How Much Time Does Your Technology Software Company Spend Doing Manual Input Of Recognized And Deferred Revenue?
If you are the CEO or CFO of a software as a service company, you know much of your revenue recognition and deferred revenue management is done manually. When it comes to subscription software, you sit on multiple small payments, and the manual input to Excel or other manual process creates a significant labor cost related to your accounting and sales staff.
Because you work with numerous types of customers in various industries, a lot of manual handovers leaves you less time to analyze or build future products. Our experience shows manual input is one of the most significant challenges for software companies. By streamlining and automating that process, you gain a substantial return to your company.
Challenges Many Technology Software Companies Face
When your team is selling licenses or subscriptions, to handle the whole renewal process, a lot is done manually. Revenue numbers need to be divided by twelve and entered every month when you have annual subscriptions. You do your invoicing of subscriptions, but the invoice does not recognize each month. Sage Intacct has a preferred revenue module so you can set up the date of the subscription, and it will recognize it over a certain number of periods, all automatically.
As a Technology company there are GAPP and industry standard accounting rules that your company must comply with, and if you are billing manually, it makes that process harder. Implementation of Sage Intacct causes you to become compliant with limited labor.
Let’s say your team is working on projects where it is tough to allocate the time spent on those projects. Without the capacity to map the time accurately, it creates a challenge related to analyzing what revenue products you are working on versus what you are building for the future. This type of analysis is needed in your business. Ultimately, by having a kind of evaluation tool, you can see where you are making money and where you are investing your money.
Many times, your financials are prone and require reviewing and correction on the back end. You usually have to finalize all that manually. Sage Intacct can track it with dimensions and based on revenue, so you don’t have to create all those reports and analysis manually. The system generates the reports for you.
When accounting reports are disconnected from the operational side of your business, it creates fragmentation. Fragmentation is vast, spreads out and normalizes revenue. Let’s say that you sold an annual subscription in October. Usually, you’d get paid in the month you sold it. However, related to revenue, you’ve got to spread that out over twelve months. It makes it hard to reconcile the deferred and recognized revenue back to what the financials say on the P & L. It helps to split that apart and report it both ways.
Trusted CFO Solutions proactively discovers the root disconnect source and where it should plugin instead of having to come back later. This helps you know when you have a new opportunity and need to analyze, and if you should make that decision or not.
Since your software company is very heavily involved in spreadsheets, you lose timeliness with your management reports. Reconstructing this helps overcome a lot of the manual, inefficient processes that lead to the inaccuracies, giving you reliable reports from which to make better decisions.
SAAS companies usually have a large sales organization, and those contracts are not easily turned quickly into invoices. Manually rekeying the revenue later is typical and that creates a timing issue in that it’s not done until the end of the month or after the month’s end.
With Sage Intacct integration and a Sales Force connection, it allows your salespeople to structure those contracts the way your business works related to the financials. Thus, you can convert that quickly into an invoice and the proper revenue recognition areas. It saves you and your accounting team time in that you do not have to rekey it later. You get a clear picture of your real revenue during the month.
Many times software companies have a month end close that is a tedious process that gets eliminated. With Sage Intacct you get a system to do the close concerning recognizing revenue, so your accounting team is freed up from doing it manually.
It can save you and your team 10’s of hours of time at their month-end close and dramatically reduce the number of days to close, making your accounting team more productive. In essence, you’re freeing up the team from the manual way of analytical evaluation and reporting to help grow the business, and that drives better performance.
What Does it Look Like When Your Technology Software Company Engages with Trusted CFO Solutions?
When all these problems rise to the top, how do you calculate your customer acquisition cost?
Trusted CFO Solutions can help you figure that on an ongoing basis. As we set up the subscription model, you’ll know which customers didn’t renew or which turned you off. You can use that information to help analyze what is happening in your business. Also, when you do an implementation or specialized services, the project accounting module helps facilitate and track where the status of those projects as they are happening.
- Get a smarter system to manage your recurring and subscription revenue
- Better Monthly Reporting
- Do Faster Monthly Closes
- Get Help Analyzing Your Business
- Receive Reports that Nearly Eliminate Excel Spreadsheets
- Convert To Forecasting and cash Requirements, more from a CFO analysis view instead of a backward historical view from just an accounting perspective.
We offer a collaborative type of environment. We provide you with tools and help you learn and understand how to do things better. We have an ongoing, continuous improvement type of mentality related to leading from a CFO hat of financial reporting and analysis. Trusted CFO Solutions has a standard daily, weekly, monthly and quarterly cadence, but particular clients sometimes have special needs, and we help deliver those based on the drivers of your business.
We help facilitate the budgeting and the forecasting that happens annually. Our goal is to look at the critical business drivers for your company and keep that top line. With manual processes, you have to wait weeks for the numbers, so we work with you to move it more into what’s happening with every transaction daily and doing review and analysis each week, instead of waiting to do input at the end of the week or the end of the month.
We look at analysis to understand what’s driving your business and how can we change it within a week to make it better for next week versus just historically reporting what happens.
We do business process reviews to uncover inefficiencies and areas for improvement. We also analyze what you are doing today. Sometimes in Excel related to your financial package or budgeting and forecasting reports. We examine all of that and Sage Intacct helps create what is missing.
We are on a mission to simplify all of the processes, simplify the structures and give you better reports and better real-time information.
As we get into assessment and applying new structures, we are also thinking about what your Stakeholders need. A lot of Technology Software companies have investors, and they need a higher level of reporting. Also, there are other departments like the sales team, the finance team, and product development who need reports. Historically they are done in Excel.
So we analyze all of that to build a better system. When we start the business process review, we are helping you construct what your reports could look like and how to make the best use of the system. 10’s of hours per month is easily saved, and inefficiencies are cut in half, leaving you increased analysis time.
How Does A Sage Intacct Implementation Play Out Your Technology Software Company?
As we launch the system, we are looking not only for financial measures but also what we call statistical measures so that you can compare data. So the number of customers you have is a significant factor.
We measure revenue by the number of customers or contracts. We count those things and add them to your analysis reports. Usually, all that work is done in Excel or in some other kind of manual way. We add that information and give you a context for what those numbers mean.
Below are two specific examples that could come out of an assessment and regular cadence meetings or calls.
Let’s say that one of your customers has a product with a subscription and it isn’t working. For some reason, you didn’t know it. If you had ten customers turn off of their subscription in one week compared to zero last week, it could be a leading indicator that there is a problem with that product.
If you have canceled subscriptions registered in your daily, weekly, and monthly reporting, you can analyze what went wrong and how to can fix it before losing more customers.
If you are looking at marketing campaigns you could quickly know that your campaign was successful for one of your products. You can see where those acquisitions are coming from and know whether to supercharge it. If the campaign shows you are not getting any results, you can make sure to end it.
We give you a steering wheel and a dashboard to see what’s going on and also have the ability to turn the business, to affect the result because the data is real.
How Will Trusted CFO Solutions Handle Operational Roadblocks?
We are intricately involved when there is something outside the realm of what we do to help our partners in the SAAS industry. We share insights with the team and keep data in front of mind and in context. If your sales are limited to the number of customers and of subscriptions and it changes, you don’t know why. We give you operational metrics so you know why numbers have changed and you can actually do something with it, and fast.
The fact that Trusted CFO Solutions has experience in the industry helps us know five different ways to approach something. We advise based on experience in the industry, and that equips us to resolve those issues. We can be a great sounding board for the CEO or CFO in various matters. We look at and weigh out the options. As we do for all our customers within the industry verticals that we handle, we help provide options and coaching for industry-specific solutions to problems they’re facing.
We are a client partner who uses best practices that could be very similar to other technology companies. With our experience of working with multiple clients within the software industry, we are able to see a pitfall, be able to share those pitfalls with you and say, “Here is what we see as our best practice in this industry.” Then if you are trying to make decisions while weighing other options, we can give you feedback on what is seen in the market.
Whether your company size is 25M to 150M, 150M to 500M, or over 500M we can help you implement the changes to calculate your customer acquisition cost on an ongoing basis.
Your Technology Software company can efficiently streamline and connect your data, attain compliance, increase accuracy in monthly reporting, generate faster monthly closes, and you and your team gain the freedom of time to do what you do best, analyze.