In B2B SaaS, failing revenue audits are mainly due to the process of re-entering manually entered data between billing systems and general ledgers.
We will break down your financial stack into five layers, define the costs associated with transitioning each layer, and define the Service Level Agreement (SLA) with your back-office operations required to withstand a board of directors’ scrutiny.
Below, we provide an unbiased view of the SaaS financial software platforms required to automate compliance and close your books within five days.
How to Build Your SaaS Financial Software Stack
The focus of developing a finance stack should not be on building "shiny dashboards" for everyone to look at, but rather building unbroken data from the moment your clients sign a contract until your company files taxes. Your tools/accounting systems to manage your financial performance should be clearly aligned with your annual recurring revenue (ARR) range and operational limits.
There are minimum performance benchmarks set by the marketplace. An optimal month-end close should occur within five to eight business days. A company's financial forecast should update and refresh every 48 hours following its month-end close. If your organization can't achieve these performance targets, your software will prove to be unsuccessful.
Don't over purchase too soon and don't continue to use broken tools long into your future. A pure software stack to support $5M ARR business typically costs between $25,000 to $60,000 annually to maintain. When a fractional CFO is added to the finance stack, that cost increases from $60,000 to $150,000.
When you achieve $20M ARR, those costs double ($120,000 to $300,000), adding in the need for a full-scale controller, with a potential cost of $200,000. When you reach $50M ARR, anticipate a finance team comprised of four to six people managing a $500,000 software budget.
General Ledger Platforms
The general ledger (GL) serves as the backbone of the business, meaning it's the last and most reliable source of truth for the financial activity of a business, and it's not an analytic tool. Every business should start with a simple, entry-level GL but build it out with an eye towards the time when they will need to implement multi-entity tracking or complex currency tracking.
1. QuickBooks Online (QBO)
Almost every startup will begin with QBO. The standard plan pricing runs between $17 and $36 per month making it perfect for bootstrapping founders. As businesses reach the $5M ARR level of revenue, we see a general move towards QBO Advanced for about $200 a month.
For several years, QBO operates well for single-entity SaaS companies and has the ability to connect bank feeds, set up your basic expense accounts, and run on autopilot. It connects with nearly every payment gateway and payroll provider.
However, once a company hits $10M ARR or opens a second company, QBO starts to break down significantly. There's a lack of proper multi-entity consolidation in QBO, meaning finance teams have to download multiple reports from QBO and manually consolidate them in a spreadsheet. Not only does this represent a large potential risk in an audit, but the time and resources spent on translating currency values manually will result in QBO becoming a significant liability.
2. Xero
Xero is a competitive option to QBO, and Xero has a strong presence in areas outside of the United States, providing customers with a price point of $13 to $70 per month and a streamlined user interface and native bank reconciliation capabilities.
Many finance professionals also prefer using Xero for their open API architecture. The SaaS stack integrates easily with Xero because of its ability to manage early-stage subscription revenue; if you can properly pipe data from a billing engine to Xero, it will work fine.
Like QBO, Xero has its limitations, so while this software is great for companies with revenue of $0 to $10M ARR, Xero will not scale into a publicly traded company.
3. Sage Intacct
When QBO and Xero don’t meet your business's needs, Sage Intacct offers an upgrade path. This application is specifically designed for businesses that need a high level of detailed multi-entity consolidation, as well as to maintain detailed audit trails. Converting to Intacct from QBO is not something that can happen over a weekend.
The length of time it takes to migrate your data from QBO to Intacct will be approximately 3 to 4 months; this is the amount of time necessary to properly migrate your historical data, as well as to build your new revenue schedules. The cost of the migration will vary widely between $40,000 and $120,000, depending on your use of implementation consultants and the first-year cost of your software.
Intacct allows you to track each dollar you spend to the level of granularity you require. For example, you can tag every dollar you spend to a specific department, location, or project, which gives your company the ability to close its books for five different global entities within just a few days, without using any manual spreadsheets.
4. NetSuite
NetSuite is designed to be the solution for larger enterprises.
NetSuite is a complete SaaS financial software solution, containing the enterprise resource planning (ERP) functionality that includes finance, operations, human resources (HR), and supply chain information in one enormous platform. NetSuite does not have a published price list; to find out about pricing, you will need to reach out to the company or to their partners.
The recommended timing to purchase a subscription to NetSuite is based on having 30M ARR or more, with a growth strategy that includes an IPO/acquisition within 1-2 years. NetSuite also requires dedicated technical admins for your books, to set it up and maintain it. Purchasing too early could be detrimental, as many startups purchase at around 3M ARR and ultimately fail due to the implementation's duration and maintenance costs.
Once set up correctly, however, NetSuite provides incredible oversight and scalability regarding the volume of data you will accumulate. NetSuite can easily support revenues in the hundreds of millions of dollars; however, the financial team must adhere to very strict operational standards.
Billing and Revenue Software
The billing platform is responsible not only for processing payment but also for interpreting the various components of your complex SaaS contracts, translating them into accounting terms. Furthermore, it is required by law to adhere to ASC 606 and IFRS 15. If your billing and revenue recognition system cannot process things like prepaid annual contracts, mid-term seat upgrades, or usage-based overages automatically, you cannot effectively pass your audits.
1. Stripe Billing
Stripe Billing has dominated the product-led growth (PLG) and self-service SaaS space for many years. Stripe has a robust API for your engineers and other developers. They can build systems whereby invoicing and recurring charges can be set up instantly based on usage, billable hours, etc.
If you have a simple pricing model with a lot of volume, Stripe would be ideal. They charge a low percentage of your transaction volume, and because Stripe handles all automatic retries of failed credit cards, you will experience less involuntary churn.
2. Maxio
Maxio and SaaSOptics merged to create the combined entity, Maxio, which is uniquely designed for B2B SaaS companies utilizing complex, sales-led operational frameworks. Pricing starts at $599/month, with a $5M ARR company generally paying between $1,000 - $3,000/month.
Maxio has exceptional capabilities for high-level compliance with ASC 606, while adeptly aligning itself with the worst-case scenario of a pre-paid annual subscription customer, who upgrades in month four, downgrades in month eight, and has a specific usage limit.
Additionally, it provides daily revenue recognition calculations and automatically posts a clean journal entry into your GL, eliminating the need for a cumbersome and potentially error-prone master spreadsheet, while protecting data integrity for enterprise software sales with highly negotiated contracts.
3. Zuora
Zuora is the innovator and leader in enterprise subscription management solutions. As an extremely complex platform designed specifically for publicly traded corporations and large, traditional institutions transitioning to cloud technologies.
It is not intended for early-stage ventures. It is capable of processing large volumes of information, creating bundled offerings of hardware and software, and supporting numerous pricing models through its complete quote-to-cash solution process.
Implementing Zuora is a major corporate endeavour that requires extensive involvement from experienced implementation consultants. It is designed for organisations generating nine-figure revenues, who require a highly robust and stable billing system.
4. Chargebee
Chargebee occupies the middle ground between developer-focused billing solutions and enterprise contract and billing solutions like Maxio. Chargebee has been designed to work with many different payment gateway providers in an easy and flexible manner.
Chargebee has also received some great feedback from customers regarding its capabilities in the area of dunning management. Chargebee has a built-in smart retry feature that automates the recovery of failed payments. The product has also done a good job of expanding into revenue recognition with Chargebee RevRec by building projection schedules on ASC 606 standards.
Chargebee also scales well; a company can start using Chargebee at a $1M ARR, then continue to grow with Chargebee all the way to over a $50M ARR. In addition to removing the engineering burden of dealing with billing logic, Chargebee allows finance to keep accurate reports.
5. Orb
Orb is at the forefront of developing usage-based pricing models. With more companies developing AI features, usage-based billing using compute power, credits, or API calls is becoming the norm.
Orb offers a unique RevGraph & SQL pricing layer which allows companies to query their own usage data, and create complex pricing models dynamically, without requiring engineers to rewrite the billing code each time.
There are many standard billing tools that will struggle when a product is billed by the gigabyte or hour, as Orb does. Orb captures true usage events, accurately meters them, and illustrates correct invoices and revenue data, instantaneously.
6. Ordway
Ordway focuses primarily on the pain points typical in hybrid business models. If your company sells a mix of products, i.e., physical hardware, one-time installation fees, and recurring SaaS subscriptions, Ordway will simplify the management of these hybrid business models.
Ordway creates a clean audit trail for multi-element contracts. Ordway's audit documentation shows the exact timing of all service deliveries and the corresponding revenue recognition.
Ordway provides specific value to controllers who are concerned about diligence periods. By automating journal entries for multi-element arrangements, Ordway eliminates the ability for auditors to prematurely recognize revenue.
Analytics Platforms and SaaS Metrics
To track what you cannot see, you will need metrics. This data layer retrieves data from your billing system on how well you are performing. The monthly recurring revenue (MRR) is tracked as it moves; net dollar retention (NDR) and cohort analysis can also be found.
1. ChartMogul
ChartMogul was the original standard for early-stage subscription analytics. Monthly subscription pricing ranges from $300 - $800/month, based on the revenue you generate.
It connects directly with various billing tools, including Stripe, and visualizes your MRR, churn rate, and customer lifetime value immediately. It also performs basic data cleaning, allowing customers to easily merge duplicate records.
ChartMogul is ideal for founders and early finance teams that require continual access to metrics. You can get daily access to all core SaaS metrics without the need for data engineering expertise.
2. Baremetrics
Baremetrics charges an MRR-based fee on a sliding scale that begins around $129/month. It is a very popular option for many bootstrappers that require immediate insight into the revenue sources of their business.
Dashboard views provide an easy-to-read overview of your revenue and where your cancellations are coming from, including basic dunning features to help recover lost revenue.
As a company continues to scale, Baremetrics will become increasingly cramped, particularly once a board of directors requests complicated multi-channel CAC payback calculations and detailed historical cohort retention tables.
3. Bricks
Bricks is a modern entrant into the metrics space with a focus on speed and design. It connects to your billing platform quickly and highlights the executive-level reporting that allows you to make data-driven decisions. It calculates the standard thresholds for healthy churn automatically.
In the B2B SaaS world, small businesses need to be below 5% monthly churn, while enterprises should remain below 2%. Bricks allows you to easily visualize these thresholds.
Bricks offers teams a way to stop struggling with spreadsheets, and start focusing on their business performance.
4. ReveniQ
ReveniQ identifies the precise disconnect between raw billing data and board-level reports. It specifically tracks MRR movement, and how new revenue is tracked is simple.
However, to accurately track the expansion, contraction and reactivation of revenue, you need accurate data logic, and ReveniQ maps these movements in a manner that ensures that your net dollar retention (NDR) calculations are entirely accurate.
When you have an NDR greater than 100%, it indicates that your existing customers are growing faster than they are churning. Once again, ReveniQ allows you to prove this metric to your investors in a way that is simple and undeniable using this SaaS financial software.
Spend Management and Accounts Payable Software
As stated, the spend layer is all about managing cash going out of the business. Gone are the days of sharing a single corporate credit card and collecting paper receipts for expenditures. The marketplace has consolidated into a few major players, but when you choose a spend card vendor, make sure to connect it only to your general ledger (GL), and don't second guess your choice.
1. Brex
Brex is the dominant player in the startup ecosystem. It provides corporate cards instantly and allows you to set employee-level spending limits.
With Brex, all transactions are auto-categorized based on spending categories and sync directly to Quickbooks or NetSuite. Brex eliminates the end-of-month receipt collection process, which steals hours from your accounting team.
The platform operates very smoothly, handling very high transaction volume with absolutely no manual data entry required.
2. Ramp
Ramp is a spend management platform, primarily designed to save companies money.
Ramp provides automated detection of duplicate software subscriptions and unusual increases in vendor pricing. Ramp provides users with both physical and virtual cards, vendor-specific limits, and allows for automatic bill payment.
Ramp's GL integration is flawless and integrates data on a daily basis into the cash flow statements so that the accounting department is always aware of the cash outflow from the company.
3. Mercury
Mercury is primarily a banking platform for startups, but it has expanded its spend management capabilities related to how business works with their bank account and corporate card and to some extent, with accounts payable (AP) processes.
For businesses with less than $10 million in annual revenue, Mercury is capable of streamlining all outgoing cash activity through Mercury.
Mercury has a clean and easy-to-use interface for developers and provides an easy way for wire and international payments.
4. Rippling Spend
Rippling originally started out with HR and payroll but has quickly transformed into a full-service operations platform, including Rippling Spend, connecting to the personnel database.
When an employee is hired through Rippling, they can automatically receive physical cards, set limits based on their department, and approve software purchases or requests. Once the employee's employment is terminated, the access to his or her account is immediately canceled.
The integration of payroll, HR, and spend data gives companies the ability to be in control of their operations as they expand.
5. Airbase
Airbase provides spend management tools to businesses transitioning from a mid-market model to an enterprise model. Airbase provides an efficient, effective approval process for larger software purchases.
Airbase can handle the payment routing process through three executive-level approvals and three levels of executive approval, if your company is planning to spend $50,000 on a new server contract. The connectivity between procurement, payable accounts, and corporate cards establishes a single pipeline by syncing up lots of structured data into NetSuite or Intacct.
Financial Planning and Forecasting Tools
FP&A tools are designed for looking at the future. Companies with less than $3 million in ARR do not need tools in this layer because they can use a spreadsheet. This becomes a necessity for companies with over $10 million in ARR when the founder's spreadsheets become heavy due to planning headcount and complex forecasting.
1. Mosaic
Mosaic is specifically designed to take the place of the high-volume fragile Google Sheets of most growing startups. It provides direct access to your GL, CRM, and other billing systems and connects to them directly.
Within two days of closing the books for the month, Mosaic will automatically update your financial forecast. Additionally, Mosaic comes with pre-built templates to help you with headcount planning, tracking burn rates, and mapping cash runway.
The CFO can use Mosaic as a "command centre" and make financial decisions that are based on live data instead of relying on an exported file from three weeks ago.
2. Cube
In contrast, Cube does not force you to move from your dashboards to another one. Instead, it sits in Microsoft Excel and Google Sheets as a database for storing financial data that connects directly with your GL (general ledger) and your existing models in your spreadsheets.
Because many finance professionals prefer Microsoft Excel, Cube allows you to maintain the security and scalability of Excel. You will be able to continue using your existing formulas and models without any changes, but the underlying data will automatically refresh with data from your GL. It removes the potentiality for a broken cell formula to ruin a presentation board.
3. Pry
Pry is geared towards early-stage/mid-market companies who require powerful forecasting and not enterprise complexity. It allows founders to create custom financial models with a few simple variables versus a complex database query.
For example, you will be able to model hiring scenarios, map variables associated with revenue growth rate, and instantly visualize the effect on your cash runway. It is very visual and operator-friendly which makes it a great first step away from manual spreadsheets.
4. CentSight
CentSight was created to meet the specific need for deep stage-based buying logic and realistic operational planning. It provides very high visibility into unit economics.
For example, if your CFO wants to see the CAC payback for every single marketing channel, CentSight gives that data in a very detailed and accurate manner. Also, CentSight enforces strict operational discipline to ensure that the forward-looking models of your team are consistent with the historical reality of the results that are recorded in the general ledger.
Audit Readiness and SaaS Financial Software Integration Rules
The "best" software on the market is completely useless if you connect it poorly; an unintegrated stack guarantees an audit failure. You must design the data flow architecture completely correctly. A well-functioning finance department relies on strict, non-negotiable integration rules across all layers of the business.
Revenue Handoff
Your billing platform (Stripe, Maxio) must push data to the revenue recognition layer of your business every day or at least once a week. The revenue recognition layer must calculate the exact deferred revenue amount and must push the final journal entry into the general ledger (generally QBO or Intacct) automatically.
Payroll Connection
Payroll must push payroll data into the general ledger based upon the payroll period and not manual mapping to the general ledger.
Outflow Sync
The corporate card systems (Ramp, Brex) must push the individual transaction data, categorized and separated daily, to the general ledger. The practice of batching up massive, uncategorized corporate card expenses and sending them all to the general ledger at the end of the month destroys real-time visibility into the cash position of an organization.
Manual Touch Diagnostic
You can perform a simple diagnostic on your team today. You should ask your controller how many times in the past month he/she had to download a CSV file, manipulate it in Excel, and upload it into another financial system.
Each time your team needs to download a CSV file, this provides a point of opportunity for human error. For example, if an auditor requests the exact journal entry that recognized revenue for an enterprise client midway through the customer contract upgrade process, that information should be immediately available in your systems.
If the answer requires opening a large Excel spreadsheet titled "Rev_Rec_Master_Final_V4", then your organization is failing the compliance test.
In addition to the manual touch diagnostic, your SaaS financial software architecture should operate as a clean, straight data pipeline. Once your engineers have to create custom workarounds to manage an unusual sales contract, you are in a risky position.
Final Thoughts
The decisions you make regarding technology will not create value if your close process requires you to perform manual spreadsheet reconciliation to pass the ASC 606 audit. Instead of over-indexing on the minor features of dashboards, you should focus on the integrity of data flow from the time a contract is signed until the data is posted in the general ledger.
