A CFO asked me, "how do I know if we're in need of a system for subscription management?". I gave my best advice to her, what signs to look for, my experiences from different scenarios and we concluded that there were indeed signs that their processes would need a review.
I understood that she was probably not the only CFO facing the same questions. So I decided to write this blog post and share a few very hands on signs that you likely need to review your processes and possibly also add better support for your subscription management.
Sign 1: Each update of your SaaS KPI:s requires manual processing
Running a SaaS business from the regular P&L and balance sheet is simply not the way to do it. Tracking SaaS KPI:s such as Annualized Contract Value, Monthly recurring revenue and gross revenue churn along with cashflow drivers is needed to understand what will happen going forward.
As most employees with customer interaction need to understand customer success and underlying drivers, having up to date SaaS KPI:s available continuously, radically increases the chance of running a succesful SaaS business.
Managing renewals is really much easier than acquiring customers, driving customer success, managing upsells smart so a missed renewal invoicing means that the perhaps "easiest" revenue is missed. The reason why this is missed for most companies is that somewhere there is a spreadsheet with renewal dates for subscriptions beacuse the financial system isn't made for recurring invoicing, less for renewal of subscriptions.
When a customer can't understand your invoice and they think the contract state something else it's a sign that the commercial model is either not properly defined or that the commercial model isn't available in your financial system. Both are signs that your business is at risk of not being scalable as is expected from a SaaS business.
If the sales contract can't be mapped to your financial system it usually have the following effects. Something is input to the financial system to ensure that at least the first invoice, or the invoicing schedule for the initial term is in place. This means that we don't have the full visibility of the current state of the subscription anywhere, the initial state is in the contract, parts of the current state is in the financial system (Sign 1-3 are often related to Sign 4). As the subscription portfolio grows it will be increasingly difficult to understand, less analyze it.
Following Sign 4, when there is a team to bridge financial and sales teams. It might be for good reasons such as work off-loading and competence sharing. However, it is often because sales teams need to know current financial status of customer, what is the current subscription state etc. or the the "bridge-team" needs to fill gaps in the sales contract or transform the sales contract to financial systems, spreadsheets and other custom solutions. The team becomes a bottle-neck in growth times and reduced in bad times resulting in poor quality data, sales not running as smooth, increased financial lead times, all that is not a desired outcome.
While missing to send a renewal invoice once may not be a problem it's a sign that the process or system support is not robust. What we see is that companies would benefit greatly from correcting these small process problems so that they, from a solid foundation, can grow their business and focus on customer success rather than wondering if they have control over their SaaS business.
When founding Younium, it was with a clear purpose - to help B2B companies run their SaaS business better. Most standard systems on the market are either not suited for subscription business or not made for B2B. Do you have a purposebuilt, standard service for managing your subscription?