As a SaaS provider, your company may have multiple sources of income, including subscriptions, one-time sales and implementation fees. You also have various bills and payments due to your vendors, lenders, and the tax department each month. You need a way to stay on top of the money flowing in and out of your company.
Cash flow management is critical for SaaS companies, particularly those in a high-growth phase. Your company’s ability to accurately project its cash needs determines your future opportunities. Cash flow forecasting also gives you useful insight into your company’s business practices and methods.
Compass East offers cash flow statement and projection services for SaaS companies that are growing fast. Our skilled professionals have ample experience and can help your company develop better control over its cash flow.
Why SaaS Companies Need Cash Flow Management
Cash flow is a delicate balancing act for SaaS companies, particularly in the beginning and during high-growth phases. You need to ensure you’re not burning through cash so quickly that you run out of it before a big product launch. Once your company gets established, you need an accurate way to forecast cash flow. Cash flow management also allows you to detect warning signs that it’s time for an infusion of funding.
SaaS companies often have multiple sources of cash, particularly as they grow. You may have revenue coming in from subscriptions, financing, and one-off sales. At the same time, you have expenses as well. In a growth phase, SaaS companies are likely not profitable and burning cash. Understanding your rate of cash burn, or cash flowing away from your company, helps you determine how far your existing cash reserves will go and what you may need to do to continue to pay your bills.
Cash flow forecasting looks to the future. It estimates the amount of cash your company will have coming in and going out during a particular period, such as the next quarter. Your cash flow forecast gives you an idea of the amount of money your company will need to survive and thrive in the coming months.
How We Handle Cash Flow Forecasting for SaaS Companies
Compass East provides cash flow management to SaaS companies. Our cash flow management consultancy services begin from the bottom up. During implementation, we rebuild your company’s financial system to better meet your business’s needs. We connect your company’s historical financial data to its present situation and future vision. We also combine cash forecasting with a suite of infrastructure and reporting tools.
When we conduct a cash flow projection for a SaaS company, we pay attention to the following operations:
- Recurring expenses from credit cards and bank accounts
- Credit card due dates and balances
- Unexpected payments and vendor payment plans
- Additions to fixed assets and anticipated technology builds
- New hires and labor costs connected to company growth
- Customer collection cycles
When we have a detailed understanding of your company’s typical variable and fixed monthly costs, projected new hires, and accounts payable and accounts receivable time, we pull data from your management tools and customer relationship management operations to create a forecast of revenue opportunities. Once we have a revenue and costs forecast, we can provide your company with long- and short-term projects and runway.
The Benefits of Working With a Cash Management Consultancy for SaaS Companies
Compass East cash flow management services offer multiple benefits to SaaS companies:
- Provides financial protection: Working with our team of financial experts allows you to reduce the risks associated with a lack of planning. We can help you prepare for surprises such as a drop in subscriptions and keep you from running out of cash.
- Minimizes cash burn: Your company can easily overspend if you don’t know how much cash comes in or flows out. Our cash flow management services ensure you understand what to expect and empower you to spend within your means. We’ll provide guidance if you need to manage your cash reserves.
- Allows you to identify growth opportunities: As your company grows, you’ll have more cash, which can mean more money to spend on additional growth. We can help you determine the growth opportunities that will have the most significant impact while properly balancing your cash resources.
- Determines business viability: When you’re seeking investor or bank funding, you’ll need to provide proof that your business is viable. Managing your cash and liquidity places your SaaS company in a better position to validate your vision and business model.
- Enhances visibility: Having all the necessary information in front of you guides smarter business decisions. Cash flow management creates an accurate image of your organization’s finances, allowing you to understand your position and options.
- Helps you improve your business: Cash flow analysis allows you to make decisions that improve your business. When you develop a cash flow forecast, you can adjust your business practices to conserve money or make the most of the funds flowing in.
Cash flow management is an excellent resource for moving a SaaS company forward. Compass East comprises a team of financial professionals with years of experience in the industry. We’ll support you as you pursue your business goals. When you outsource your cash flow management needs to a consultancy, you’ll get access to our years of experience for a fraction of the price of hiring a full-time, in-person team.