How Do You Manage Cash Flow and Collections in Volatile Times?
Cash management is critical in this downturn. Investors want a 12 to 18-month runway before you raise again. How can you leverage automation and prevent a cash crunch?
In this SaaS Success Series session, finance leaders share how automation can maximize cash flow performance. Learn how to manage your cashflow and adjust to today’s business volatility. Get the videos and slides for all four SaaS Success Series sessions for B2B SaaS finance peers navigating change and getting a jump on growth.
David Appel, Head of Software and SaaS at Sage Intacct, was joined by:
- Deborah Dang, VP of Finance at OpenSesame, a leading e-learning and corporate training platform, that synchs with any LMS and offers more than 20,000 courses.
- Joe Maxim, VP, Corporate Controller at Discovery Education, providing award-winning digital content for over 50M K-12 learners and professional development for 4.5M educators.
- Carlos Vega, CEO at Tesorio, the only cash flow performance platform, the only cash flow performance platform using machine learning to better manage, predict, and collect cash.
Days Sales Outstanding (DSO) really starts with the SaaS customer’s order
“We work hard to get it right on the front end in terms of setting up the contracts appropriately, making sure that we know the revenue recognition needs and, also have clear line of sight into the billing needs. If we get it right further upstream- when we build sales, quotes and opportunities, and proposals, there should just be a natural flow through to the contracts.”
-Joe Maxim explaining how DSO starts with the order
Days Sales Outstanding (DSO) is the calculation that fast-moving growth SaaS businesses use to estimate how many days – on average – for clients to pay their invoices. Finance leaders who create and follow a defined process early in the sales cycle will deliver value to the entire organization, from sales and sales ops to SaaS billing and revenue recognition and revenue management. They’ll also help provide the visibility their company needs to understand sales opportunities that have yet to become a full contract. By setting themselves up for success, they can think ahead rather than react after the bill goes out.
With that blueprint for success in mind, ask yourself: “How do you follow up with your customers to make sure you're getting paid on time? How do you more intelligently time your payments to your vendors so you can manage your cash outflows properly? Do you have a holistic platform that shows the sales, the subscription billing, as well as the accounting activities that happen further upstream?”
Collections is a team effort – and should be part of your SaaS KPIs
“Cash collections is one of our main OKRs. So, there is definitely a whole company focus on that number. All our teams then know that this is an important metric for the company and that we all need to do what we can to improve collections.”
-Deborah Dang on the role of cash collections to business success
Now, more than ever there’s a direct spotlight on DSO metrics, in addition to SaaS metrics, especially for growth stage SaaS companies. With a company focused on cash and cash collections, groups like customer success can take an active role in reaching your DSO goals. Native integration with Salesforce and your subscription management software means that the accounting information, invoicing, and payments are up to date so customer success can have effective conversations about what’s paid and unpaid with customers. Since DSO is also a strong indicator for churn, you’ll know when to proactively reach out and work with your customers.
At Discovery Education, they established weekly AR reporting meetings to review balances by customers and week-over-week changes in aging to get instant feedback on whether they’re closing the gap for outstanding receivables. This is critical for early stage SaaS companies who need to know their cash position and want to invest more into the business. The meetings include the CEO, CFO, and the leaders of each line of business so they can leverage a broad range of experience to resolve issues. It’s also allowed them to make business processes improvements as they take a closer look at why balances were outstanding.
Use automation to predict and collect cash so your collections team can focus on customer relationships
“What is your cash flow story? In order to understand that and predict what's going to happen next, look at an automated system of engagement that allows collectors to focus on higher-value work like connecting with customers who may be struggling right now. They can also leverage machine learning to learn from historical trends and automatically put people into different categories that you might want to treat differently.”
-Carlos Vega, on the value of a cash flow performance platform
Companies need to predict and collect cash as efficiently and effectively as possible while building and maintaining strong customer relationships. It’s not enough to just predict or forecast cash. Tesorio understood that and created its cash flow performance platform from the ground up with cash as a core unit of value. Other systems look at revenue expense as a core unit of value. With cash as the focus, you have the ability to go beyond forecasting and actually take action on it. You can follow up with customers to make sure you get paid on time and more intelligently, and time your payments to your vendors so you can manage your cash outflows properly.
Bottom line: the more you leverage billing automation, the more cash you get in. For OpenSesame, Salesforce integration and subscription billing automation means that 80% of customers are “low maintenance” and they can focus on the 20% who need more attention. That’s especially valuable during the COVID-19 pandemic. As Deborah explained; “We are touching our customers much more because I want to be right next to them. I want to know what's going on. I don't want to be surprised by bankruptcy or something like that. And I think our customers appreciate it. Some of them have come back and asked us for delayed payment terms and we work with them. We’re aware of these situations and there aren’t any surprises.”
This is just an excerpt of this great conversation about DSO and SaaS subscription management. Learn more about how B2B SaaS Finance experts and peers prepare to recover faster than their competitors with videos, slides, and other SaaS Success Series sessions.
David Appel is the Head of Software & SaaS at Sage Intacct, and is passionate about creating great B2B SAAS companies. Over time he has developed a series of SMB, Mid-Market, and Enterprise customer-lifecycle playbooks that focus on creating value for customers, increasing return for shareholders, and building great teams, that have generated over $1.1B in market capitalization for his clients.
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