What are the expansions in today’s SaaS CFO’s responsibilities?

The role of a SaaS CFO has undergone a significant transformation in recent years.?

Traditionally, the CFO’s scope was limited, being mainly focused on historical transactions. They handled the ledger and financial records, took care of expense management, handled compliance matters, and similar functions.?

But was the CFO a strategic asset to the bottom line in the same way as the CEO??

Not so much.

However, today’s SaaS CFO is a different story entirely, for public companies and smaller organizations alike.?

In this post, we’ll help you understand the full scope of your role by 1) Exploring how the SaaS CFO’s financial obligations have changed with time, 2) Examining how these expansions impact your day-to-day working life and organizational strategy, and 3) Looking at how you can use your tech stack to make the most of the CFO role at your company.?

Let’s get started.

How was the SaaS CFO role traditionally viewed?

In order to grasp how the CFO role has shifted and why those changes matter, it’s important to look at where things began.?

What were some key concepts that defined the previous iteration of your role?

Backward-looking in nature

Originally, the CFO role had a retrospective focus, concentrating on accounting data analysis and historical financial performance.?

The traditional responsibilities of the CFO were mainly concerned with the analysis of historical financial statements and records.

This approach meant CFOs were primarily backward-looking in their perspective, with a primary emphasis on tracking transactions and handling reporting.

Focused on numbers, not on strategy

This second point is an important extension of the prior one.?

Today’s SaaS CFOs continue to rely heavily on reporting and backward-looking functions, but they do so for the purpose of informing their financial strategies.

This differs from the older viewpoint of a CFO.?

Traditionally, they engaged in historical reporting more for record-keeping or to inform other stakeholders’ strategies, rather than doing the heavy lifting themselves.

Highly isolated, rarely collaborating with other stakeholders

SaaS CFOs of the past were solitary creatures–at least as far as their professional responsibilities were concerned. Traditionally, their role tended to be inward-looking, working to verify financial historicity rather than strategically interfacing with other business leaders.

What else characterized the role of “yesterday’s SaaS CFO?”

Responsible for handling regulatory compliance

Traditionally, revenue recognition formed the bulk of SaaS CFOs’ obligations for meeting regulatory requirements.

Compliance is still an integral part of the SaaS CFO’s role today and will be for the foreseeable future.?

However, as we’ll see shortly, the regulatory aspect of a SaaS CFO’s responsibilities has expanded in scope–along with many other parts of your job.

How has the modern CFO’s role expanded?

In business, nothing remains the same forever. But over the past decade or so, the rate of change in the SaaS CFO’s role has been especially noteworthy.

Below are six essential responsibilities of today’s modernized SaaS CFO.

1. SaaS CFOs are strategic planners

As we mentioned, in previous years the value-add of SaaS CFOs was largely about tracking historical data.?

For the most part, strategic matters were left to other leaders at the company.

That state of affairs is now over, with CFOs acting as central SaaS strategists on a wide range of initiatives:

• Reducing churn and generating positive cash flow.
• Boosting shareholder value and cutting operating expenses.
• Creating profitable user segmentation strategies.
• Engaging in extensive financial planning and analysis (FP&A).
• Forecasting the effects of different pricing strategies, and much more.

Historical accounting is still a huge piece of what a SaaS CFO does.?

But there’s now a lot more on your plate.?

Essentially, you’re expected to provide strategic contributions on the same level as any other stakeholder–which brings us to the second change on our list.

2. SaaS CFOs routinely collaborate with other stakeholders

Today, SaaS CFOs are expected to be team players in a big way.?

In the context of CFO and stakeholder interactions, there are two important puzzle pieces to fit together:

1. SaaS CFOs are expected to foster data visibility: At a SaaS company, every department relies on data from the finance team to achieve its professional goals. This means CFOs are tasked with creating an environment where inter-departmental data transfers are as seamless as possible. Many SaaS CFOs are turning to cloud-based tools to supply real-time data across organizations.
2. SaaS CFOs actively collaborate with other stakeholders: Whether you’re fine-tuning your budget, helping out with a specific strategic problem, or supplying important data, the CFO role has become highly collaborative across teams. CFOs often collaborate directly with CEOs and other C-suites to attain company objectives.

What other workplace changes are SaaS CFOs currently adapting to?

3. SaaS CFOs’ regulatory purview has expanded

Revenue recognition compliance was traditionally the centerpiece of SaaS CFOs’ regulatory responsibilities.?

ASC 606 compliance is still a huge component of that part of the role, but there are additional regulatory considerations as well.

Below are some of the most important regulations for SaaS finance leaders to be mindful of.

The Sarbanes-Oxley Act (SOX)

SOX was drafted to protect American investors from fraudulent accounting practices.

Since SaaS companies often take external funding–both public and private, depending on organizational status–it’s essential that CFOs ensure full transparency for investors.

System and Organization Controls (SOC 2)

SOC 2 puts cybersecurity mandates in place to protect companies’ data. This is extremely important for keeping user data safe from hackers.

Given that SaaS companies frequently handle massive amounts of personal and financial user data, it’s not hard to see the value of regulatory cybersecurity standards.

The General Data Protection Regulation (GDPR)

The GDPR provides standards for using and protecting the personal data of citizens of the European Union and European Economic Area.

This includes informing customers about how their data is used and why it was necessary to collect it, allowing users to see what’s being collected, and more.

The Health Insurance and Portability Act of 1996 (HIPAA)

HIPAA sets safeguards in place for the confidentiality of medical records and data.?

Similar to SOC 2, it also requires companies to have provable means of protecting individuals’ medical data.

Since healthcare is a growing SaaS sector, SaaS CFOs are expected to account for HIPAA compliance.

What else is new for SaaS CFOs?

4. SaaS CFOs are now financial data scientists

As the SaaS CFO role has grown more strategic, it’s become imperative for CFOs at software organizations to adeptly handle huge volumes of data.

This includes:

• Driving success with data analytics: SaaS CFOs are tasked with mining huge amounts of data, arriving at profitable insights, and turning those operational epiphanies into subscription revenue. Many SaaS finance leaders use cloud-based tools to help them with this process.
• Using technology to the fullest: Speed and accuracy are both at a premium when it comes to data analytics and insight detection. SaaS CFOs are increasingly turning to automated solutions to reliably detect and leverage useful SaaS data patterns. You should see it as your responsibility to make sure your tools can keep up with these needs. But you need to balance that by doing your due diligence and using tools you can trust.
• Creating a data-first corporate culture: The best SaaS CFOs take their “data-first” mindset and work to instill it in the rest of their department and the broader company.

Top-performing finance leaders know organizations win or lose their markets based on the quality and usability of their data.

5. SaaS CFOs now handle investor relations

Another development for SaaS CFOs lies in their relationship to fundraising and investor relations.?

While this was traditionally more in the purview of the CEO, times have changed.

CFOs at software companies are now expected to play a pivotal role in raising capital all the way from seed funding to IPO.?

This includes keeping detailed track of funding through capitalization tables, making sure the company has investor-grade metrics that tell a compelling story, and more.

6. SaaS CFOs are expected to take the lead on technological innovation

Financial management is no longer the sole focus of SaaS CFOs. You also need to spearhead technological innovation within your department and the broader organization.?

This entails:

• Staying abreast of the latest technological advancements and their potential business applications.
• Collaborating with the CTO to align financial and technological strategies.
• Integrating cutting-edge technologies such as artificial intelligence (AI) and machine learning (ML) to enhance operational efficiency.

The companies that consistently win their market are those with tech-conscious leaders.?

That’s now a significant part of succeeding as a SaaS CFO.

As you might imagine, these considerable changes in your professional responsibilities call for rethinking your tech stack. What should your strategy be with respect to the tools you use?

What does this all mean for your tech stack?

In the same way we’ve talked about legacy software, there’s also a “legacy approach” to CFOs’ use of accounting and business tools.?

This features siloed data and departments and often forces CFOs to cobble together a tech stack from multiple software apps.

Now you’ve had a refresher on the SaaS CFO’s overhauled responsibilities, it should be clear that neither legacy software nor the legacy approach behind it will result in subscription cash flow at scale.

What changes should you make to stay competitive in your market?

Tech stack integration is now vital

Tech stack integration is the combination of multiple finance and accounting functions into a single software solution. An integrated tech stack combines reporting and forecasting, billing functionality, revenue recognition, payables and receivables, and more under one digital roof.

Integration is now considered a best practice among SaaS CFOs because:

• It saves significant amounts of time and cash: Spreading your tech stack between a bunch of different apps is known to be more expensive than an integrated approach. This makes perfect sense when you consider that integration entails paying for one product as opposed to many. You’ll also save time because you won’t have to worry about updating and potentially troubleshooting multiple different solutions.
• It prevents compatibility issues among products: Cloud native apps were built specifically for the cloud. They’re considered the gold standard of reliability. Cloud enabled apps are software solutions that are compatible with the cloud but weren’t natively built for it. Trying to combine the two is known as the “lift and shift” approach. Due to legacy compatibility issues, this method is known to be unreliable.

Besides integration, what else should you look for in a tech stack?

GenAI should have a place in your finance department

Incorporating generative AI (GenAI) into your financial toolkit is essential to help you keep pace with the new strategic standard you’re held to as a SaaS CFO.

Accounting software equipped with GenAI can instantly create:

• Accurate billing and revenue forecasts
• Effective board packs that tell a financial story
• Multi-entity financial reports, capitalization tables, and much more

By leveraging GenAI, CFOs can achieve more with less, driving departmental efficiency and stronger business outcomes.

GenAI also plays a crucial role in risk management through churn projections and data analytics around customer sentiment.?

This tech allows CFOs to leverage real-time insights for improved decision-making.

You need a single source of truth that can scale with you

Let’s return to the legacy approach to SaaS tech stacks we mentioned earlier.?

This approach requires CFOs to manually create a functional tech stack with many different software apps.

At the 10,000ft level, you might say, “So what? It’s how we’ve always done things, and it works just fine in our corner of the business world.”?

Here’s the thing. Even if that strategy seems to be working for you, there are inherent problems you’re not considering.

Complex workflows such as revenue recognition necessitate a single source of truth

Revenue recognition is one of the trickiest financial operations in any SaaS accounting department.?

That is, if you perform it manually and without a single source of truth (SSOT).

This is because revenue recognition usually requires reconciling multiple data sources.?

Once you start scaling meaningfully, this quickly becomes a nightmare of manual inefficiency.

Automated cloud accounting software supplies a centralized SSOT for revenue recognition.?

These tools can eliminate the manual errors and revenue leakage that result from running on the hectic hamster wheel of manual rev rec.

A disjointed tech stack makes it difficult to scale your company at speed.?

Your approach to your SaaS finance tech stack will have a massive impact on your company’s ability to scale rapidly and smoothly.

Naturally, not every app in your tech stack will be able to handle the same workload.?

This means you’ll need to upgrade various pieces of your stack when their utility tops out as your organization grows.

When you use an integrated cloud-based tech stack, you never have to worry about outgrowing your SaaS finance tools.?

From the ground up, they’re built to scale right alongside you–from seed to IPO and beyond.

To learn more about Consero Advisory Services, visit our website here: https://learningcenter.conseroglobal.com/consero-advisory-services-li

Article first published by Sage, a Consero partner.