B2B SaaS Scale-ups: The Right Finance Stack To Drive Your Revenue Expansion
Dec 2, 2021
Growth is the number one priority for any Scale-up. And in an increasingly competitive landscape, it’s important to pay attention to which tools you use to accelerate your success.
They can help propulse your business - or they can hinder your growth. Although a proper finance department tends to be one of the newest later additions in most scaleups, there must be proper resources allocated to it. A good finance stack is one of them.
As a fast-growing B2B SaaS scale up your financial stack can be a crucial deciding factor in whether your business fails or succeeds.
It helps support your growth by:
Allowing better communication between your teams,
Giving you an accurate overview of what is happening in real-time,
Automating the most repetitive tasks so you can focus on the ones making a bigger impact.
Having the right finance stack really does drive your revenue expansion and improves cash flow. Upflow recently hosted a live event with financial SaaS experts to dive deep into the elements of an ideal finance stack.
Many thanks to Jean-Thomas Cock, VP Finance at Proxyclick, Johnny Vincent CFO at ActivTrak, and John Pearce, Sr. Director of Product at Chargebee, alongside our own Director of Marketing Benjamin Twitchell for sharing their expertize at our live event.
Keep reading to get:
A complete vision of the ideal structure of a finance stack.
Information on how to build a finance stack tailored-made for your B2B SaaS scale-up.
The keys to benefiting from finance automation.
How to gain visibility and reduce churn with connected systems.
The best solutions to optimize revenue operations.
Plus, you will find out what the best finance stack is for you right now.
The Importance Of Your Finance Stack For Your B2B SaaS Scale-Up.
Let’s start at the beginning: why is your finance stack important?
At Upflow we’ve noticed that in the early days, companies often fail to prioritize their finance stack.
But the truth is: you need to have financial data to make strategic business decisions. As Jean-Thomas from Proxyclick explains, the finance stack tends to be neglected because it doesn’t have a direct impact on revenue.
There tends to be a focus on the general ledger and account systems but in reality, some of the building and collection applications are at least as important in that positioning process.
Johnny from ActivTrak recognizes that getting buy-in from across the organization to invest in your finance stack over areas such as sales or marketing is always a challenge. However, having a strong finance stack gives the company a strategic advantage and positively impacts other aspects of the business.
A Finance Stack That Drives Growth For B2B Scale-Ups
In a recent live event with Lattice, we discussed that in general, there are four levels in a finance stack
Four levels of an ideal finance stack:
1. Strategic finance: Intersection of cross-functional data and teams
2. Reporting & Planning: Budgeting, Insights, Forecasting
3. Records: Reconciliation, recording transactions
4. Transacting: Send invoices, receive payments
According to Jean-Thomas, SaaS companies usually have limited finance or business operations teams. That means that very few people handle the tasks from the top of the pyramid to the base. Since you have limited resources, you need to be efficient in how you allocate them.
One thing is sure: transactions will always happen in your company. Automating them allows for more time to be spent on the upper level of the pyramid. The goal would therefore be to replace levels 2, 3, and 4 with software tools and automation in order to be able to focus on level 1. Strategic finance is where the real value of finance is revealed.
The next question is: when do you move from manual to automation for the lower levels?
Johnny points out that regardless of your processes for transactions and recording, they become very strategic when you raise capital with external investors.
Scalability is a huge issue. Every business will pick a different stage to implement some of these tools depending on their transactions and metric but reaching $10-20 million in annual revenue is a good time to think about automating and scaling.
John adds that the order in which you do this is also important. If the base of your pyramid stack isn’t strong, then the rest isn’t going to be stable either: first, you need solid foundations. He suggests focusing on sending invoices and collecting payments first, before starting to worry about the other levels.
The Keys To Building Your Finance Stack For Your SaaS Start-Up
Open ecosystems are a must.
To build the right finance stack, you need tools that speak to each other rather than having interfaces that need to be managed by the IT department.
This approach is more cost-effective since the technical resources aren’t always there. Leveraging the existing apps, API, or financial SaaS software in an open, integrated ecosystem is a cost-efficient approach to building your finance stack.
Jean-Thomas highlights that native integrations are always good if you work with other SaaS: if they break, somebody else is responsible for fixing them. When looking at tools for Proxyclick, they look at their features, consider whether it’ll serve them in the future, while also paying close attention to how it connects with other tools.
Choose a stack that adapts to your future needs.
“As you scale, you’ll have to think about the impact that this growth will have on your finance stack. Make sure your stack is built for your growth.” - John Pearce, Sr. Director of Product of Chargebee
It’s not uncommon for companies to realize they’ve been using hundreds of different tools, because everyone in the company chose the ones they liked. That creates a lot of problems when it comes to migrating data, scaling, and making sure information is readily available.
You then have to waste your resources sorting it out yourself rather than spending this time on the part of your product the customer actually interacts with. It’s a common error that can hinder a company’s growth.
So what is the solution? Firstly, make sure management decides which apps and tools the company will use - the sooner, the better! Choosing and implementing the right financial SaaS tools makes growing easier.
This is especially true for tools used to manage pricing, transactional billing, revenue recognition, and recording transactions: they’re extremely difficult to change out.
It’s better to go for a service that is top of the range and that can scale with the other apps used in the company than going for a cheaper short-term solution. In the long run, the apps that fit your future needs will have a better ROI.
There is also the fact that sometimes you're so embedded in a tool that nobody wants to do a migration. This is also something potential investors will look into very thoroughly before investing.
A good way to make sure you plan for your future is to make a cost-benefit analysis for your company 2 years from now.
A Typical Finance Stack For B2B SaaS Scale-Ups
The picture below is a generic layout of a finance stack. What’s important here? What do you need to pay attention to first? Here are the answers from our panel:
Billing software, Accounts Receivable software and CRM software are usually the first investments made by a company when scaling. It makes sense as you have to build a customer base and collect from them to be able to grow.
Billing & collection: In B2B SaaS especially, these should be the first tools to invest in, unless you have a very low number of invoices per year. They could be separate or the same tool but they need to work perfectly well together.
2. CRM: As your sales team grows, you need to get a CRM tool that allows your salespeople to access the information they need through their own interfaces. That’s much better than them spending their time in your accounting or billing tool.
Don’t focus on:
An Accounting tool: at an early stage, you shouldn’t worry too much about it. Quickbooks goes a long way in terms of accounting. Focusing on the other apps is better. When you start scaling and reviewing your processes, you can choose an ERP or another accounting software.
The Main Challenges Associated With B2B SaaS Finance Stacks
B2B SaaS Scale-Ups are sales-driven
It means that pricing negotiations, flexible payments, and discounts are part of your business model.
These need to be reflected in both your accounting processes and your sales stack and they need to match. You can’t have prices set up in one system but not reflected in another. Your stack also needs to be able to handle a salesperson creating a discount for a customer. You can anticipate these challenges through integrations between your different tools.
International expansion of B2B SaaS Start-Ups
Another challenge is when you extend your business to different countries. You need to be able to deal with different currencies, payment methods, or payment practices.
For instance, in the US people pay mainly through cards but in Europe, there is a preference for direct debit. The way you handle, process, and reconcile payments is therefore very different. You must think about this when you start producing higher amounts of revenue.
Which is another reason to use a tool or app: they can offer some knowledge that you don’t have on a topic, for example on taxes. They’re different in the European Union, in the US, … so to be compliant, you can either:
Hire people locally
Get a tool that provides that knowledge
Using an app is usually more cost-efficient. It gives you global reach and peace of mind.
Finance Automation For B2B SaaS Scale-Ups
At Upflow as soon as we have a manual process that works we automate it. We asked our speakers whether it was the same in their respective companies.
As we saw before, you have 4 levels in finance operations. If you want to be efficient, automating the base levels is key. Instead of hiring more people to do repetitive tasks, you can use a tool that will streamline your processes. The real value of finance is in strategic decision-making.
Since you never know how fast your company will grow, you need to be ready and start automating ASAP.
The first task is to really understand your process. Write down your current process, as well as your expected outcome. This will help you and your team to adopt the right mindset.
Once that is clear, you can move on to finding a tool that matches your expected outcome - make sure to maintain some flexibility here.
While it’s tempting to build a tool that’ll match 100% of your current needs, it isn’t the best idea because:
It's a waste of resources that could be spent on improving your product ;
Just because it fits your current needs doesn't mean this will remain the same in the future ;
It’s your responsibility to fix if anything goes wrong.
Choosing an app that allows you to automate say 90-95% of your operations is usually good enough. You can deal with about 5-10% of manual operations. Especially if it helps you find the right tool and implement it faster.
In the end, you’ll have a better ROI with tools and integrations. That’s without counting the added features to the software you use that may help you in the future too.
The Benefits Of Interconnected Systems For B2B SaaS Scale-Ups
Visibility: Managing late payments and churn manually is not an efficient use of time. Having data pushed to you in real-time on the other hand will make it easier for you to make strategic decisions based on facts, not assumptions.
For example, you might think that your company doesn’t discount a lot. However, the numbers might reveal something else and you may be surprised. The base of any pricing analysis is to start with accurate data.
Choosing The Right B2B Finance Stack For Your Saas Scale-Up
Example of stacks you can use, depending on your stage and sales model
To sum up, to build your B2B SaaS Finance Stack:
Connect with peers
Know your processes and data
Prioritize open ecosystems
Think about your future needs
Buy instead of building
Q&A - questions asked by live participants
Finance automation is often part of a wider cultural change? How do you encourage your staff to embrace this stage?
Jean-Thomas said “At Proxyclick, it’s already part of our culture. When you grow you’ll have a need to combine different parts (like sales and customer service) into one tool to make better decisions. Change has to be in your DNA.”
For Johnny, Finance people come after Marketing and Sales, when you realize you have a real business.
Most people can understand that investing in long term industry-standards and connected tools rather than throwing money at problems is a good approach.
You’re creating value by selling and at some point it’s more cost-efficient to automate. Apps have a good ROI so it makes sense once you get to this critical mass.
What about analytics? Do you need to build a data hub? How do you get started with it and structure it with data analytics, metrics, and dashboard?
According to Johnny, a lot of tools are available nowadays to collect and present data. You can start small and work on the things that are the most important for you now while thinking about the future. Start early!
John agreeds and adds:
“Slowly building up to the features and tools you need is a cost-effective way to approach it".
You don’t need to get into this big monolithic system that will “safeguard your future” but that you don’t have the resources to maintain right now. And you might not need the features anyways.
Address the areas as you need to address them with the B2B SaaS tools. Start building piece by piece.