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    10 / 14 / 2021

    Replacing QuickBooks: 5 Essential Features Your Startup Software Needs

    Accounting systems that rely on manual processes, spreadsheets, and delayed reporting timeframes have no efficiency hacks. As SaaS and subscription businesses grow, their patchwork processes and accounting systems that worked so well in the past are now slowing business growth. Here are the five essential features to look for when considering startup software for your growing SaaS and subscription business.

    It is best to bring everything together in a complete quote-to-cash system that is specifically built for the SaaS industry and its recurring revenue models in order to maintain a fast growth rate and scale. You need a revenue system that helps you simplify meeting ASC 606 compliance requirements and shorten the close as you outgrow QuickBooks.  

    CFOs are expected to provide more strategic insights on business drivers and levers, and be the business model architect. To help accomplish this, they need a modern accounting system that brings more value to the finance function with artificial intelligence, machine learning, and automation. 

    Here are five must-have features subscription-based businesses should look for when replacing QuickBooks: 

    1: One system of record connecting finance and salessaas-metrics

    An automated and streamlined quote-to-cash process means that data flows seamlessly from your Customer Relationship Management (CRM) system into your accounting system. This process reduces data entry, increases efficiency, and improves accuracy. You need an accounting system that: 

    • Integrate Salesforce with your accounting system to help speed up the quote-to-cash process. Reconciling between systems is eliminated and data entry is reduced – improving accuracy, customer satisfaction, and days sales outstanding (DSO). 
    • Easily handle an increase in locations, transactions, and customers, allowing you to scale complex revenue recognition.  
    • Provide one holistic and centralized view of your entire quote-to-cash process for a single system of record throughout the contract lifecycle. Whether changes are input to the accounting system or CRM, the data should flow between systems to keep accounts and teams updated. There will be one complete view of each customer for both your sales and accounting team. 

    2: Can handle the unique billing and revenue models of subscription and SaaS industries 

    Systems that are order-based cannot handle different types of revenue schedules or revenue streams. They cannot scale to support recurring revenue models or increasingly complex billing. Your modern accounting system should: 

    • Help you accelerate cash flow with powerful recurring revenue recognition and flexible, contract-based billing, even when managing complex multi-subscription contacts with different billing schedules. It should have the ability to handle different revenue recognition formulas based on subscription type, and deploy recurring billing across usage, perpetual, and professional services. 
    • Help sales teams access and analyze information to spot churn conditions and upsell opportunities, positively impacting customer experience and the bottom line. This helps the team maximize customer lifetime value (CLTV). It should also be flexible to help you innovate and incorporate new offerings as you find more opportunities. 
    • Provide a financial framework that consistently manages and captures data through the life of a contract and customer lifecycle for easier, quicker analysis, and improved confidence in your data. Your sales and accounting team should have one identical and complete view of each customer. 

    3: Support GAAP and ASC 606 compliance requirements 

    The ASC 606 revenue recognition standard provides a framework for the SaaS/Subscription industry, and meeting the requirements is not an easy task. While there are only five steps, it is complex enough for Ernst and Young to have created a 480-page guide. It helps ensure an accurate valuation of your business. Your new accounting system should provide: 

    • End-to-end revenue management in a single system that integrates the entire quote-to-cash process. You should also look for billing and revenue recognition that spans the entire customer lifecycle to align with ASC 606 requirements and help you comply with GAAP reporting requirements. 
    • A single system of record for revenue recognition across unbilled, billing, and paid for recognized and deferred revenue. 
    • Handling multiple revenue recognition scenarios, including daily and monthly recognition, across revenue types, such as perpetual licensing, professional services, and usage based.
    • An IT-free way to handle revenue management requirements. It should have a method that relies on configuration, not scripting, reducing the need for consulting services or IT. 

    4: Provide configurable and native SaaS metrics dashboards and financial reporting 

    SaaS metrics help keep a watchful eye on the health of your company. Additionally, they can help you identify issues that can kill your company like high customer acquisition (CAC) costs or excessive churn. SaaS metrics are what investors look for; they provide the essential key to landing more funding, prove product market fit, and confirm your revenue engine is working. Your team shouldn’t be pulled away from their day-to-day tasks to spend hours compiling and tracking these metrics. You need an accounting system with SaaS metrics that can: 

    • Provide you with real-time data, showing you the historical trends of your business and where it is heading with dynamic CFO and SaaS metrics dashboards. Whether you are heading towards an IPO or proving product market fit, you need to know the state of these six SaaS metrics: Customer Count, Cash Flow, Customer Lifetime Value (CLTV), Churn, Customer Acquisition Cost (CAC), and Committed Monthly Recurring Revenue (CMRR). 
    • Help minimize risk by providing real-time data. Since you can see things as they happen, you have more time to act, prevent an issue from arising, or correct course. 
    • Improve efficiency with role-based dashboards that provide visibility into business drivers whether in finance, product, or sales. Collaboration is easier with one version of the truth. Your teams will have more strategic discussions about where opportunities abound and processes can improve, and less discussions about what information is accurate and current.    

    AcctTwo SaaS Intelligence - Performance Cards (HiRes)-2

    SaaS and subscription businesses in the early stage are often still trying to find their footing: they may still be determining product-market fit and may not have gained robust market traction. In addition, their financial tracking may not be fully mature. At this stage, investors are asking broader questions, including:

    • Is there a market for this product?
    • Can the company grow or is it beginning to grow?

    They may look to metrics like CARR and CMRR growth as an indicator of market fit and to determine if that growth is steady and predictable (or at least has the potential to be.) Cash flow is a critical metric at every stage, but early-stage companies face particular challenges as they seek to cover startup and operating expenses at a time when they have very few customers. Investors may pay close attention to operational issues that drain cash flow and whether the company can cost-effectively attract enough customers to help sustain it.

    While these early metrics remain important as SaaS and subscription businesses move into Series A, investors begin to dig deeper in a broader set of metrics. They may look at CAC to better understand the cost of acquiring new customers, what types of activities are driving that spend, and how high-touch those activities are (as high-touch activities like personal interaction can be more costly or challenging at scale.) They may look closely at churn to determine how long customers are staying, if customer lifetime is long enough to cover CAC payback, whether they are renewing, and what the potential impact of their behavior is on cash flow. They may also begin to look at gross margin to understand whether the business model has potential for levels of profitably that meet their expectations.

    5: Help you create forecasts and build agility into your planning with ease 

    Reports with manually entered data are focused on the past. You can increase your confidence and take your reporting to the next level with powerful automation and drill down capabilities that incorporate scenario planning and forecasting into your reports. To make strategic decisions faster, your QuickBooks replacement should: 

    • Provide strong forecasting capabilities that include Artificial Intelligence (AI) and Machine Learning (ML) to help keep your company's trajectory in view constantly. 
    • Enable you to perform scenario planning so you can make adjustments to drive business outcomes and influence the trajectory of your company. 
    • Help you move to a more comprehensive view of customers for a better understanding of cash flow and other financial metrics. It should also include prebuilt and customizable dashboards for GAAP and SaaS metrics that automate tracking and managing data to deliver real-time insight for faster business decisions. 

    SaaS metrics enabled by powerful startup accounting software help you demonstrate financial and operational health, illuminate performance trends and the drivers behind them, and inform proactive decision making. Further, these metrics are essential to attracting the investors needed to extend the financial runway, help scale, and report out to existing investors. We outline the importance of and how to achieve automated metrics and deep, granular insights in our White Paper, How the Right B2B SaaS & Subscription Metrics Tools Accelerate Growth & Attract Investors.”

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    Baker Tilly curates, integrates, and optimizes the right technology stack for your organization. We layer in our own proprietary “last mile” solutions. And we offer these technologies either via a Software-as-a-Service delivery model, where your own Finance function manages the day-to-day use of the technology, or via a Finance-as-a-Service delivery model where we run your accounting operations and provide the outcomes you need. Here are some additional resources that may help you find solutions for your challenges. Or schedule a discussion to go over your needs and goals now.

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