Even for seasoned SaaS CFOs that have been in the subscription revenue sector for years, reporting and forecasting can be daunting processes. Not to mention the tight deadlines finance teams frequently operate under.
However, reporting and forecasting doesn’t have to be frustrating or even difficult activities. Modern automated accounting tools make both of these strategic tasks seamless and straightforward.
But before we dive further into the magic of automation, let’s get better acquainted with reporting and forecasting. Why do they matter so much? And how do the most successful SaaS companies use them to rise above their competitors in a multidimensional industry?
Reporting Lays the Groundwork for Accurate Forecasts
Some people fall into the mistaken belief that financial reporting is purely about rehashing numbers. Nothing could be further from the truth.
Effective, fast, and accurate financial reporting gives your entire company an incredibly valuable real-time snapshot of how you stack up in the competitive SaaS ecosystem.
More specifically, excellent reporting serves as a company-wide strategic asset because it:
- Provides clarity to your board and critical decision-makers about your CAC, CLTV, churn rates, and other essential SaaS metrics.
- Gives your sales and marketing teams a sense of direction by allowing them to see granular data about where they’re succeeding and failing. This knowledge will allow them to formulate more effective plans to drive recurring revenue in the coming months and quarters.
- Offers an entirely objective benchmark to measure future results against your present position. This objectivity is critical at all stages of your company’s lifecycle: your board and potential investors will all demand objective proof of how your company is performing.
Financial reporting is more than just mindlessly putting numbers up on a screen: those numbers serve as the scaffolding on which you construct your forecasts.
And if the inputs for your forecasts (your SaaS reporting data) are inaccurate or incomplete, your entire company will pay the price. If you’re not targeting the right customers, your churn rates will start to increase and your ARR and MRR will start to decline.
That’s a pretty gloomy picture. So how do you prevent it from turning into a reality?
Accurate Forecasts Give Your Company a Strategic Edge
As with financial reporting, forecasts involve much more than just playing with numbers. That might be what they are on the surface, sure. But once you peel back a few layers, you’ll see that there’s more going on.
CFOs who put in the time and effort to finesse their forecasts contribute massively to the rise and results of their companies. Predictable forecasting might seem counterintuitive. After all, forecasting implies a certain degree of unpredictability.
But reliable forecasting can be repeatedly achieved if you follow a few practical guidelines:
- Put your pipeline under a microscope. Aim to understand your sales pipeline at the deepest possible. How did your MRR (monthly recurring revenue) for the preceding quarters look compared to what you expected? Were new features added to your product that resulted in a wave of new signups? Conversely, were there portions of your pipeline where customers churned or hesitated in signing up?
- Look for sales cycle patterns. Once you have a better grasp of your pipeline, it’s time to analyze your sales cycle. Sales cycles for subscription billing companies tend to be highly variable since people sign up and churn throughout a given month. Still, it’s well worth your time to comb through the data to discern patterns you can capitalize on.
- Match your model with your mission. Ensure that the forecasting model you employ matches your end goals for your forecast. There are a variety of forecasting models you can choose from, including lead-gen forecasts for different marketing methods and historical forecasts that use past revenue data to predict the future. Always base your selection on what you hope to achieve with your forecast.
There’s one last element of reporting and forecasting for SaaS companies that we haven’t touched on yet.
Embrace Financial Automation
The most effective SaaS CFOs realize that automation is the only way to guarantee accurate, actionable, and reliable forecasts. Automation removes every ounce of guesswork and manual processes from your reporting and forecasting.
SaaS accounting automation software also:
- Centralizes all your data. Automation enables you to say goodbye to manual, spreadsheet-based approaches forever. It lets you access all the data you need, on a single screen, with a single click.
- Acts as a force multiplier for your forecasting. Robust automated forecasting allows you to plug in your data to generate accurate forecasts more quickly, easily, and for larger time horizons than manual spreadsheets.
- Gives you role-based dashboards. An automated accounting solution like Sage Intacct provides specific dashboard views for particular members of your team based on the data they need access to for their daily responsibilities.
The future of SaaS reporting and forecasting is all about efficiency. By minimizing unproductive processes and leveraging relevant technology, you can save yourself and your team time and money.
Feel free to contact the Kiteview team to find out more.
