SaaS FP&A is the ticket to ensuring long-term growth and profitability for software companies.
Whether you have a dedicated FP&A team or you’re handling those responsibilities as the CFO, this post will help you:
- Understand why optimized FP&A is fundamental to your organization’s success.
- Pave the way to profitable planning and analysis at your firm.
Why is data all-important in FP&A?
In order to achieve optimal results from your FP&A, it’s vital to have access to as much financial data as possible. After all, acquiring financial data is the first step in analyzing it.
Organizations that rely on manual accounting technology often find themselves in a vicious cycle.
With the best of intentions, they collect what little financial data they can. Then they analyze it through the lens of present goals, run forecasts with it, and otherwise put it to use.
But FP&A is a lot like life itself: you largely get out of it what you put into it. Finance professionals who come to the table with incomplete or unhygienic data are setting themselves and their companies up for failure–or, at the very least, highly ineffective SaaS FP&A
What objectives should you have when conducting financial analysis?
The primary goals of FP&A in SaaS finance
Modern SaaS FP&A is conducted with a few core goals in mind.
We’ll go into much more detail about specific FP&A functions below. But the broader goals underlying those processes include:
- Helping companies understand the likely financial outcomes of various plans.
- Identifying companies’ main profit drivers for optimal resource allocation.
- Supplying organizations with a comprehensive and updated view of their essential financial information.
How, specifically, do SaaS FP&A teams achieve all this?
Revenue & billing forecasting
Revenue forecasting is the lifeblood of profitable sales campaigns, pricing rollouts, billing adjustments, and much more.
A cardinal rule of effective financial management is that you always look (then look again) before you leap.
Cloud-native financial management software makes revenue forecasting as simple as entering your data and clicking a button.
Forecasting in the cloud enables further-reaching, more reliable forecasting for:
- Hybrid billing experimentation
- Pricing new products and features
- Extrapolating usage trends into the future and much more
FP&A also plays a vital role in effective hiring for SaaS organizations.
Hiring decisions and department headcounts
Hasty hiring can be costly in terms of both time and cash. FP&A helps companies make profitable hires in a few different ways.
Without detailed FP&A, it can be tricky for SaaS companies to gauge the precise scope of their hiring needs in various departments.
Clearly establishing goals
“We need more people here” is not a strategic hiring statement. FP&A establishes concrete outcomes to aim for and keeps you from making regrettable moves.
Providing team and department headcounts
Once the hiring process is underway, your FP&A team will also carry out headcounts. This helps SaaS CFOs keep an ongoing and updated sense of how their hiring results are shaping up relative to their budget and expectations.
Reporting on metrics and KPIs
FP&A is inextricably tied to your SaaS metrics. The more exhaustive your library of KPIs and metrics, the more detailed and profitable your financial analysis will be.
Manual accounting software is often unequipped with the full range of KPIs necessary to thrive in today’s competitive SaaS market.
When you equip your FP&A team with cloud-native financial management software, you’ll never have to worry about missing metrics.
Automation will help your team fully understand how all your various KPIs work together and impact each other in real time.
Budgeting optimally and minimizing variance
Budget variance is a massive impediment to SaaS profitability. What’s more, if you repeatedly miss the mark on budgeting, it won’t be long before your board takes notice.
A strong investment in FP&A can help you hit your budgeting goals by:
- Providing real-time variance alerts: Cloud-based accounting software automatically alerts your team when you’re approaching budget milestones too quickly.
- Enabling detailed budget forecasts: Forecasting removes the guesswork from SaaS budgeting–because when it comes to setting budgets, no one likes surprises.
- Ensuring proper allocations: Failure to achieve proper budget allocations can cause serious capital shortfalls in your company. It’s hard to stay profitable unless you can put the right resources to work at the right place, at the right time.
Cloud-native financial management software helps CFOs and finance professionals eliminate budget variance.
Enhance your SaaS FP&A effectiveness today
In many ways, FP&A acts as the foundation of SaaS accounting success. Maximizing the FP&A function and surrounding technologies such as automation allows leaders to confidently chart their course for effective financial decision-making.
FP&A may serve as the foundation of accounting success. But when you’re building a house, you don’t stop at the foundation. That’s why we created the Modern SaaS Finance Academy, an online academy designed to help you learn vital skills that will set you apart from the competition in the coming years.
Join the academy today.