As a SaaS business owner, bookkeeping probably isn't your biggest priority. Your focus is on running and growing your business, especially if you’re in the start-up stage. However, every business needs sufficient working capital to survive. High business expenses are a quick way for businesses to run into cash flow issues. Therefore, it's crucial for SaaS businesses to keep their books up-to-date in order to monitor their business expenses and cash runway.
Ultimately, while bookkeeping may not be a very glamorous function, it's critical that it's done right for the success of your business. Accurate bookkeeping is key to identifying where you can cut costs.
Here are 6 ways to reduce business expenses at your SaaS company:
1. Create a budget and stick to it
Budgeting is the most important means of keeping a sharp eye on business expenses. You’ll easily be able to identify where to cut expenses that can't be mapped back to the budget. It’s commonplace to have a budget per department, rolled up into an overall company budget.
With team leads creating their department budget, it’s important that you communicate what the acceptable limits for certain business expenses are. For example, a maximum of $200 per night on hotels for business travel, or $75 for business meals per day. Each team should know their budget and understand that they’re responsible for keeping track of their spending and remaining within the approved amount.
It’s easy for spending to get out of control, especially if your business is in a growth stage. A new subscription here, extra digital ad spending there; it all adds up. Using business credit cards gives you extra time to pay (and you can earn significant rewards depending on the card you're using). But without any oversight on your spending, your company could easily develop cash flow problems or risk high-interest rate payments.
Proper budgeting helps ensure that business expenses are limited only to approved items, reducing the likelihood of mystery business credit card charges and unnecessary expenses.
To anticipate outgoing cash flow, set a time limit for when employees who have used personal credit cards must submit expense reports for reimbursement — usually until the end of the following month. Tools such as Dext Prepare or Expensify make digital submission of receipts easy for employees, and is especially useful when your team is working remotely. If you’re sticking to your budget, and have communicated it effectively, there should be no surprises when your employees submit their expense reports.
2. Outsource back office tasks for cost savings
When business expenses get into the millions (which can easily happen with growing SaaS companies), headcount is precious. Hiring full time employees comes with increased overhead costs, a fixed salary, benefits and pension, etc. Outsourcing non-core business functions such as bookkeeping can help reduce business expenses.
If you’ve taken the time to create a budget, you'll want to know that employees are sticking to it, and also whether all the expenses are necessary. For this, your monthly books must be accurate and up-to-date, and this is what an outsourced bookkeeper will do for you.
Some business owners are initially put off by the thought of outsourcing, assuming it comes at a higher cost than hiring in-house. However, in most cases, it’s actually much more cost effective to invest in experts like Enkel who will work with you to find a flexible monthly pricing plan that works for your business and your budget.
3. Automate as much as you can
Work smarter, not harder! Invest in tools that can help automate as much of your business as possible. You may find you can significantly reduce headcount, and therefore reduce business expenses this way.
Start by finding the tasks in your business that take the longest and see if there's a way to automate the process. There are lots of tools available that will help with your business automation. Zapier, for example, easily connects your business apps to automate repetitive tasks. Tools like Zapier often have free trials making it easy to test multiple products and find the ones that work best for you.
For SaaS companies, collecting monthly recurring subscription fees and invoicing are processes that can be automated. A tool like Rotessa can pull both monthly pre-authorized client payments as well as collecting invoice payments that become due after sending out from your accounting software. Your bookkeeper can set each of these automated processes up for you.
4. Cost savings on overhead
Office space is expensive and rent is likely one of your larger business costs.
If the COVID-19 pandemic has shown us anything, it’s that even the most traditional in-office roles can be home-based, and in many cases, has no impact on employee productivity. In fact, a study out of Stanford University of 16,000 workers over 9 months found that working from home actually increased employee productivity by 13%.
Countless organizations have chosen to continue with their employees’ current work-from-home arrangements, downsize, and save a considerable amount in rent despite the ability to re-open their offices.
If allowing all employees to work from home full-time isn't an option, there are still plenty of solutions to aid in reducing the amount of office space needed:
- Reduce the physical size of the office and rotate which of your employees work from home, implementing hot-desking for those working in the office.
- Eliminate the office entirely and move to a co-working space, paying only for the desks needed.
5. Maximize available grants
Startups and SaaS companies need funding. There are a variety of sources from which to fund your business, including bank loans and venture capitalists, however, there are also plenty of government grants that you can take advantage of.
These grants often don't need to be repaid as they're intended to support innovation and cover the business costs of research and development, hiring, training, and more. An example is the Industrial Research Assistance Program (IRAP) which provides financial support to small business owners pursuing technology-driven innovation.
To maximize your chances of getting approved for a grant, you’ll need to ensure your books are up to date and that you have current financial statements prepared. Funders might also want to see a grant budget to know how you intend to spend the money once approved. At Enkel, we're experienced in preparing the books and financial statements for many tech companies going through the grant application process.
6. Maximize your tax deductions
When it comes to fundraising or tapping into government tax credit programs, maintaining an accurate set of books is essential. Even small expenses can add up, so keeping track of all expenses means you can write them off and minimize your tax bill.
If your SaaS company is eligible for the Scientific Research and Experimental Development (SR&ED) tax incentive, your chart of accounts must be set up to track all SR&ED eligible expenses separately as part of your day-to-day SaaS bookkeeping process. At Enkel, we can help get your books ready for SR&ED claims.
As a SaaS business, you need a properly managed SaaS accounting system that can grow with you as your number of subscriptions increase, and accurate expense tracking to ensure you’re not only reducing or eliminating unnecessary expenses, but also writing them all off for maximizing your tax savings.
Contact us today to learn more about how our accounting and bookkeeping services for SaaS businesses reduce business expenses.
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