Outsourced CFOs work as an extension of your team to manage the business’s finances, provide strategic direction, and promote growth. 

While they have their own set of important tasks, they also work closely with the CEO to provide the financial insight needed to make decisions, large and small. 

As the business grows, their professional dependence on each other grows as well. Here are some of the areas in which an outsourced CFO will benefit a CEO. 

This image has an empty alt attribute; its file name is NOVAA-Leaderboard-1-1030x127.png

Metrics Management

One of the primary tasks of a CFO is collecting relevant data and analyzing the performance of that data. 

While most businesses track standard reporting KPIs (Key Performance Indicators), like gross profit, budget variance, and customer acquisition cost, they also need to track metrics that are specific to their own unique needs. 

Outsourced CFOs create tracking strategies to ensure your business collects and relays the information it needs to make strong decisions moving forward.  

Along with managing the standard and unique KPIs previously mentioned, CFOs are also responsible for managing cash flow. A healthy cash flow is an indication of a healthy business, so proper management and reporting are vital.

Once the data is collected and reports have been made, outsourced CFOs present the information to the CEO in an easy-to-understand format. Together, they will strategize to create a plan to get the numbers to match the goals and needs of the business. 

Financial Planning and Budgeting

For a business to grow, it has to spend time preparing for the future and in most cases, this can be done through financial planning and budgeting. These tools use a combination of previous data and forecasts to develop strategies for how and when money should be allocated to reach business goals. 

Financial planning and budgeting require a combined effort from the CFO and the CEO. While the CEO knows where money needs to be allocated and is much more fluent with the overarching goals of the business, the CFO knows how to manage that money to produce the financial results that help the business reach its goals.  

Once the tools are created, the CEO will spend their time implementing the financial plans and budget, while the outsourced CFO keeps a close eye on the metrics, measure progress, and suggest changes where needed. 

Systems and Processes Management and Upkeep

Building the financial processes your business needs requires plenty of planning and attention to detail. What may start as shifting from manual processes to automation (or simply improving previously automated processes) may lead to the need to build out a perfectly integrated tech stack. 

This can be a tricky process and more times than not, it’s something a CEO doesn’t have time for. However, a CFO, working closely with the CEO to define goals and strategies, can take the time to do the necessary building and implementation of these processes. 

They understand the technology and systems and can select third-party applications that work well with what you currently have in place, smoothing out the integration process and building a high-performing tech stack.

Strategizing Long-Term Growth Plans

CEOs are responsible for creating long-term strategies that further the business. Some examples of these strategies include: 

  • Product development and pricing
  • Adding a new branch
  • Planning a rate to hire employees
  • Etc. 

However, before implementing these strategies there are plenty of financial aspects to take into account. This is why it’s essential the CEO and outsourced CFO work closely together.

While the CEO brings the ideas and methods for implementing long-term strategies, the CFO works on the financial aspects like market analysis, pricing analysis, studying growth rates, economic impacts, and more. Working together helps to create the most sound strategies to forward your business. 

Decision Making

In addition to long-term strategizing, CEOs are also responsible for making day-to-day decisions. While it may seem like the short-term decisions don’t carry as much weight in the moment, they absolutely play a role in the overall success of the business. 

There are almost always financial implications associated with these daily decisions and a CFO is responsible for providing guidance in this area. 

They also play an essential role in determining if the short-term decisions being made align with goals and the long-term plans for the business. 

Outsourced CFOs Partner with CEOs to Enhance Business

As the outsourced CFO works to manage metrics, create growth-focused financial plans and a budget, select and manage the upkeep of systems and processes, strategize long-term plans, and aid in decision making, it’s essential to work closely with the CEO. 

While an outsourced CFO is not in the office, their relationship with the CEO still requires the same levels of trust and communication. Together, their skills will go hand and hand to improve the business as a whole.  

For more information about how outsourced CFOs and CEOs work together to create a thriving business, visit: https://www.novaa.ca/

Growth is the goal, and in this day and age, outsourced CFO services are a one-way ticket for businesses to reach their growth goals.

As the world around changes, updates, and digitally integrates, you’ll find yourself falling behind if you try to keep up on your own. 

This is where an outsourced CFO can help. They are well-versed in financial planning and know what it takes to build a sustainable accounting system, a strong cash flow, and budgets and forecasts that keep your business needs and goals in mind.

Here’s how:

This image has an empty alt attribute; its file name is NOVAA-Leaderboard-1-1030x127.png

Outsourced CFO Services Means a Sustainable Accounting System

Your system needs to be able to grow with you. If growth leads to strain, that’s a sure sign your system isn’t able to sustain growth.

To ensure your system can grow with you, you need processes that will suit your needs now and in the future. This includes a tech stack with easy-to-use tools. Your system will be organized and efficient to track progress and make adjustments quickly.

Outsourced CFOs are experienced in building systems meant for business growth. They have time you may not to evaluate your business landscape and develop a financial system that helps you meet your current and growth goals.

Cash Flow Management

Cash flow is your business’s lifeblood. It measures the flow of money in and out of it. There’s no disputing; you should track it and always be looking for ways to increase it.

Excellent cash flow changes everything. When you manage cash flow, you understand the real cost of day-to-day operations and can use that knowledge to streamline and take advantage of growth opportunities.

Cash management includes:

  • Finding out how much cash you have on hand
  • How much money you will need in the future
  • Evaluating the cost-benefit for technology and other investments
  • Pinpointing asset changes as they occur (or anticipating them)
  • Knowing your liabilities
  • Keeping your cash flow under control
  • Timely invoicing
  • Timely payments

Outsourced CFOs know what it takes to improve cash flow, can monitor it closely, and make adjustments to improve when needed. 

Outsourcing financial services gives even smaller businesses access to expertise, analysis, and resources they might not otherwise think they can afford.

And sadly, they may feel this way because of poor cash flow management that an Outsourced CFO can fix. This is a massive financial failure you can avoid.

Budgeting and Forecasting

Overspending is often where businesses fail. 

Take customer acquisition costs as an example. They just expect it to be worth it down the line. But if they’re not also spending to increase customer lifetime value, this spending never pays off.

A budget is essential to keeping spending on track, so you’re spending in the right places and ensuring what you’ve allocated works together across the budget to achieve goals.

Budgets also go hand in hand with cash flow management. You can make easier purchasing decisions with a budget because you already know how much you’ll spend on that line item. 

Sticking to a budget ensures you are not overspending in one area, leaving other areas underfunded.

Your budget should be time-bound, whether that’s quarterly or annually, and it should account for:

  • Every source of revenue
  • Every possible expenditure

Your budget should be realistic while allowing you to operate within your means and manage unexpected revenues and expenses. A reasonable budget can also help you identify opportunities and forecast what you’ll need in the future, like having money for those technology investments you know you need to grow.

Forecasting lets you see where your business is headed and serves as a guide to building a better budget, meaning this all works full circle. With forecasting, you are looking forward rather than backward. 

You can predict where things are going and use this understanding to implement data-driven strategies to confidently move towards your goals.

Outsourced CFO services keep your business moving toward growth and realizing it.

KPI Development and Monitoring

Tracking the right KPIs is essential for a growing business. The data your KPIs generate benefits your financial reporting process and are key to giving you a big picture view of how your business is doing.

With consistent monitoring and analysis, you can quickly make adjustments to get back on track when your numbers are off.

Relying on data is also a long-term strategy in that you can use it as a tool for making better business decisions.

An outsourced CFO can help present opportunities within your data that could add value to your financial strategy.

You can rest easy knowing your outsourced CFO is spending the time you don’t have, getting to know your numbers and monitoring the progress of your financial goals.

Outsourced CFO Services Could Be the Right Move for You

As your business grows, you need your financial system to grow with you. You need someone who can manage and maximize your cash flow, guide you toward the right business decisions, and help you move your business build a strategic financial plan.

Hiring a full-time experienced CFO may not be in the cards, and that’s where NOVAA steps in.

NOVAA’s technology forward, cloud-based outsourced CFO services will help you get a handle on cash flow, create a budget and system that works, and take advantage of the opportunities to grow your businesses. Book an appointment today.

Reporting Key Performance Indicators (KPIs) measure performance over a period of time. They provide important information for nearly every aspect of your business.

Generally, KPIs are tracked across five major categories:

  • Sales
  • Marketing
  • Financial
  • Customer Relations
  • Employee Success

When you track the right KPIs, you can use the information to make changes to these categories and that will result in major improvements in your business.

For guidance, here are 10 reporting KPIs your business needs to track.  

This image has an empty alt attribute; its file name is NOVAA-Leaderboard-1-1030x127.png

10 Reporting KPIs Your Business Needs to Track

1. Cash Flow

Cash flow is arguably one of the most important KPIs a business can track. It is a measure of the money moving in and out of your business.

Tracking cash flow allows you to see how much cash you have to pay for day-to-day operations, pinpoint changes in assets, liabilities, and equity accounts, and create forecasts. 

More often than not, a healthy cash flow results in a healthy business.

2. Customer Acquisition Cost

Bringing new customers on board can be costly. Customer acquisition cost is a measure of how much you are spending to acquire a new customer and is a great indicator of the success of your marketing. 

A low customer acquisition cost means you are efficient in gaining new customers, however, a high number may mean you need to adjust your marketing strategy.

3. Customer Lifetime Value 

Customer lifetime value is an estimate of the total revenue you can expect from a single customer throughout their relationship with your business. Ideally, your customers will work with you for an extended period of time and produce large amounts of revenue.

Typically, business owners will rely on customer acquisition cost and customer lifetime value to work hand in hand to determine how long it will take to be profitable from each new customer. 

4. Gross Profit

Revenue minus direct costs, or costs of goods sold, leaves you with your gross profit. It is essential to have a gross profit because if you don’t, it means you are losing money as you produce your products. 

When it comes to turning materials into finished products, efficiency is key, and gross profit measures that for you. It is also helpful for setting prices and determining profit potential. 

5. Budget Variance 

Comparing your budget to your actual spending and noting the difference is known as budget variance

In a perfect world, you wouldn’t need to track this metric because your actuals would always match your budget. However, that is rarely the case, so instead shoot for a budget variance as low as possible. Sticking to your budget will help you do this. 

6. Churn Rate

To help measure the performance of your team, you need to track churn rate. Churn rate measures the rate at which customers are ending their relationship with your business. 

A low churn rate is ideal because it means you are retaining customers well. Inversely, a high churn rate means you are losing customers quickly and therefore losing revenue.

7. Accounts Receivable Ratio

The accounts receivable ratio provides the average amount of time it takes for a customer to pay you what they owe. 

A low ratio indicates your customers are paying in a timely manner. If your accounts receivable ratio is high you need to implement a strategy to collect payments more quickly. Otherwise, your cash flow will suffer. 

8. Revenue

Revenue is a metric every business already tracks, so including it on this list seems a little obvious. 

However, not only does tracking revenue give you insight into how well your sales team is performing and provide a clear indicator of the success of your marketing and advertising efforts, but it also shows growth over time and is used in measuring a variety of other KPIs like: 

  • Profit margin
  • Gross profit
  • Revenue per employee
  • Average customer revenue 

9. Revenue Per Employee

Revenue per employee is as simple as it sounds. It’s your total revenue divided by your total number of employees. 

While it’s a good metric to know, it isn’t overly helpful on its own. However, when it’s compared to other businesses in your industry, it can provide valuable insight into how successful and efficient your employees are. 

10. Cost Per Hire

From a human resource perspective, cost per hire is an essential metric. It takes into account recruiting and onboarding expenses. 

As your business grows, hiring will become more and more common. So understanding the cost of each hire will aid in forecasting cash flows. When this KPI is matched with revenue per employee you can determine how long it will take before a new employee will start generating profit. 

Want to Ensure You are Tracking the Right Metrics? 

As your business continues to grow, reporting KPIs will play a greater role in your success. 

They provide valuable insight into your financial state and, when tracked and applied correctly, help you make better decisions to drive your business forwards. 

To ensure you are using KPIs to their full potential, consider working with an experienced accounting partner, like Novaa. We are experts in helping businesses track the right KPIs and will help you utilize the results to create success. 

We work as an extension of your team to customize your KPIs and ensure you are collecting the right information to grow your business. 

Contact us today to learn how we can help your business! 

Over the last decade, software-as-a-service (SaaS) has exploded as companies have flocked to subscription and cloud-based services for their software needs. While the growth of the SaaS market has lowered barriers to entry, it has also created opportunities for entry. This presents a double-edged sword: the SaaS sector provides you the opportunity of founding a lucrative company but it also poses the threat of that company failing. Failures are all too common in the industry and you can’t afford to make mistakes that can sink your company. Here are a few of the most frequent financial fails that SaaS startups commit.

5 SaaS Startup Fails You Can Avoid  

1. Cash Flow

When launching a product, you want to make a splash. But making a splash comes at a cost, which can include overspending on branding, marketing, offices, and other expenses. These types of overspends lead to cash flow problems for SaaS startups. The biggest splash you can make is with a good product. As a result, your money is best spent on product development and design until you have a viable product. 

Beyond this early phase, managing cash flow is important so that you don’t run out of money. This requires sound accounting practices and planning, including adequately forecasting cash flow needs for each stage of growth. Keeping track of costs should be straightforward and accurate. But projecting sales is where companies can be inaccurate and fail to bring in the revenue necessary to keep operations running. Make sure to maintain accurate financial projections.

2. Having More Churn Than Growth

In a subscription-based industry, churn rate is a key metric: it is the attrition rate or the number of customers you are losing. In SaaS, this means customers who either cancel or do not renew their subscription. Churn will be inevitable no matter how good your product is – customer wants and needs change over time and you can’t always respond to them. But when churn is higher than growth, your company is failing. 

Plan for some churn and don’t underestimate it. But focus on keeping your churn rate low by improving your product(s) and services(s) to retain as many customers as you can. You can also assess your pricing model and the competitive market to make sure you’re not overcharging.

3. Your Product Isn’t Market Ready When you Go to Market

Building a successful SaaS company involves having a viable and workable product that has a market. Basically, there must be a market need and your product must address that need. Even if you have a great pricing structure your product can be sunk by poor user experience, technical issues, lack of customer support and documentation if your product has a learning curve, and so on. If you try to book demos or close deals for products that aren’t quite ready, you can expect low adoption rates, high customer acquisition costs, and high churn rates. 

The old adage that you never get a second chance to make a first impression stands. The customers who don’t adopt or are part of the churn may not come back even after you’ve worked out the glitches, given that SaaS is a competitive space and they will have moved on to your competitors. Ultimately, you need to do product testing, fix bugs, and make sure you have an intuitive and user-friendly product before you go to market.

4. Not Having the Right Pricing Structure

Pricing is one of the first things that customers will look at, which means it has a major impact on your viability. Despite this, SaaS companies spend surprisingly little time considering their pricing structure. Pricing is difficult to establish given you need to navigate your customers’ need for an affordable price and your need to generate revenue. Put differently, if you undercharge you’ll have happy customers but won’t turn a profit and will likely go bankrupt; if you overcharge, you’ll have a price structure that would make you profitable but there are no customers willing to pay the price. 

Obviously, there are no set rules to navigate this problem and it will depend on the product you have to offer, competing products, and the existing market. But the point is you need to devote time and effort to develop a reasonable pricing structure; this includes reassessing your pricing as your business grows, achieves new milestones, and moves through various phases.

5. Marketing Spend

Because marketing involves a trial and error process, overspending in initial marketing efforts is a major reason. Marketing involves knowing the market for your product, which can involve trial and error. Before you start spending on marketing efforts, you need to define your target audience, your goals, and your key performance indicators so that you aren’t blowing the budget at the start of your marketing efforts. Be sure to conduct market analysis and have a set marketing strategy before you begin. This will help you to maximize ad spend through targeted efforts, rather than the old spray and pray approach to marketing. Similarly, it is possible to underspend or not assign an adequate marketing budget when first launching. Finally, once you have your marketing up and running, you need to conduct marketing audits to see where your efforts are or are not working to better allocate your money and effort.

NOVAA’s Fractional CFO Services for SaaS Startups

Poor management is another fail for SaaS startups. Many of the above fails can be avoided simply with an experienced management team, including a CFO who can assess the financial status of your company, offer ways of improving operations, and check to see that everyone follows and tracks these improvements.

NOVAA offers experienced fractional CFO services for SaaS companies to chart out a path to growth and profitability while avoiding the common SaaS startup fails mentioned above. For our fractional CFO clients, we have a 10 step growth strategy that plots out the full development of your company. Using the latest analytics software, we sit down with you to look at Key Performance Indicators (KPIs) and historical data in relation to your business goals and industry standards to see if you’re accomplishing the necessary goals to become a profitable company. We also evaluate the effectiveness of KPIs as your business grows and continuously analyze them to implement necessary changes in your business operations and evaluation metrics. We also conduct cash flow planning for 6 or 9-month periods at a time so that you can keep your company operating or plan financing rounds and loans to fill in the gaps for any shortfalls. Finally, we conduct quarterly audits to see whether your company is meeting its goals, as well as discovering where goals or operations need to be tweaked.

For more information on our CFO services and how we can help your SaaS startup, book a consultation.

Top 3 Financial Considerations for Acquisition

The goal for most startups is acquisition. Being acquired shows that your company has a successful product and your hard work and long hours have paid off. But there’s a lot of work to be done for the acquisition to be successfully executed. As you’ll know from funding rounds, investors do their due diligence to see if there are any deal breakers in your books. With acquisitions, that due diligence is more extensive because the investor is buying 100% of your company. Ultimately, they require information to show that your company is profitable and therefore worth acquiring. 

Getting through the acquisition process requires financial statements, realistic projections and compliance with tax and other regulations. Without these, your acquisition could fall through or the prospective buyer might offer a lower valuation. To avoid these problems, you need experienced accountants to help you through the process. Ultimately, accountants provide the information to backup the viability and profitability of your business. Here are three key areas that an accounting firm can help with during the acquisition process.

1. Providing Accurate Financial Statements

As investors did during funding rounds, potential buyers want a full financial accounting of your business. Accountants provide financial statements with this information, including: 

  • Assets
  • Recurring monthly and annual revenue
  • Your tax status, including compliance and any liabilities owing
  • Historical growth
  • Cash flow
  • Potential cash injections
  • Growth projections for the future 

Beyond this, accountants create reports for the board on any performance indicators that they require. What’s important here is that you have experienced accountants to provide accurate statements and attainable financial projections. Failing to account for cash shortfalls or providing unrealistic projections can undercut your sale.

2. Determining Your Valuation

Financial statements are important in and of themselves – they show whether or not your company is profitable and, therefore, whether it’s worth acquiring. But they’re also necessary for valuation purposes. Figuring out your valuation involves assessing a number of factors:

KPIs

You need to know your key performance indicators, including historical and projected growth and sales, and the basic financial status of your company, including cash flow. Again, these numbers need to be accurate and realistic. If you want to value your company at $100 million, you need to be able to show figures that can back this up, including growth over your company’s lifetime, increases in annual and monthly recurring revenues, and the prospects for continued growth into the future.

Competition

You need to know the market for competitors and how you stack up in terms of growth and other performance indicators.

Historical Financial Information

You need to know your valuation during previous funding rounds as well as growth since that time.

Buyer’s Background

You need to know your buyer’s background and why they are looking to acquire you. If they are an equity firm investing for financial reasons, the valuation process may be more formulaic based on assets, debts, and other financial figures. If they are acquiring you for strategic purposes, the valuation may be higher and more negotiable, as the company is interested in your product or technologies because they have a synergy with the acquirer’s existing business.

During acquisition, accountants are constantly guiding CEOs and founders on when and where they should be positioning themselves in terms of valuation, including supplying them with the financial statements and projections to back up their position during negotiations. Particularly if this is the first time you’ve gone through an acquisition, it’s necessary to have experienced professionals helping you through the valuation and negotiation process.

3. Staying Compliant

Tax Compliance is the main arena of accountants during the acquisition process. First and foremost, you want to be able to show prospective buyers that you have stayed compliant and they won’t be liable for any tax issues. Beyond this, because share structures and ownership change, compliance issues become more complicated. 

While things are more streamlined if you are an entirely Canadian company being acquired by another Canadian company, more complications arise if the company acquiring you is based in the US or elsewhere. In the former case, the company retains its Canadian Controlled Private Corporation (CCPC) status. But in the latter case, that status changes. With the different statuses come different tax rates and considerations. Similarly, different rules apply to different statuses for claiming the Scientific Research and Experimental Development Tax Incentive (SR&ED). 

Finally, you’ll need to complete “deemed year end” taxes. Even if your acquisition closes on March 31st, you’ll need to file a tax return for the 3 months of the year you owned the company. Executing these aspects of the acquisition and remaining compliant through the process involves utilizing accounting experts who know the ins and outs of the tax regulations you are under.

Acquisitions with NOVAA

More often than not, acquisition is the outcome that companies are looking for – a realization of the dream that your company started with. Given the complexity of acquisition, realizing this dream requires the help of experienced professionals who have been through the process and can help you navigate it, avoiding any deal breakers or disappointments in valuation.

NOVAA is a technology-forward accounting company that uses advanced financial tools to help you realize your company’s goals. We have years of accounting experience and an established record with acquisitions, including for technology companies. We view ourselves as part of your team and can answer the due diligence potential buyers will demand of your company during acquisition, whether it’s financial statements, valuation, or compliance.

For more information on how NOVAA can use its experience and track record to help you realize your acquisition goals, book a consultation.

One of the first benchmarks for any business is reaching its break-even point. The break-even point is when you’re in a no profit, no loss situation. But you’ll encounter many obstacles on your road to break-even, particularly in competitive industries like software-as-a-service (SaaS). SaaS companies often face a long road to get to break-even. This can be achieved if you focus on three basic factors necessary to get you to SaaS profitability.  

Estimating Costs and Revenue

Finding your break-even point requires estimating your costs and revenues. When making financial estimates, you need to be accurate as underestimating costs or overestimating revenues can lead to shortfalls.

Costs will, of course, depend on the specifics of your business. But here are some basics to start with:

  • Rent
  • Utilities
  • Payroll
  • Infrastructure, including: hosting; website design, development and maintenance; marketing

Figuring out the individual costs for each of these and adding them up gives you your basic costs.

Next, you’ll need to determine your pricing structure. Obviously, the structure will vary depending on industry and you’ll need to consider standards and competitors in your SaaS sector. In doing so, you also need to strike a balance between what will make you money and will not dissuade your potential customers from subscribing.

Finally, estimate your revenue. This will be based on projected monthly recurring revenue, or sometimes annual recurring revenue, and the rate of acquiring new customers. Once again, you need to be accurate and reasonable here. If you project a certain amount of revenue based on an estimated client base, this has to be realistic and you have to have a plan to acquire that many customers – all while also accounting for the costs of doing so.

Keeping an Eye on Churn Rate

When you are starting out, your customer base should experience growth well above your churn rate. But as your customer growth increases, your churn rate will do the same. The problem arises when your customer acquisition and churn rates are equal – that is, when you’re losing as many existing customers as you are acquiring new ones. The good news is that you have time to account for this, as there is a bit of a lag as the churn rate gets closer to the rate of customer acquisition.

The immediate thing to consider is whether you need to re-evaluate your pricing model. If it’s too high, it could be driving clients away. Of course, pricing isn’t the only cause of churn. You need to analyze other elements of customer satisfaction, including customer service, satisfaction with your product, etc. On the flip side, you should consider whether you are being active enough in trying to acquire new customers. This involves putting more revenue into advertising, marketing and sales.   

Understanding Customer Acquisition Cost

The problem with trying to acquire new customers is that it can come at a cost. This is why it’s important to consider your customer acquisition cost (CAC) – the amount of money you put into marketing, advertising, sales, and other avenues to acquire leads and convert them to customers. Calculating this is important. Customer acquisition can look great on its own but if your churn rate and CAC are high, you aren’t getting close to your break-even point let alone making a profit, which can deter investors. Ultimately, you need to calculate your CAC and the lifetime customer value (LTV).

While a textbook response might suggest that your LTV to CAC ratio should be higher than 3:1, this isn’t always the case at every stage of your growth process. In fact, your initial CAC costs may be extremely high, but this can be worth it if you are trying to establish your brand by acquiring high value customers so that others will follow. Netting a customer who can directly or indirectly influence others to become customers may be extremely expensive on its own, but the cost of the single customer is worth the extra customers who come along because of name recognition. Likewise, you need to consider other factors, like the total value and duration of the contract. While in some SaaS fields, contracts may be relatively small (e.g. $50 per month for basic software) in others they could be significantly higher value and duration (e.g. $50,000 per year for cybersecurity software). Higher value and duration can often justify a higher CAC.

NOVAA’s Fractional CFO Services for Forecasting SaaS Startup Profitability

SaaS companies often try to reach break-even or hit profitability on their own and only seek professional advice when they struggle. This can involve processes of trial and error around estimating costs and revenues, pricing, and monitoring important analytics such as churn rates and customer acquisition costs. Accurately forecasting your company’s road to break-even, and analyzing your performance along the way, requires experienced professionals in the Chief Financial Officer (CFO) role.

NOVAA offers fractional CFO services for SaaS companies at all levels, from startups to established companies in the field. Our goal is to help you not only break-even but turn into a profitable SaaS company. In this role, we view ourselves as part of your team, taking a hands-on approach in working with you to accurately forecast expected costs and revenue months or years into the future. To do this, we utilize advanced business intelligence software to provide accurate metrics to help you determine what is and isn’t working. This begins with assessing your pricing model, in relation to your margins and industry standards. 

But pricing models aren’t the only thing that can help your company. We also analyze other key performance indicators and projections, including churn rates and CAC, with an emphasis on isolating variances and why they occur, as well as seeing your performance indicators in relation to other companies in the industry. These can help to assess your overall operation to see what other costs can be brought down to aid in your growth to break-even and profitability.

For more information on NOVAA’s fractional CFO services or how to determine the break-even point for your SaaS company, book a consultation.

The Tax Benefits of Section 85(1) When Incorporating

When growing your business, you may be considering incorporating to take advantage of tax savings or to avoid personal liability. Even though incorporating may not change the day-to-day operations of your business, the act of incorporating is more than just a status change. It involves changes to the structure of your business, which can create new tax costs. Luckily, there are provisions in the income tax act that can help you defer some potential taxes, including the Section 85(1) provision.

Deferring Capital Gains Taxes with Section 85(1) Rollover

To understand Section 85(1), let’s use a hypothetical scenario. You are a sole proprietor dentist. As part of your business, you own an office, which you purchased for $300,000. You also own $200,000 in equipment. Over the span of 2 years, your business grows and you decide to incorporate. Because the corporation is a separate business entity, this requires an asset transfer – that is, you have to transfer the assets from your personal ownership to the corporation. Moreover, you must transfer the assets at a fair market value. This poses a problem: despite the fact that you own the corporation, the asset transfer is tantamount to a legal sale. As a result, on your personal tax return, you would have to pay capital gains taxes on the transfer of the assets to the new corporation. Capital gains can be significant, particularly when it involves things like property, whose value can skyrocket.  

Luckily, 85(1) allows you to defer these capital gains taxes through an asset rollover. This provision of the income tax act rolls the assets over to the corporation through an exchange of assets for shares in the newly formed corporation. In our dentist scenario, you would transfer the assets to the corporation at cost base using the section 85(1) rollover in return for shares of the corporation. As a result of the rollover, there are no immediate tax consequences. Taxes will only be incurred if you sell the corporation or if the corporation decides to sell the assets at a future date.

Avoiding Complications

While an 85(1) rollover may sound straightforward, it is a complicated and multi-layered process that requires experienced professionals with knowledge of the CRA’s provisions. Beyond this, it involves accountants and lawyers working hand-in-hand. Accountants prepare an instruction letter that lays out the cost base for the transfer of assets. This can be difficult because it involves assessing the fair market value of assets, which can be tangible (e.g. properties or equipment) and intangible (e.g. goodwill). Moreover, because the rollover requires a transfer of shares in return for the assets, a lawyer has to execute the transaction.

NOVAA and Section 85(1) Rollovers

At NOVAA, we aren’t just traditional accountants who manage your books. We are a full-service firm that covers the full breadth of your tax services and accounting needs. Our experienced team have worked closely with lawyers executing 85(1) rollovers, including when incorporating or executing an asset rollover will help you achieve your business goals. Beyond this, we pride ourselves on making sure our clients understand what they’re doing, translating tax codes so that non-specialists can understand when and how such decisions can be beneficial to them.

For more information on how NOVAA can help you with incorporation or a Section 85(1) rollover, book a free consultation.

Accurate accounting is key to the success of any business. It allows you to keep track of costs and revenue in order to implement your business plan, while also giving you concrete numbers to show potential investors. While this might seem to go without saying, many in the competitive software-as-a-service (SaaS) field have failed to follow through with accurate accounting. For startups, this is a particular concern as you attempt to go from pre-revenue to bringing in profits. Agile Payments found that one of the main reasons SaaS startups failed was the failure to save financial resources because they didn’t know how much money they had or needed.

Luckily, accounting software has become a standard technology that SaaS startups can use to avoid this problem. But this poses a different problem: which accounting software should you choose? While there is no “one size fits all” choice and it will depend on your needs, two of the most used accounting software platforms in the SaaS industry are QuickBooks Online (QBO) and Xero.

The Importance of Cloud Accounting

Both QBO and Xero are cloud accounting software platforms. This means that your accounting will be 100% online rather than stored on a computer. This has a number of benefits over desktop solutions. Because desktop solutions are on a computer, they present a greater security risk both in terms of being hacked and in terms of theft. Cloud solutions are protected by state-of-the-art security systems and are not on-premises. Likewise, cloud solutions are constantly backed up and you don’t run the risk of losing your accounting data, which can happen through manual errors or system failures with desktop solutions. Finally, while desktop options are largely limited to the single computer they are on, cloud accounting software allows for easy accessibility to those who have permission. Relatedly, you can check cloud accounting software while on the go via your phone or other devices, whereas desktop solutions require direct physical access to the computer on which the accounting software is on.

Choosing Your Solution: QuickBooks Online vs. Xero

While QuickBooks Online and Xero are both cloud accounting software solutions, which of them is better for you will depend on compatibility with your needs. Here are some things to consider when making a choice.

1. Subscriptions

Xero offers three monthly subscription plans: Starter, Standard and Premium. While they all come with basic features and allow for unlimited users, Starter has usage limitations, including for quotes, invoices, and bills. Standard offers unlimited quotes, invoices, and bills. On top of these unlimited features, Premium includes foreign currency transactions and project and expense management. 

QBO also offers three monthly subscription plans: EasyStart, Essentials and Plus. While there are no limits on usage, as you move up the scale different subscriptions offer increased user capacities and more complex features, such as accelerated invoicing and enhanced reporting and tracking. 

Aside from feature sets, the biggest difference lies in the price ranges: Xero ranges from $15 to $52 per month; QBO ranges from $20 to $60 per month. But price isn’t everything. What really matters is figuring out which feature set will best suit your needs.

2. Setup 

Once you’ve selected which software and subscription you prefer, both offer easy setup and provide customizable dashboards so that you can organize it in a way that best fits your needs. However, before you sign up for a subscription you need to check whether they are supported by your bank. If they aren’t, you won’t be able to integrate your bank accounts with the software and there will be no reason to purchase a subscription.

3. Functionality 

Much like choosing a subscription, functionality will depend on your needs and your expertise. QBO is an older platform and was designed for people with accounting backgrounds. While you should obviously have accountants doing your accounting, if you take a collaborative approach and want you or your team to have some oversight with accounting software, there can be a steeper learning curve. At the same time, its advanced reporting and tracking tools are exceptional. 

Xero is a newer platform and designed in a way that is more user friendly for non-specialists. This makes the learning curve less steep and allows for easier training when it comes to things like invoicing, which may be done by members of your team other than accountants. But it can also mean limitations in terms of advanced features.

4. Integrations 

Your cloud accounting software needs to interact with the other platforms and tools you use, whether it’s payroll, payment, or any other software. Both QuickBooks Online and Xero offer a growing number of integrations, with Xero providing, at the time of publication, more integrations. Of course, raw numbers don’t matter. You need to make sure the integrations they have work with the software solutions that you depend on.

4. Scalability

You want to choose software that will grow with your business. Migrating to another platform because your accounting software can no longer handle what you need is costly and time consuming, as well as rife with the possibility for problems. QBO offers a great solution for small businesses hoping to expand to the Enterprise level. However, Xero has increasingly become the choice for startups, as it can cater to mid-market companies with up to 1000 employees. 

Live Accounting with NOVAA

Even if you’ve narrowed down your cloud accounting software choice to QBO or Xero, the choice isn’t easy given the different subscriptions and features available. This is why it’s best to consult experts so you can best assess your accounting needs and which solution suits them.

At NOVAA, we are accounting experts and are certified by Xero with Silver Partner status, and as QuickBooks Online certified ProAdvisors. Regardless of which cloud solution you choose for your business, we provide “live accounting” for our clients. Unlike many accounting firms that wait until the end of the month or year to update your books, we update them daily so that you have live access to your accounting data. That means that you can login to your account and look at accounting entries as they happen, assuring ease of use and access to all of the information you need to run a successful SaaS startup.  

For more information on NOVAA’s live accounting services for QuickBooks Online or Xero, book a free consultation.

Understanding your company involves knowing where you are financially at any given moment as well as where you will be in the future. For this reason, financial projections are imperative for any company. Financial projections draw on available historical data to model the future financial performance of your company, including cash flow, costs, and revenue. Modeling this data is a standard practice. But it’s important to know why it is a standard practice and how financial projections can benefit your company.

3 Benefits of Financial Projections

1. Funding Rounds

In order to take your business to the next level, you need funding from investors, and they want to see future growth in sales and revenue. Financial projections provide potential investors with key benchmarks for your company that let them assess whether you are worth investing in, including, most importantly, when you will start bringing in a profit and showing them a return on their investment.

2. Loans

As with funding, companies may need loans for additional capital. In order to give out loans, banks and other lenders require not only a full accounting of the current state of your company but projections for where it will be in the future. They need to know that your company is viable and that you’ll be able to pay back the money you borrow.

3. Planning and Growth

Financial projections are also important from an operational standpoint. On the one hand, they allow you to assess how your company is doing from a cash flow perspective and when you need to open a new funding round or seek out loans. On the other hand, financial projections allow you to analyze key performance indicators, including assessing actual vs. projected numbers so you can re-adjust your projections to account for deficits or surpluses in projected funds. These are necessary for long term growth strategies, including knowing when you need to start hiring new employees, spending money on capital investments, and investing in other expenditures or reducing costs.

The Importance of Accurate Financial Projections

It bears mentioning that it’s important your financial projections are accurate. Ultimately, you want to be optimistic but realistic at the same time. If you want to have X million dollars in sales in 2 years, you need to have a plan to get there. Likewise, you need to have reasonable explanations for all of your expenses. For example, you need to show why the salaries you are paying are necessary (e.g. are they in line with the average for the market) or how you are coming up with your future sales projections (e.g. are they based on current contracts and the prospects for renewals and growth). If your numbers aren’t realistic, investors and lenders will not provide you with funds. Moreover, inaccurate projections can lead to shortfalls that undermine your ability to operate.

Financial Projections for SaaS Startups

Financial projections are particularly important for startups, especially in the SaaS industry. Because startups are in the infant phases of developing, they often lack direction in their first few years as they adjust to changes in the market and within the company. Likewise, they are often pre-revenue and need to understand future financials. At such an early phase, they need to know their monthly and annual burn rates to see how much cash they have on hand and how much they need to keep operating. 

Likewise, they need projections to tell them when they can break even or even start pulling in revenue. From a purely operational standpoint, projections allow them to know when they need to cut costs and when they need to spend money as part of their growth planning, whether this is hiring new employees or acquiring new technologies or another company. Finally, financial projections are key to understanding when they might need to bring in outside capital through a new funding round or loans and what their valuation is.

Recurring Financial Projections with NOVAA

Both as a standalone service and as part of our fractional CFO services, NOVAA offers experienced recurring financial projections using cutting edge business intelligence technology. This involves offering more than just a model or template. Models and templates are based on projections and historical data. But startup companies in particular evolve in directions that alter financial projections. Most companies don’t have the skills to re-assess and re-model their projections, which become obsolete as your company changes and grows. It’s necessary to maintain accurate and useful financial projections whether you’re looking for investment or just engaging in long term planning. To help do this, we tailor your projections to your company and business plan, then maintain and change them on a recurring basis so that your projections develop as you do. This avoids your financial projections becoming obsolete because of changes in markets or within your company.

Additionally, we have a proven track record helping SaaS startups grow into successful enterprises. Given this, we know how to account for future expense projections and costs as you grow from pre-revenue to revenue-bearing. This includes accounting for cash flows, planning for the next 6 to 12 months of operations, and figuring out when you need to open a new funding round. Given that in the tech industry who you know is as important as what you know, we also have connections in the venture capital world and can get word out about your product.

For more information on NOVAA’s financial projections services, contact us today.

Recurring subscriptions are the norm for SaaS services. They allow customers to manage costs by paying on a recurring basis as they continue to use the service. But billing can be a major pain point for business-to-business (B2B) SaaS companies. They have to manage subscriptions across different pricing tiers and customer lifecycles, while also collecting payment through a variety of providers. Fortunately, state-of-the-art management subscription software, like SaasOptics, Recurly, and Stripe, offer a solution to these pain points. Top notch subscription software not only allows your B2B SaaS company to manage and automate subscriptions, but also provides you with advanced analytics that can be used to assess your marketing and sales efforts. Here are what we think are the most important attributes to look for in a subscription management solution that will scale with your business. 

Automation and Efficiency: You Want to Set it and Forget It

The most important aspect of subscription management software is the ability to automate your payment processes. Automation eliminates the need for your accounting department to manually deal with subscriptions across customer lifecycles. This can be overly complex and subject to human error, particularly when you have a tiered pricing system that may include free trials. If your business is growing then you don’t want to wait to invest in a robust subscription management solution. The longer you wait, the more complicated it will be to migrate away from legacy software or spreadsheets, which can create bottlenecks in the migration process and efficiency of your billing system.  

The right subscription management software allows you to automate the entire billing process, while also customizing it so the software efficiently serves your business plan. 

4 Benefits of Automated B2B Subscription Management Software

  1. It saves your catalogue and pricing, allowing customers to customize their subscription, including giving them the option to upgrade or downgrade their subscription. You can also use the software to test different price points and offer discounts and promotions.
  2. It stores customer information and manages billing and payment, including integrating with different payment gateways. This also means the software automatically contacts customers for payment failures or declined credit card payments, which are a major source of lost revenue in manual processes.
  3. It scales as you scale, avoiding the hassles that come with migrating data from legacy systems.
  4.  It provides PCI compliance. Customer payment information data needs to be encrypted and protected in accordance with regulatory compliance expectations. With manual processes, encryption is both more complicated and more expensive. Most management subscription software is PCI compliant out-of-box.

Leverage Data for Marketing, Sales, and Investors

By automating the process, subscription management software let’s you take a hands-off approach to billing and payments. But you still want to keep your eyes on the data that is produced through the software and integrate it with your other management software, including customer relationship management (CRM) and other analytics software. By doing so, you can gain key data insights, including:

  • How many subscribers you have
  • Your churn rate
  • How long subscribers are subscribing for
  • How many customers are converting from free trials to subscriptions
  • Basic demographic information about who your customers are

While the most common blocker to using subscription management software is the fees, consider this an investment. The type of data you gain is key when it comes to analyzing and assessing the success of your marketing and sales outreach efforts. Subscription data allows you to re-assess these outreaches and improve your conversion rates. Under the subscription model, subscribers are key and this data can help expand your subscriber base. 

Additionally, once companies start to grow, potential investors and other stakeholders want to look at key trends, like customer growth, before they’re willing to back your company. Subscription management software makes it easier to provide comprehensive subscriber data and growth projections to potential investors.

NOVAA’s B2B Subscription Management Software Solutions

As SaaS has exploded, so have subscription management software solutions. This presents the problem of figuring out what solution is best for you. Moreover, you need to customize the software to fit your needs. This is so the automating functions work without constant oversight and you continue to collect data that can help to assess your marketing and sales and have data ready for potential investors.

NOVAA provides experienced management consulting for precisely these purposes. Whether it’s SaaSOptics, Recurly, or Stripe, we have the expertise to help you figure out which solution is best for you based on your needs and the different feature sets they offer. Once we’ve helped you select your software solution, we set it up with customizations to fit your goals. This establishes a baseline for all of the automated features. Finally, we integrate the subscription management software with your existing software solutions so that all of the components of your organization are in communication with one another and providing you with the data that is necessary to help realize your business goals. 

Contact us for more information on how subscription management software can help you realize your business goals.