Enabling Agile Finance: The Strategic Toolkit for Modern CFOs

Over the past couple of years,  growth has been the single most important factor in determining a  SaaS company’s valuation. According to the OpenView SaaS Benchmark Report 2022, a year ago,  the valuation of SaaS companies highly correlated with their next 12-month growth rates. It meant that 57% of a company’s valuation was explained by the rate at which they could grow their ARR. But, with a recession on the horizon, the era of hypergrowth has taken a backseat and the famous ‘Rule of 40′  is making a comeback. Investors are now rewarding efficient growth over growth at all costs. So a company needs to more than double its ARR to command the same valuation received 12 months ago. 

Amidst the shrinking availability of capital and rising interest rates, businesses turn to their CFOs to ensure liquidity and long-term endurance. The new mandate for the modern CFO is to be able to build an agile finance function that ensures sustainable growth, no matter the headwinds. 

In this blog, we will look at why CFOs need to adopt an adaptive revenue management strategy to manage revenue cycles more effectively with a robust tech stack and become the financial architects of their firm’s long-term success.

How can Modern CFOs Drive Agility Within an Organization?

Here are three ways CFOs can drive agility within their organizations from day zero and ensure a long-lasting impact.

• Set up processes for revenue visibility and predictability

In a turbulent market where multiple initiatives compete for time and budgets, it’s imperative to set up processes that provide revenue visibility and predictability – which are inarguably the drivers of growth in SaaS businesses. 

• Align your revenue operations 

Connecting the cash and the cost of the business with the revenue generated is a plausible expectation from every finance operations team, albeit a tricky one. There are several gaps to fill, and as the company grows, the gaps become harder to plug. 

• Map processes between people and tools

As your organization grows from startup to scaleup, it’s critical to have a single source of truth across the business. As you onboard more team members and begin using different tools, things can get chaotic quickly. When discussing a cross-functional metric, are you sure everyone is looking at the same number?

Revenue Management Tools for the Strategic CFO 

Given the economic downturn, implementing the right toolkit for finance-led business planning provides CFOs the opportunity to be adaptive – pre-empt changes and plan for it – and in turn, allows their subscription business to react quickly to new opportunities. Modern finance leaders need a robust revenue management infrastructure that saves their team precious time, enabling them to focus more on driving strategic initiatives such as increasing revenue, experimenting with pricing, and monetizing effectively.

Let’s take a deep dive into how you can build a command center for your recurring revenue that can handle the end-to-end subscription management right from billing to accounts receivable all the way to retention and renewal.  

Seamless billing and invoicing

The core business of billing software is to efficiently process, collect, and account for money paid by customers. As your business scales, managing upgrades, pauses, and downgrades, all with managing multiple products and global expansion can get very complicated. That’s why it’s important to think beyond a billing software that processes payments to an automated billing engine that takes care of all the operations surrounding how you plan, price, package, and bill your products.

Error-free payment processing 

Once you bill your customers, you need a tool that can help you with glitch-free recurring payment processing. Apart from the general cold feet of customers, the other biggest reason for non-payments is the unsupported payment methods. 

Siloed payment solutions may not suit or adapt well to the specific needs of your customers as you scale your business. Moreover, failed transactions and long latency times for approvals can damage the goodwill and reduce customers’ lifetime value. This can be avoided by offering multiple payment methods that help you accept recurring payments globally via credit cards, debit cards, digital wallets, bank transfers, and checks.

Solid Accounting 

SaaS accounting could be quite an arduous task. During a recession, customers tighten their budgets and instead of committing to bigger fixed subscription payments, customers may opt for mid-cycle plans and price changes such as cancellations, or downgrades which add an extra level of complexity to SaaS accounting.

Implementing automation from day one for such repetitive accounting processes gives the finance teams more time to concentrate on tasks that require strategic decision-making.

Efficient Revenue Recovery

To ensure your business has a healthy cash position during the economic slowdown, recovering every penny counts. A manual receivables process can leak ~3% of your revenue, even with an ERP.  Integrating your tech stack with robust Accounts Receivable (AR) software can help plug revenue leakages in your billing process, and maximize cash flow. An intelligent dunning system can mitigate payment failures and prevent involuntary churn. Investing in an integrated billing plus receivables system that can automate your entire AR workflow will help plug revenue leakages and improve your bottom-line growth. 

Compliant Revenue Recognition 

Revenue recognition can be a complex process for subscription businesses. There is no doubt that you need to offer your subscribers the flexibility to change or pause their subscriptions anytime during their tenure, but manually calculating the revenue to be recognized can be a nightmare for finance teams. Besides, any errors that indicate non-compliance can attract hefty fines and affect your fundraising as well. Since accurate revenue recognition is key to business valuation, CFOs need to invest in automating revenue recognition to help them eliminate complexities, automatically recognize revenue upon fulfillment, accurately forecast revenue, and stay compliant with global standards like ASC 606 and IFRS.

Strong Reporting Engine

The modern CFO needs a single source of truth that could help highlight the right data that underlies the recurring revenue lifecycle, and even provides the relationship between the different data points like customer lifetime value, churn, average revenue per customer, etc.

This can help in price experimentation, financial analysis, and revenue forecasting consistently. Based on your metrics, your financial forecasts need to be altered to match the changing scenarios every quarter.

For example, Rise Vision used third-party analytics tools that showed invoice-deep data. Since they ran their metrics on invoice information, their MRR was not a true representation of their revenue numbers as it did not take into account information such as promotional credits — something that Rise Vision issued in abundance to push for better product engagement and higher renewal. Chargebee’s RevenueStory provided a 360-degree view of the transaction and customer-level metrics. With the help of this, the team at Rise Vision saved 50% of their time that was spent in reconciling numbers earlier.

Since you are also looking to align capital with growth initiatives that give you the highest ROI, having a single source of truth when it comes to all your data.Chargebee provides a holistic view by centralizing all the data helping you understand all the business components, figure out the areas you need to double down on and where you need to optimize apart from allowing you to course-correct on a real-time basis.

Sail Through Market Turbulence With Chargebee

To prepare for the impending recession, it’s critical for a modern CFO to adopt and leverage automation to emerge stronger. 

The modern finance leader is expected to straddle all three responsibilities- accounting, strategic finance, and leading the function – with finesse. And the cornerstone to said finesse is an integrated toolkit. The authors of the book Nine Keys to World-Class Business Process Outsourcing rightfully said: “The value is in the integrated toolkit, not any individual tool.” That’s why we built Chargebee to offer multiple, modular solutions under one umbrella: recurring billing, receivables, revenue recognition, and retention. Chargebee enables efficient, sustainable growth, better customer acquisition, and increased customer LTV without compromising compliance and operational excellence. 

If you would love to bring more agility to your finance operations, get in touch with our experts and we’ll take it from there.