December 23, 2020
Can Your SaaS Business Scale When It Matters Most?
Posted by Armanino Financial Advisory Team
For SaaS companies, growth isn’t just a goal – it’s imperative. According to McKinsey, a software company that can’t grow at least 20% annually has a 92% chance of failing. There’s little room for error and no time to waste. That raises two critical questions. First, how will you engineer that amount of growth? Second and more importantly, how will you scale to accommodate that growth once it appears? Because if you can’t grow the back end of the company – the staff, technology, policies and leadership – to match the scope of the company, growth only feels like an obstacle.
Scalability is even more important in the midst of disruption like the COVID-19 pandemic when continuing to meet growth targets is both necessary for survival and also an opportunity to gain meaningful market share over competitors. Disruptions make growth more important, not less. It’s vital that your enterprise is equipped to scale, so you don’t become a victim of your own success.
The Leading Edge of Scalability
Every part of a company needs to grow and evolve eventually, but some things need to scale before others. To put it differently, if certain aspects of a company don’t scale quickly or fully enough, growth becomes far less likely.
Accounting and finance are on the leading edge of SaaS companies, meaning they’re the first thing that needs to scale. If these critical functions can’t keep pace with growth (and pick up the pace whenever necessary), you compromise the most important things your company does: collect revenue, pay invoices, stay compliant, manage tax liabilities, plan investments, etc. They call it the bottom line for a reason, and if a company grows larger than the accounting function supporting it, financial problems are inevitable and can often cause disaster.
The opposite is also true for companies that successfully scale their accounting department at the same rate as the enterprise around it. Scalability still presents challenges, but they carry less risk of compromising growth when money flows in and out of the organization efficiently.
This insight is crucial for companies on the cusp of growth and for those scrambling to adapt after a disruption. When you’re questioning how to scale, the answer always starts with accounting.
Scale Your SaaS Business’ Accounting Processes
A key to scaling for a SaaS company is to do so without increasing headcount. By automating your team’s daily accounting processes, you can empower your people to focus on more valuable tasks and ensure your technology can support more complex demands that come with growth.
The key accounting processes to scale for a SaaS company include:
- Streamlining your quote-to-cash process to reduce order processing times
- Maximizing renewal revenue, gaining greater control over deferred revenue and defining specific revenue recognition rules
- Improving cash and collections while decreasing churn
- Simplifying subscription billing for products and services that require complex billing
- Accessing real-time dashboards combining financial/non-financial data
With these processes in place, you’ll have a crucial foundation for growth during disruption and beyond.
To learn more about scaling your SaaS company, contact [email protected]