5 Tips for Building the Ideal FinTech Stack

The SaaS finance tech stack is one of the most powerful tools for a company’s accounting department. Simply put, a fintech stack is the automation that Controllers and their teams use to optimise and streamline your accounting workflow in billing, invoicing, payables, and reconciliations.

As you’re building your stack, start the process with a definite sense of what you’d like it to achieve for you based on your stage and billing model. It’s essential that you avoid common SaaS accounting pitfalls such as:

• Manual processes that delay your monthly close cycle. The more processes you have in your accounting cycle that aren’t automated, the longer your close will take.

• Multiple systems of record that aren’t centralised. It’s essential that every department have instant and centralized access to all the information they need. Integrations can kill your efficiency.

The following five tips can help you build a fintech stack that’s efficient, effective, and boosts your company’s revenue for years to come.

Establish Your Foundation: Build Your General Ledger

Your general ledger (GL) is the foundation of your accounting department. It’s the source log of your SaaS company’s transactions and all the data surrounding them, such as customer demographics and behaviour, key SaaS metrics, and more.

Practically all companies use software-based GL solutions. But not all companies use fully automated ledgers, which is the differentiating factor between merely good and genuinely excellent fintech stacks.

Specifically, your GL should be able to:

• Seamlessly categorise transactions for later reference. It’s vital for the members of your team to be to instantly look up information for previous billing periods based on a wide variety of subcategories: customer and transaction type, billing tier, charge amount, and many others. #Dimensions

• Track and optimise your SaaS metrics. Whether it’s your customer acquisition cost (CAC), your customer lifetime value (CLTV), or another benchmark altogether, your GL should help you continuously measure and improve your SaaS metrics with statistical accounts. They’re the guiding lights of your business.

• Facilitate financial reporting that’s 100% accurate every time. Accurate financial reporting should be a rigid standard to which you hold your fintech stack.  The GL is often the only system that is audited.

Opening the books back up to correct an error in your GL is every accounting team’s worst nightmare. Avoid that scenario altogether by choosing an automated and streamlined ledger.

Know Your Billing Use Case

Being conscious of how your company bills its customers is crucial to setting up your tech stack.

Billing is the lifeblood of a SaaS company’s finance department, and CFO’s must know the answers to the following questions at all times:

• Who is our primary customer type? Do you mainly serve individuals? Small businesses? Large enterprise firms?

• What is our most popular subscription type or billing cycle? If you offer multiple subscription tiers, which one accounts for the lion’s share of your revenue?

• What’s our realised revenue look like versus our ARR? Your revenue includes all cash your business generates, and your ARR is just your subscription-based cash coming in. Your tech stack should be able to give you a real-time and crystal clear snapshot of both, as well as help you forecast what they’ll be in the future.

Make sure your fintech stack helps you map your business practices around your most frequent billing use cases.

Know Your Revenue Recognition Scenario

Revenue recognition is an accounting principle that requires companies to report their revenue when services are completed, not necessarily when cash changes hands.

To help keep companies honest about their revenue reporting practices, the Accounting Standards Codification (ASC) 606 (from the U.S.) was signed into law in 2014.

Under (ASC) 606 for instance, five fundamental conditions must be met for revenue to qualify as realised and reportable.

First, a contract must exist between the business and the customer. Second, that contract must outline the professional obligations of the company to the customer. Third, the price for the specified services must be explicitly stated. Fourth, the services must be rendered. Fifth, the revenue may be considered earned even if the payment has not yet been made.

Knowing your revenue recognition scenarios inside and out allows you to forecast and report more efficiently and accurately and will help you streamline your entire department.

Plan Ahead: Selling Process Exceptions

Generally, a selling process exception is anything that goes “off script” during a sales encounter or makes it harder to close the sale.

Usually, exceptions come in the form of buyer objections or difficult questions. Knowing this allows you to track those sales exceptions over time and craft expert responses that can smooth over every single one.

Every company experiences sales exceptions, so look at them as opportunities for growth rather than as sources of frustration.

Your fintech stack should enable you to automatically and instantly share ideas for selling exception responses between team members and departments. The finance team may have ideas that would benefit the sales and marketing staff and vice versa. Trust between departments on what is important, and how to both win business, and have it be financially appropriate for the company, is key to scale.

Optimise for Compliance

Compliance is one of the most crucial aspects of your fintech stack. A compliance slip-up can cause enormous headaches for an otherwise well-run company.

Make sure your fintech stack has everything you need to keep you from being audited or receiving unwanted regulatory attention in some other manner.  The more data is in one place, with less reconciliations, the easier it is to pass an audit.

Also, double-check that your fintech stack takes other compliance issues into account, such as those surrounding taxes, international subsidiaries, and so on.

Summing Up

As a SaaS CFO, your fintech stack is one of the major business components on which your success hinges. Making the right choice is more than a gift to yourself: it’s a gift to everyone who works with you.

To learn more about building your fintech stack, check out this webinar from 2022’s Modern SaaS Finance Forum.

The Akuna Solutions Team