With the increasing popularity of software as a service (SaaS) products, new SaaS companies are popping up every day. But come funding time, many SaaS companies find in organizing their finances that their budgeting system is a mess. This is when it’s time to turn to a SaaS CFO.
For most SaaS businesses looking at seed or series A funding, a SaaS CFO may seem like an out-of-reach luxury. Aren’t CFOs supposed to be for big businesses? With fractional and virtual CFO services, your SaaS business can hire a CFO part time for a fraction of the cost.
With a SaaS CFO as a viable option for your early stage SaaS business, not taking advantage of CFO services is the biggest mistake you can make as a business owner. Here are just some of the benefits of bringing a CFO onto your SaaS business team.
1. A SaaS CFO Can Reduce Costs and Accelerate Growth
The biggest reason for getting a CFO is the cost savings from sound financial management. A CFO will keep track of spending patterns, finding redundant expenditures eating into your bottom line such as unused software licenses or costly processes.
With additional finances at your disposal, you can invest more in your growth. The SaaS CFO can help plan and strategize for growth with actionable goals and key performance indicators. Some fractional CFOs offer flexible pricing options so you can increase services as your company grows.
A SaaS CFO will analyze your marketing and work with your sales team to expand subscription services for existing customers as well as find new ones. They may also be able to help cut the cost of customer acquisition.
2. Budget Forecasting With SaaS CFO Metrics
With a SaaS CFO, financials are no longer confusing. The CFO will assess your cash flows to identify monthly and annual recurring revenue (MRR/ARR). With this as a baseline, the CFO will assess your variable revenue to identify its sources and predict revenue and profit movement over the long term.
Of course, “prediction” is highly dependent on what your business actually does. Your SaaS CFO will develop several forecasts based on various strategies your SaaS business can take.
3. Tax Planning With Your SaaS CFO
You might be wondering, “Okay, but can my SaaS CFO handle taxes?” While your CFO is not (usually) a tax accountant, they can interface with your tax accountant on your behalf to explore all possible deductions your business might be able to claim. This usually results in a reduced cost of customer acquisition as expenses are written off.
Since tax time might require more hands-on time for your CFO, you may want to find a fractional CFO with flexible pricing options. This allows you to increase the amount of contact time you have with your CFO when they’re needed most.
4. Find New Funding Sources With a SaaS CFO
The average user thinks their SaaS exists either on their computer or “on the internet.” But you know that SaaS companies have significant capital needs. Because much of the property of a SaaS company can’t be repossessed, qualifying for loans can be tricky.
A good CFO will have knowledge of creative sources of funding. With a battery of strategy documents, a good CFO can convince a loan officer that your SaaS company is worth taking the financial risk on. And with the flexibility of a fractional CFO, you can increase their contact time with you to prepare for funding rounds.
5. A SaaS CFO Can Build Your Finance Team
A SaaS CFO is just one piece of your financial management puzzle. As your company grows, you will want staff to handle things like accounting and tracking of SaaS metrics.
With data analytics, your finance team will identify key strategies for targeting customers, successful efforts at revenue retention, and areas for improvement.
Fractional CFOs are typically the preferred financial management option for small businesses. When your SaaS business gets too big for a fractional CFO, your fractional CFO can help in hiring a full time CFO, CPA, and finance staff.
Questions to Ask a SaaS CFO
CFOs vary widely in capabilities and experience. It’s important when hiring a CFO or fractional CFO for your SaaS business that you know if they can provide you with all the services you need.
Things you may want to consider include, can they integrate into your company’s business model? What sorts of connections do they have to funding sources? Are they able to be flexible with their time? What kinds of savings have businesses realized under their supervision?
There are likely other questions you will want to ask depending on the particular service you provide. At Michigan CFO Associates, we’re here to answer all your questions about hiring a fractional CFO and the benefits they provide for SaaS-focused businesses.
Get on the fast track to making intentional financial decisions. Contact us today for more information.