Key takeaways from The SaaS CFO's 5th Annual Finance Tech Stack Report

The traditional finance tech stack once dominated by spreadsheets is now giving way to robust, scalable, user-friendly software. While these tools give CFOs a lot of flexibility in how they manage the different finance functions in their business, with so many different software tools on the market today, the landscape of finance software has become highly complex making it difficult to determine which investments make sense for the business and when to make them. 

While it’s always tempting to try and solve a problem (whether accounting, invoicing, or cash flow forecasting) with some shiny new software, leaders are becoming more discerning than ever. So much so, that 2024 has been dubbed, the “year of automation, simplification, and consolidation. 

This article will give you the key takeaways from our webinar with Ben Murray, the SaaS CFO. During the webinar, we discussed six key categories of finance software and the use trends revealed in Murray’s 5th Annual SaaS Tech Stack Report: 

• Core accounting software and tools for invoicing
• Tax software and tools for revenue recognition
• Financial planning & analysis software
• SaaS metrics reporting software

Core accounting software and invoicing tools

Key takeaway for core accounting software

Accounting software choices for SaaS companies have remained relatively consistent over the past five years, with QuickBooks, Sage, NetSuite, and Zero being the dominant players. New entrants like Microsoft Dynamics are gaining traction, though. 

“Tech changes as you get bigger.” 

Factors like complexity, transaction volume, and revenue streams of your business will heavily influence the software solutions you need in your tech stack. 

Key takeaway for invoicing software

Invoicing software usually becomes necessary when the volume and complexity of invoicing grow beyond the capabilities of your core accounting system. 

‍“Transaction volume dictates a lot.”

For example, if your company is an enterprise SaaS with only 10 customers and a total contract value (TCV) of $10 million, you can probably continue to use software like QuickBooks or Xero to do your invoicing. 

However, if you have 500 customers and are sending out 100 invoices each month with a lot of transactions, you need to leverage tools that can handle more transactions. The complexity of your business is what determines whether you need an automated system for invoicing. 

Tax software and tools for revenue recognition

Key takeaway for tax compliance software

Given the ease at which SaaS companies can sell across multiple geographies, tax compliance can be a concern. The complexity of sales tax compliance in the United States can be particularly challenging for SaaS companies because different states have different rules. This is where tax software helps SaaS companies stay compliant and avoid issues during fundraising or exit processes. 

‍“At some point [tax compliance software] has to be on your product roadmap. It’s a big headache, but it’s a must-have headache."

Key takeaway for revenue recognition software

Many companies start with spreadsheets for revenue recognition. However, it's essential to plan for transitioning to dedicated software solutions as your business scales. (This need typically  arises when you reach around $3 million ARR). 

“For SaaS, Revenue Recognition has to be bulletproof, right? Our valuation is based on our recurring revenue and we can't go into due diligence and someone saying, ‘Hey your revenue is off.’”

‍You’ve got to start somewhere but eventually, you need a rev rec module. In this category, you’ll find both standalone point solutions like Maxio that integrate with QuickBooks or Xero or as modules within larger ERP systems like Sage or NetSuite. 

Financial planning & analysis (FP&A) software

Key takeaways for FP&A software

FP&A software has become a hot space in the tech industry, with a growing number of companies investing in FP&A solutions. Almost every finance team starts out using spreadsheets, but at some point, the company begins to scale. 

When businesses start hiring CFOs, controllers, accounting clerks, and others to build a dedicated finance team, it’s usually time to start considering a purpose-built FP&A solution. 

And while it’s true that a lot of FP&A pros still use spreadsheets, if your company is generating more than $10 million in ARR, you probably already know it's time to consider a dedicated solution like Drivetrain. The signs are pretty obvious when you get to this stage, and once you switch, you’ll wonder why you waited so long.  

‍“You put in an FP&A software to make your life so much easier. And, once you've gone through that, you kind of see the light and you don't want to go back to spreadsheets again.”

According to Murray, Drivetrain – a third-generation FP&A tool – shines in the FP&A category, helping CFOs become more agile in their financial management and decision-making and forecast more accurately. 

Drivetrain focuses on being a centralized source for various systems and creating custom metrics that make sense for their business. Drivetrain provides graphical and tabular reporting and is a source of conglomeration and truth for centralizing financial reporting.

SaaS metrics reporting software

Key takeaways for SaaS metrics reporting software

Businesses know they need to understand their metrics in order to scale their SaaS companies successfully. However, many finance teams are still struggling with spreadsheets to calculate and track their KPIs. As a result, financial reporting software, particularly those with SaaS metrics reporting capabilities, is quickly becoming a hot category in finance software. 

In his report, Murray looked at various tools, ranging from standard BI platforms like PowerBI to specialized SaaS metrics-focused solutions. He characterized the solutions in this category as some being “aggregators of data” while others are actually powerful calculation engines like Drivetrain, that can automatically calculate and track first-, second-, and third-order metrics with ease. 

“There’s a lot of mix here and it just depends on where you want [your metrics] to reside and how much you want that application to do for you to create metrics for you.” 

Tips on choosing the best software for your business

1. Budgeting for new software

When deciding on a budget for your finance tech stack, consider factors like how robust the software is and the potential it has for organizational impact. For instance, simpler applications tailored for primary users often come with lower price points. However, solutions geared towards CFOs or requiring sophisticated integrations may necessitate a higher budget.

The key is to assess the impact on the organization and the value it brings. Revenue management is a prime example where the initial cost might seem daunting. Still, considering its critical role in financial operations, the investment pays off as the company grows.

‍“Revenue management for rev recognition has to be perfect, and it may sting now as a $5M ARR company. But think about when you're at 15, 20, 25 million. You can still be using that solution, and it's going to pay for itself in less pain and better reporting.”

2: Take a close look at integrations a tool can provide

Integrations are critical when evaluating a new tool. When choosing financial software, it's important to consider how well it plays with the other solutions in your tech stack. Will the tool you’re looking at integrate with your ERP and CRM system data, so you can easily combine your revenue, cost, and headcount data?

Drivetrain offers 200+ integrations plus the ability to create custom integrations. This means that no matter what your current tech stack looks like or how it evolves, Drivetrain can automatically bring all your data together into one place – a single source of truth – for financial planning, modeling, and analysis and real-time decision-making.  

3. Evaluating the cost of hiring analysts vs. investing in software

Manually pulling data from various systems, such as accounting, CRM, and HR, especially when the data needs constant updating, is incredibly challenging. This process can lead to inefficiencies, with analysts spending more time on data manipulation rather than analysis itself. 

While tools may have an upfront cost, they can streamline processes and ultimately save time and resources compared to hiring additional staff. Ultimately, you should consider the needs of the organization, including the demands of the board, executive team, and investors, in making decisions about resource allocation.

4. Invest in versatile, long-term solutions

The finance tech stack for B2B SaaS companies has gone through significant changes. In the past, businesses had to use separate solutions for different tasks. However, many subscription management solutions today combine invoicing and revenue recognition functionalities to simplify processes and ensure compliance with accounting standards.

It's always advisable to choose a solution that meets most of your business needs today and can scale with your business. 

5. Choose the right metrics to track and a tool that can help you track them

SaaS companies should tailor their metrics to align with their unique business models, considering factors such as subscription-based revenue, churn rates, and customer acquisition channels. 

In addition to the traditional metrics such as Customer Acquisition Cost (CAC) payback period and Customer Lifetime Value (LTV) to CAC ratio, you should keep an eye on newer concepts like the Rule of 40 proposed by Bessemer Venture Partners (BVP).

6. Develop a roadmap for your finance tech stack

The fact is, every SaaS company’s tech stack will change over time as the company grows. Financial management tools and software covers a broad range of finance functions, and the number of vendors in each category makes it very difficult to determine which combination of tools will best meet your needs.

‍“Just like R&D has a road map for product development, we [CFOs] need our product roadmap. We’ve got to plan out how our tech stack is going to evolve.”

If you develop a plan for your tech stack now – one that envisions your company’s continued growth and how it might impact the features and functionality you will need in the future – it will be easier to make good decisions when the time comes to adopt new software. 

The best place to start when creating your roadmap is The SaaS CFO's 5th Annual Finance Tech Stack Report, in which Murray covers 21 categories of finance tech and the things you might need to consider when figuring out how to best align your technology investments with your business goals and requirements.  

Listen to the full conversation with on-demand access!

What we've shared here is just part of a great conversation about the technology that's driving SaaS businesses forward faster.  

Listen to our webinar with the SaaS CFO Ben Murray to get even more insights on how other SaaS finance leaders are making decisions about the tools to add to their tech stacks. You’ll also learn a lot about the different categories of financial software and each can offer your business.

While you’re at it, take a few minutes to learn more about Drivetrain to see how we can help you make your financial planning and analysis easier!