Wondering how to structure your back office so it will support your SaaS company through exponential growth? You’re not alone.
Many SaaS business founders struggle to understand the type of financial accounting assistance they need, and when they need it.
- When does it make sense to hire full-time help?
- How senior should you hire?
- What type of finance leader do you actually need?
To help you build accounting functions that scale with your SaaS company, let’s consider 3 key startup milestone moments: hitting $1 million, $5 million, and $10 million in annual recurring revenue (ARR).
Milestone 1 – $1 million ARR
Recommended accounting functions: Bookkeeper
If you’ve reached this growth milestone, your financial transactions likely revolve around:
- Recording revenue and expenses
- Invoicing customers and paying bills
- Reconciling bank and credit card statements
Since your books will only get more complex as you scale your SaaS company, however, streamlining day-to-day processes for consistent tracking, billing, and financial reporting is a must.
Proper bookkeeping is essential to gain clarity on your financial position, cash flow, and business performance - and to generate the financial statements required (like balance sheets and income statements) for bank loan or tech grant fund approvals.
You could hire a full-time accounting professional at this point. But if you’d rather reserve your headcount for sales and marketing, outsourcing your bookkeeping function is a great alternative.
Trained, experienced external bookkeepers can:
- Uncover inefficiencies in your existing accounting processes
- Suggest tools for automating or improving your system
- Generate the necessary financial reports for tax filing and external funding
If you need additional support with fundraising or budgeting, you might also consider hiring an outsourced, fractional controller.
Milestone 2 - $5 million ARR
Recommended accounting functions: Bookkeeper + Controller
With millions of dollars coming in now, you probably have millions going out as well and could benefit from strategic financial planning activities like:
- Forecast and budget building
- Calculating and reporting on churn, retention, and other key growth metrics
- Evaluating profitability by product or vertical
Hiring a controller now will improve your cash flow planning and provide greater financial oversight. Ideally your hire will be capable of handling day-to-day work when necessary, but senior enough to drive financial strategies through managerial accounting.
Maintaining internal or external bookkeeping support at the same time, meanwhile, will:
- Divert time-consuming transactions away from your controller
- Allow them to focus on financial data review and analysis
- Make it easier to use your financial information to make better business decisions
If you’re considering bringing in a CFO or Director of Finance instead, note that they’re unlikely to engage in routine accounting at all, and you’ll need to rely on in-house staff or an outside firm for your bookkeeping, AR, and AP.
Milestone 3 - $10 million ARR
Recommended accounting functions: Bookkeeper + Controller + CFO
At this point, you’ve likely moved beyond simple management accounting and will need to hire a Director of Finance or CFO to increase focus on:
- Financial analysis and modelling
- Redirecting your team toward more high-value work
- Governance or compliance requirements
If you’re looking to expand operations to the US, for example, you’ll need a CFO to spearhead this process.
At the same time, your collections, receipt management, and monthly reconciliations may have grown beyond what your staff accountant or accounting department can handle.
Outsourcing your accounts receivable will make it easier for your team to stay on top of their responsibilities, and will prevent your company falling behind on collecting the client payments that are so vital to cash flow.
A word about raising capital
Since many investors require financial reviews or audited financial statements, it’s worth having a senior accounting professional you can turn to for advice when you start raising funds.
As fundraising initiatives grow, however, it can be more beneficial to have a full-fledged CFO or Director of Finance on staff who can:
- Inspire confidence in investors
- Think strategically about how to best apply and invest funding
- Report directly to your board of directors
Whatever stage you’re at as you scale your SaaS company, remember that it’s never too early to invest in accurate bookkeeping as a fundamental accounting function.
At Enkel, we offer a full suite of accounting-as-a-service options for growing tech companies just like yours. Contact us today and find out how we can help.
