Why SaaS Companies Need a Fractional CFO

These same companies see their value grow once they get their finances in order. Money management skills matter more now as investors want both growth and profits. This explains why 82% of SaaS CFOs hired by portfolio companies since 2023 already had CFO experience. The same thing happens when SaaS startups focus too much on profits and ignore cash flow. They end up accepting awful deals like Participating Preferred Stock with 3x liquidation preferences or loans with returns above 20%.

Tax Acts

Gross profit measures the efficiency of your delivery engine—how effective you are at delivering on your contractual obligations. This pillar provides insight into scalability, cash flow, and sustainability. It’s getting harder to define ARR with changing pricing and revenue models, but ARR is the life of your SaaS company.

Reasons Why Indianapolis Startups Need a Fractional CFO

• They also contribute to strategic planning, guiding companies through mergers, acquisitions, or even initial public offerings (IPOs).
• If you do, it might take weeks – perhaps even months – for this employee to really get to know the business and how it operates to perform their duties appropriately.
• This pillar provides insight into scalability, cash flow, and sustainability.
• A SaaS fractional CFO provides this kind of expertise on an as-needed basis.

However, if you are above $10M ARR, you should have a metric calculated in each box on my framework. Without accurate overall margin calculations and margins by revenue stream, you really do not know where to focus in your business. You look left into the cockpit, where a pane full of instruments provides pilots with the data they need to navigate safely to the intended destination. Their expertise will be the cornerstone for thriving in a competitive business environment. Let’s decipher if your growing business could benefit from the nuanced insights https://www.bookstime.com/ of a Fractional CFO.

Cost Savings

We will explore what exactly they do, how they operate, and what benefits they bring to a startup. We bookkeeping will also look at situations where hiring a fractional CFO might make sense for a company. Often, these fractional CFOs collaborate with multiple startups at a time, as opposed to full-time CFOs — who commit to one company — enjoying all the benefits and obligations of such a position. Fractional CFOs bring decades of experience and insights, making them a popular choice for businesses of all sizes. You can choose to hire an in-house professional to meet your organization’s needs on an ongoing basis. If you have the financial means to do so, that can be an exciting opportunity to build your company.

Why SaaS Companies Are Turning to Fractional CFOs

We also assist you in transitioning to a full-time CFO when the need arises. With a short-term (next 90 days), mid-term (rest of this year), and long-term (next 3-5 years) view of the business, a company can better anticipate its trajectory and cash position or requirements. Fractional CFOs are often brought into an organization when there are financial challenges that the company’s existing team does not have either the skills or manpower to overcome. In some cases, however, the company may have an existing CFO, and the fractional CFO acts as a partner or advisor or helps lead separate projects such as raising capital or navigating an audit. By adopting my SaaS metrics framework, you’ll not only operate saas fractional cfo with greater clarity but also set your SaaS business up for sustainable growth and long-term success.

The Iterative Financial Information Cycle

Your business may be able to save a lot of money by choosing the right tax strategy. They’ll work with your business leaders to come up with a tax plan that maximizes deductions to minimize your company’s out-of-pocket costs. Fractional CFOs can also help you develop a high-level financial strategy. They can take your business objectives and come up with a money strategy that will help you reach them. This can help you understand how your business needs to behave financially to get where you want it to go.

Improving Profitability & Success with Business Data

Minor accounting errors can snowball into major problems that require financial restatements. Companies need reliable financial reporting to track cash flows and make smart decisions. Many SaaS companies’ inconsistent reporting creates major downstream problems. Manual accounting processes raise the risk of reporting errors substantially. Running a startup comes with the high-stakes challenge of managing your burn rate—the pace at which your company spends cash.

With the increasing popularity of software as a service (SaaS) products, new SaaS companies are popping up every day. But come funding time, many SaaS companies find in organizing their finances that their budgeting system is a mess. If you urgently need financial leadership and guidance, it’s possible to get started with a fractional CFO in as little as a week. Overall, if you feel like you lack the financial clarity required to effectively lead your company and plan for the future, it’s likely you would be well-served by a partnership with a fractional CFO. But how should SaaS businesses approach finding, evaluating, and ultimately hiring a fractional CFO?