Software as a service (SaaS) companies are often faced with the challenge of how to grow their business. SaaS companies that function on a recurring revenue model typically will need to invest in sales or marketing channels, such as ads and cold calling, to create new leads. Another option is Finance as a Service (FaaS), where SaaS providers can outsource their financial needs from a FaaS provider who handles all aspects of finance for SaaS businesses.
The demand for enterprise software, which functions on a “pay-as-you-go” or SaaS model, has led to significant disruption in the marketplace; FaaS is the drive from SaaS into finance.
SaaS providers who outsource their finance needs to a FaaS provider can focus on what they do best and leave the details of finance in the hands of a professional.
FaaS solves the recurring challenge of managing revenue growth with professional finance experts and enterprise-level accounting software for simple automated single sign-on access.
But who can really benefit from FaaS the most? Legacy in-house finance departments and older solutions are about to become extinct. While an in-house finance team provides a range of qualitative benefits, many small businesses choose to outsource one or more components of their accounting needs. On the contrary, high-growth and investor-supported SaaS companies can benefit from FaaS because they are easy to deploy, cost-effective, and scalable for growth.
What is Finance as a Service?
Finance as a Service (FaaS) is an agile service delivery model that helps SaaS companies with their finances. FaaS can help SaaS businesses to reduce cash flow, optimize business performance and strengthen financial management. It typically offers automation of time-consuming tasks for finance department personnel such as general ledger, billing, accounts receivable, and payable. SaaS businesses that have finance-related needs can use FaaS to improve their financial operations.
Finance as SaaS typically covers three areas:
- General Ledger
- Accounts Receivables and Payables
General Ledger: SaaS businesses can use FaaS to automate their general ledger process. Implementing this type of solution eliminates the need for human intervention and ensures that all transactions are accounted for accurately in real-time. This means companies have a high level of control over their data, including access rights and security settings.
Accounts Receivables and Payable: SaaS businesses can use FaaS to automate their AR/AP process. Implementing this type of solution eliminates the need for human intervention, ensures that all transactions are accounted for accurately in real-time, and reduces recovery time when errors occur.
Billing: SaaS businesses can use FaaS to automate their billing process. Implementing this type of solution eliminates the need for human intervention and ensures that all transactions are accounted for accurately in real-time.
Advanced FaaS Services
Aside from the basic outsourced bookkeeping, FaaS also provides SaaS businesses more advanced services. Among the services included:
Controller-level Compliance and Reporting – SaaS businesses can use FaaS to automate controller-level compliance and reporting requirements. SaaS companies that need this type of service should ensure they work with a SaaS partner who offers a variety of services, including:
- Sarbanes Oxley (SOX) compliant reports
- XBRL reporting
- Sustainability reports
- General ledger
- SaaS financial metrics reporting
Financial Planning and Analysis – SaaS businesses can use financial consulting services to help them with their SaaS financial planning and analysis. SaaS companies that need this type of service should ensure they work with a SaaS partner who offers a variety of services, including:
- Projection modeling
- Financial forecasting
- Strategic capital allocation
- SaaS financial KPIs and metrics reporting
Strategic CFO Support – SaaS businesses can use SaaS CFO services to help with their SaaS financial operations. SaaS companies that have a need for this type of service should ensure they work with a SaaS partner who offers a variety of services, including:
- Strategic planning and budgeting
- Financial analysis
- SaaS financial metrics reporting
The Importance of Accurate and Timely Financial Reporting
SaaS companies are often reporting on a monthly basis, and finance as a service can help automate this process.
The SaaS company will create an invoice template that they send to the customer every month and then input it into their FaaS provider for processing. The system integrates with the SaaS company’s other software and can process the invoice, send it to their bank account for payments, and finally generate a report showing how much was paid per customer.
The SaaS company may also use finance as a service to produce other reports such as sales forecasts or ratios from historical data.
There are many financial benefits of SaaS companies using FaaS, and it can be a very effective tool for SaaS companies to help grow their business.
- SaaS companies focus on providing value rather than doing finance
- SaaS companies often report monthly, which means they are more likely to need accurate financial reporting
- Finance as a service providers have the ability to automate SaaS companies’ finance processes
- SaaS businesses can use FaaS to produce other reports, such as sales forecasts or ratios from historical data
- SaaS companies that use FaaS can get better insight and make more informed decisions on their business performance. These insights help SaaS companies grow over time.
- SaaS companies can use FaaS to help them better manage their growth
- SaaS companies often need financial insight into customers’ behavior, which is another reason why SaaS businesses tend to benefit from using finance as a service provider.
The Benefits Of Financial Reporting
SaaS companies that have a recurring revenue model need to make sure they are performing well financially. This means forecasting and reporting their income from month to month and year over year.
However, SaaS companies often do not have the financial background or expertise to perform these tasks themselves. FaaS companies offer SaaS companies an alternate solution. Below are some of the benefits of financial reporting:
Increased Cash Flow Management – Financial reporting is an essential tool that can help you manage your company’s cash flow and better keep track of who receives how much. Without regular access to financial statements, SaaS companies often incur expensive expenses that come out of the blue.
Standardized Financial Reporting – SaaS companies can standardize the financial reporting process by using an automated solution to do it for them.
Improved Customer Service – SaaS companies with a recurring revenue model need to make sure they are operating well financially. Financial reports provide this information in detail, so SaaS customers don’t need to worry about their finances.
Better Service – SaaS companies that are financially healthy will have the resources to provide better customer service because it is one less thing for them to worry about.
Improved Financial Performance – SaaS businesses with financial expertise in place from the getgo can forecast more accurately, which means they can plan easier. They also know how well they’re performing financially thanks due to automated reporting solutions and visualizations offered by FaaS providers.
Better Debt Management – SaaS companies that are financially healthy and better understand their financial performance will manage their debts more effectively.
Trend Identification – SaaS companies that use financial reporting will identify trends in their performance and make better decisions about how they spend.
Revenue Recognition – One way SaaS companies can determine when to recognize recurring revenue is through their financial statements. Sales may be recognized at the time of purchase or over a period as services are rendered, and each approach has its own benefits based on needs. The modern business world increasingly relies on revenue to function, and financial statements can reveal the truth behind whether or not income is being collected accurately.
Integrating FaaS With Key Business Systems
SaaS companies have various critical business systems they need to integrate with, such as CRM, ERP, billing, and accounting. FaaS can be used by SaaS businesses that function on the recurring revenue model because it provides an automated way for SaaS companies to manage their finances in real-time without having any human intervention. SaaS companies can also use FaaS to optimize the management of their assets.
Finance automation is a crucial SaaS strategy that business leaders should consider adopting because it helps SaaS businesses become more efficient, reduce expenses and improve profitability. When considering finance as a service for your SaaS business, you need to determine whether it is suitable for your SaaS company and how to integrate it with the other key business systems you use.
Integrating FaaS with CRM
Finance as a Service (FaaS) can be integrated with SaaS companies’ customer relationship management (CRM) software. This helps SaaS companies better manage their revenue growth by collecting customer data and forecasting future revenues. SaaS companies can use this data to make better decisions on future product pricing, etc.
CRM systems are more than just SaaS; they also integrate with other SaaS applications like accounting or marketing automation software. For instance, a SaaS company may have its CRM system connected to HubSpot for lead nurturing and email marketing. SaaS companies may use their CRM system to integrate with the accounting software seamlessly.
FaaS can integrate with the company’s CRM system to provide SaaS companies with a full-circle view of their customers, which can help SaaS companies better plan for future growth.
The Benefits of FaaS/CRM Integration:
- SaaS companies can use FaaS to manage their CRM data and forecast future growth.
- SaaS integration with other SaaS applications also means that customer information is collected from the CRM, which helps SaaS make better decisions on pricing etc.
- A full-circle view of customers can be provided by SaaS integration with CRM, which can help SaaS companies to plan for future growth.
Integrating FaaS with ERP
SaaS companies can leverage finance as a service to better manage their business operations and grow. FaaS is focused on providing SaaS companies with the tools necessary for financial management, budgeting, forecasting, reporting, and analysis of company data – all without needing costly internal resources or hiring an expensive CFO. SaaS companies can integrate FaaS with their ERP system to get the benefits of finance as a service.
The Benefits of FaaS/ERP Integration
- SaaS companies can leverage ERP to calculate the profit margins on a single transaction
- SaaS companies are able to use FaaS for reporting and analysis of company data
- SaaS companies have access to more financial management, budgeting tools that help with forecasting.
Using Cloud-Based FaaS Platforms
Cloud-based FaaS platforms are the SaaS industry’s response to the need for a more efficient way of automating repetitive finance tasks.
The concept behind FaaS is that it provides software tools, such as invoicing and billing applications, which are pre-built and easy to use via a web browser or an app on mobile devices. Rather than building these from scratch, SaaS companies can integrate FaaS into their applications to reduce time spent on repetitive tasks and focus more on building their core product or service.
As you may know, SaaS providers don’t have access to most financial data because they are only authorized to see what’s needed for billing purposes. However, by using FaaS, SaaS providers can automate the labor-intensive process of analyzing this data and provide valuable insights to help them grow their business.
The SaaS company pays a monthly fee for access to these prebuilt software tools rather than hiring staff with financial expertise in-house. This is more cost-effective and gives SaaS providers access to these tools where and when they need them.
In a SaaS company, FaaS can play an important role in automating repetitive finance tasks that would otherwise take valuable time away from building the core product or service. For example, Consero Global’s SIMPL cloud-based FaaS platform automates and manages SaaS companies’ transactional processes so that they can focus on building their core product.
The Features of SIMPL
SIMPL was explicitly designed to be a SaaS company’s one-stop-shop for all financial needs. Below are some of SIMPL’s main features and benefits:
Cloud Accounting Software – Cloud accounting software separates you from the drudgery of repetitive financial tasks, automates processes, and empowers greater insight into your business performance.
Customer Invoicing and Vendor Billing – SaaS companies need a SaaS solution for invoicing and billing, which SIMPL can help provide. You can monitor accounts payable and receivable from a remote location and have the possibility to approve vendors’ bills and release payments. You can also send customer invoices, have access to outstanding customer invoice status and collection efforts, all of which will help your organization get paid faster.
Employee Expense Approvals & Payments – SaaS companies often need solutions for overseeing employee expenses. SIMPL provides a FaaS solution that enables you to approve and pay employees’ expense reports on the fly and monitor whether an employee is authorized or not to spend money from their accounts.
Task Management & Workflow Software – SaaS companies need a way to manage their tasks and workflows, which SIMPL can provide. This includes the ability for employees or other users of your SaaS company to plan their days with different types of scheduled meetings – all from one location. SIMPL also provides support for a wide variety of recurring processes, including multiple concurrent ad-hoc requests. Regardless of how many inputs there are, all the financial outputs will be delivered on time with any data recorded and tracked ad hoc processes.
Graphical Metrics & KPIs – Easily visualize and communicate the performance of your business with KPIs that can be tracked through dashboards. This data can help you make swift, informed decisions so you can grow your business efficiently.
The Benefits of SIMPL Cloud-Based FaaS Platform
Combining pre-integrated software with specialized financial expertise, SIMPL delivers substantial, ongoing benefits to your company in as little as thirty days.
SIMPL Cloud-Based FaaS Platform offers SaaS companies a wide variety of benefits including:
- Reduced overhead costs and the risk of delays,
- Streamlined processes,
- Improved collaboration with stakeholders, partners, and clients.
SIMPL SaaS Cloud-Based FaaS Platform provides a scalable solution so you can focus on acquiring and retaining customers.
For SaaS companies, finance is an essential component of the revenue model that drives growth. SIMPL’s platform enables SaaS firms to provide their clients with professional financial services without hiring additional staff.
The SIMPL SaaS Cloud-based FaaS platform reduces overhead costs for SaaS firms while also providing streamlined processes that help SaaS companies collaborate with stakeholders, partners, and clients.
For SaaS firms that use a recurring revenue model, SIMPL cloud-based FaaS platform is an excellent solution for reducing overhead costs and risk of delays while also improving collaboration with their customers.
The SaaS model is an innovation that has changed how we use software by allowing companies to focus on one product or service and grow it exponentially. However, SaaS companies often struggle with a recurring revenue business because they miss out on opportunities for upselling as well as integration sales. With the help of FaaS modules, SaaS companies can better manage their finances.
Finance as a Service modules allows SaaS companies to better manage their finances by automating accounting, invoicing, and collections. As a result, SaaS companies can focus on higher-margin revenue streams such as consulting services or integration opportunities.
The SaaS model is an innovation that has changed how we use software by allowing companies to focus on one product or service and grow it exponentially. Together with Consero Global, you will be in a far better position to stay ahead of the competition and grow your software as a service organization.