Software CFOs: Managing Metrics for Continued Success
The software industry is evolving away from a focus on on-premises software and towards a focus on SaaS offerings. Even companies that continue to provide on-premises options now often sell subscription-based services as well.
That evolution is distinctly important for CFOs because key metrics and performance benchmarks are changing as well. Traditionally, software CFOs looked at revenue, expenses, and profits to measure performance. And since sales figures are what drives the bottom line, the sales department led the way in revenue forecasting.
Now that subscriptions are what drives revenue, CFOs must consider both financial and operational data at the same time. Success is based on retaining customers and growing the size of the hosting platform, which are actions that can’t be easily expressed through point-in-time financial metrics.
Adding New Metrics to the List of KPIs
Older performance benchmarks are still important. But they must be considered in concert with newer metrics that are specific to the SaaS business model:
- Recurring revenues
- Subscriber numbers
- Growth rates
- Revenue per customer
- Customer acquisition cost
- Customer maintenance cost
- Customer lifetime value
- Scalable hosting platform cost
In addition to being more complex, SaaS financial management operates at a faster pace. Growth happens suddenly and swiftly, and when one metric moves all the others are impacted. This is a challenge, but in the hands of the right software CFO it’s also an opportunity.
Piloting Performance with a Financial Management Platform
Successful software companies must track revenue metrics, customer metrics, cost/expense/profitability metrics, and cash simultaneously. Since each one of those categories includes multiple complex indicators, a single platform for financial management is essential.
CFOs gain real-time visibility when both financial and non-financial data are integrated and updated in one place. A platform also allows analysis, reporting, and benchmarking to be automated. As a result, KPIs are always accurate, up-to-date, and instantly available.>
Once a platform is in place, it becomes easier to forecast revenues, expenditures, and liquid cash. Consequently, red flags and golden opportunities are apparent far enough in advance for software companies to prepare. Devising strategy and allocating resources becomes a clear and confident process. And companies enjoy a level of stability and sustainability that would be impossible otherwise.
Sage Intacct is a financial management solution that turns complexity into accessibility. Working with new metrics becomes easier than ever and directly impacts the bottom line. And the CFOs who lead the effort become indispensable to the software companies they serve. Consult with InCloud360 to learn more about using metrics as a launch pad for growth.