cash on hand. 

Unfortunately, legacy accounting systems make this extremely difficult–and actually exert force in the opposite direction–for a number of reasons. 

• Departments update their data independently, making it hard to get a quick, unified view of your firm’s financial health. 

• The lack of a single source of truth (SSOT) leads to revenue leakage. 

• Manual forecasts lack the range and flexibility for effective long-term planning, further shortening the cash runway. 

• Manual reporting lacks the financial detail that SaaS companies depend on to see them through hard times. The importance of data-driven recession management can’t be overstated. 

How does automation compare to legacy tech during a recession?

Automated recession management 

Cloud-based financial management software equipped with AI and predictive analytics can help SaaS companies regain clarity during financial storms. 

A few particularly potent benefits of automation for recession management include: 

• Financial process automation leads to optimised resource management.  

• The ability to eliminate the close: cloud-based accounting software continuously closes your books with each transaction, instead of leaving teams scrambling to do it all at once. In a recession, who has time for that? 

• Multi-factor forecasting becomes as simple as entering your starting data and clicking a button. 

Why else should SaaS finance teams embrace AI in the midst of a recession?

AI can extend your cash runway

As we mentioned, your cash runway becomes extremely important during a recession. 

The main reason to invest in AI is that it allows you to manage your cash flow more effectively in good times and bad. 

Let’s look at some specific ways that AI can help SaaS accounting departments lengthen their cash runway.

Identify cash-drains faster 

During a recession, you need to do everything you can to spot and eliminate suboptimal uses of cash. 

This is achieved by using AI to generate granular financial reports, allowing you to instantly identify what’s working and what’s not. 

We already touched on a significant cash-drain for many SaaS organisations–the monthly close. 

A few other common cash thieves include failed payments from manual processing, poor fund allocation due to high budget variance, and wasted time from manual reporting and forecasting. 

How else can AI contribute to your cash runway and cash flow during recessions?

Boost sales and marketing effectiveness

When SaaS companies opt for cloud-based accounting software with AI, the resulting impacts extend well beyond the finance team. Sales and marketing see considerable improvements as well, directly impacting your cash position. 

Thanks to your SSOT, you’ll have seamless access to sales and marketing data that’s continuously updated in real time. 

This helps finance leaders link up with sales and marketing leaders for proactive problem-solving, strategising, and campaign performance monitoring.   

Managing churn with AI 

Churn is something that SaaS finance leaders can’t afford to tolerate when the markets dip. 

AI and predictive analytics can help you skilfully manage and swiftly respond to both voluntary and involuntary churn. 

Voluntary churn

Voluntary churn occurs when users grow dissatisfied with your product and unsubscribe. 

During a recession, high rates of voluntary churn can add significant strain to the baseline stress of poor market conditions. 

AI and predictive analytics help SaaS CFOs take control of voluntary churn by:

• Enhancing billing and pricing flexibility: A well-timed discount campaign or a retooling of your pricing strategy can help keep users from leaving.

• Forecasting churn trends: The problem with churn is that it often starts slowly. This can lead to finance leaders not picking up on the long-term severity of problematic trends until they get out of hand. Early intervention is key to recession churn management–which is vital for recession cash flow. 

How can AI help SaaS companies eliminate involuntary churn?

Involuntary churn

Involuntary churn occurs when customers’ payment methods are out of date and can’t be processed. 

With most manual systems, the user is either unsubscribed at that point, or the payment card is tried again in a few days with the same result. 

Cloud-based financial management software takes care of this through automated dunning emails. 

A dunning email is a simple message notifying the customer that they need to update their payment info and that you’ll run the charge again in 3 to 5 days. 

It’s a hands-off way to completely eliminate involuntary churn (the cost of which can add up quickly).  

Cloud-based automated forecasting 

In a recession, you often need to think creatively about discount campaigns, cross-sell ideas, new billing tactics, and other strategies that will allow you to tip the scales back in your favor. 

Automated forecasting has the horsepower to handle all of that. 

In addition to forecasting to find and create opportunities, you’ll also be able to run forecasts to look for troubling trends. Rooting out potential problems is much easier with robust automated forecasts and predictive analytics.  

Learn what you need to succeed

Cloud-based forecasting, AI, and predictive analytics are essential ingredients for SaaS accounting success. The effectiveness and agility made possible by cloud-based workflows have allowed many SaaS accounting departments to rapidly level up their results. But there’s something even more important to consider than external strategies or tech: making an investment in yourself.  

The Modern SaaS Finance Academy is an online academy created by SaaS finance and accounting leaders and experts. It features a curated course list that focuses on the most critical skills for finance and accounting professionals to develop in order to thrive in the coming years and decades. Lesson topics include frameworks for reporting to your board, innovative AR design, revenue recognition strategies, and much more. 

Click here to join today.