“If you can’t measure it, you can’t improve it.” That maxim, attributed to the late management theorist Peter Drucker, contains “some of the most important words in business,” said Chris Price, director at Baker Tilly Digital, during his presentation at the Sage Transform conference in Las Vegas.
Price specializes in helping finance professionals transform their organizations from paper-and-pencil practices into modern digital domains.
He said that with the proliferation of data in business today, it’s imperative that financial professionals become “data whisperers” who can effectively gather and interpret data into useful measurements and insights for their executive decision-makers.
The good news, according to Price: SaaS executives are realizing the crucial role their finance team members play in supplying both financial and operational insights to guide tough business decisions. As a result, in addition to their traditional roles in accounting, audit, compliance and treasury, organizational finance leaders are now expected to be soothsayers who can interpret huge amounts of data in real-time, track and deliver key performance indicators and predict the effects of new strategies on future financial health.
The bad news is that finance professionals are too often conditioned to be overly reliant on spreadsheets, which typically worked well as historical snapshots of financial dealings, but lacks the sophistication to efficiently monitor and discover keen insights. Price characterized spreadsheets as time-consuming, fragile, error-prone, unreliable and lacking the required depth of analysis to support today’s goal of data-driven decision making.
Growing SaaS organizations can sometimes fall into the trap of becoming hyper-fixated on a single metric as their indicator of success. While positive trends in individual metrics such as MRR/ARR Growth, Net Dollar Retention or Customer Lifetime Value (CLTV) can signal strong business health, no single metric can gauge the viability and predictability of a SaaS organization’s model. It requires a combination of metrics to assess the performance of a business across the critical pillars of growth, retention, unit economics and capital efficiency. Having the right information will help organizations stay solvent as startups and attract investors while building a path toward growth.
The metrics needed to measure will vary, depending on the “stage” of your business, whether it’s an early startup, a growth company, or one that’s on the verge of going public. The later the stage, the more complex the metrics.
Complex metrics call for a SaaS-based metrics tracking system. When choosing a system, Price suggested, finance leaders should select one with these four characteristics:
Automation: The software should remove reliance on humans to enter metrics about sales and subscriptions, allow finance experts to focus on data analytics rather than data entry, expedite delivery of critical business data to stakeholders, enforce business policies and automate processes and scale as the business grows.
Real time data: The metrics tracking application should support a lean startup methodology so leaders can quickly build and measure success, highlight emerging and evolving trends, enable rapid course-correction to quickly mitigate loss, identify growth levers producing positive outcomes and help finance experts transform from keepers of a historical record to strategic planners.
Reliability: The tracking system should generate metrics from a controlled reliable system of record and integrate with an Enterprise Resource Planning (ERP) to pull the most up-to-date, accurate financial data, allowing team members to conduct drill-down research.
Insightful: Finally, the SaaS metrics tracking application should reflect a deep dive into finance activity. For example, subscription records should go beyond the usual broad categories of “new,” “expansion,” “contraction” and “churn.” The software should also enable segmentation of data by a variety of customer and product cohorts, deliver crucial metrics for all stages of maturity and support customizable calculations, reports and visualization.
The best solution, as Price advised during his session, is to build a company’s finance function around a cloud-based ERP software such as Sage Intacct. In October 2021, Baker Tilly acquired AcctTwo, a seven-time Sage Intacct Partner of the Year and provider of the only “preferred” financial management system of the American Institute of Certified Public Accountants. The Sage Intacct software helps team members:
In SaaS systems like Sage Intacct, the cloud automatically delivers the most current versions of financial software, so all finance team members have access to the latest thinking in metrics tracking. To learn more about Sage Intacct and how Baker Tilly Digital professionals can help you, contact us.