For a B2B SaaS or subscription business, finance operations are no longer just a back office function. Finance executives are playing a larger role in their businesses’ strategic direction and growth. How do you know if your systems and processes are set up to provide the necessary insight into your growing business? We derive our assessment from the Capability Maturity Model (CMM) which was originally created by the Software Engineering Institute (SEI) in the 1980s to assess the ability of government contractors to implement software projects.
CMMs typically use a five-level system to define and score process maturity. We use a three-level system covering three main B2B finance functions: Revenue Recognition, Invoicing & Payments, and Subscription Metrics & Analytics. Our three output scores are Basic, Transitional and Optimized.
What Defines a Mature Finance Operation?
We have worked with hundreds of B2B SaaS business around the world and uncovered many processes and functional patterns that contribute or detract from the maturity of their finance operations. Here’s what we found that most of the businesses have in common:
Streamlined revenue recognition and deferred revenue process
- Your business needs to be able to automatically recognize revenue over the life of each customer agreement. B2B contracts are complex, and this level of detail cannot be maintained in a spreadsheet. You also need a system that can automatically calculate deferred revenue as you invoice customers.
Automated Order to Payment to Renewal Process
- Your CRM and general ledger need to be integrated. This allows you to close an opportunity in your CRM and auto-create customer contracts, revenues and invoices in your general ledger. If these processes are disconnected, you open yourself up to missed renewals, errors and incorrect data.
Tracking Basic and Advanced Performance Metrics
- As a by-product of integrating your major systems, you can easily and accurately track basic financial metrics like MRR/ARR, churn/retention rates, customer lifetime value (CLV), as well as advanced metrics like CLV to CAC and cohort analysis.