SaaS startups invest heavily in product and staff, way before revenue starts coming in. They have to. How else can they stand out in an increasingly competitive market, if not by building the most robust platform possible?
The problem with this approach is that many businesses in the early and growth stages are loss-making operations. Which means that, to remain operationally viable, they must put in place meticulous, data-driven, forward-looking financial strategies and keep an eagle-eye on the cash flow position.
Enter Fractional Finance, a team of experienced finance professionals, led by Top 50 Women In Accounting two-time nominee Kat Wellum-Kent.
'Our specialty,' says Kat, 'is SaaS businesses that have been operating for at least twelve to eighteen months. They have ambitious growth plans and need help executing them.'
And Float has become instrumental in helping them help their clients gain the visibility and control they need to succeed.
Operating at a loss — either because you've not yet gone to market, or because annual recurring revenue still isn't where it needs to be — requires granular visibility and careful monitoring of the cash flow position.
'The sooner we know about a potential cash flow problem,' Kat says, 'The more options we have in terms of how we could get in front of the issue. So, do we need more money coming in? A new funding round, perhaps? Or would moving some due dates around be enough?'
These options dwindle the closer a business gets to the end of their financial runway, putting growth, and, potentially, even the business' very survival at risk.
But cash flow visibility is important even when things are going well.
'We do a lot of work around reporting and KPIs,' says Kat. 'The goal is to make sure founders understand what's going on and have the data they need to make informed decisions when they need to make them.'
In situations where the client has already secured funding, Kat continues, the data also serves to give investors comfort that growth is trending in the right direction and they're on track to generate returns.
Despite sharing more or less the same business model, no SaaS is like another.
'Most of what we do can't be templated,' Kat says. 'We must base our approach on what each business is doing, where they are in their journey, and where they want to get to.'
Of course, the depth and quality of strategic advice can only be as good as the data it's extracted from. And here's where the biggest challenge lies.
'Very often, the businesses we work with haven't worked with a senior finance person before,' Kat explains.
'They've — for want of a better word — muddled through with an external accountant who'll do VAT returns, payroll, bookkeeping, and maybe some spreadsheets. The back-office and compliance stuff, if you will.'
These are all important aspects of the finance function. But accurate budgeting and forecasting, and, more to the point, strategic, proactive decision-making require something extra.
'You need a single source of truth,' Kat continues. 'Scalable, repeatable processes you can trust to show you an accurate and up to date picture of financial performance across the entire business.'
Fractional Finance's clients typically don't have these systems and processes in place, so Kat and her team can't hit the ground running.
'We have a fairly lengthy onboarding process,' she says. 'Typically three months. So a whole quarter. We spend this time auditing the business, seeing what systems there are in place and what needs to be done.'
And, once the audit is complete, there's the small matter of establishing the systems and processes required to plug these gaps.
In any other case study, this would be the point where we'd describe how time-consuming, laborious, and challenging it was to establish robust systems and processes, until Float swooped in and saved the day.
That won't happen here, because Kat incorporated Float into her workflow from day one.
'I can't even remember when I first came across it. That's how long I've known about Float,' she says. 'I think it was at an exhibition I attended while working with an accounting practice.'
What Kat does remember, is that she was immediately struck by what Float brought to the table. So, when she came up with the idea for Fractional Finance, there was no question that she'd incorporate it into her workflow.
In Kat's view, when it comes to cash flow forecasting, Float is the product to beat.
'I don't think there's anything similar on the market that's as good as Float for direct cash flow forecasting,' she says. 'It's extremely detailed, and very simple to set up and use. Once it's connected to the client's bookkeeping software, you can see the cash flow position straight away.'
The high level of integration, particularly with Xero, was a large part of the attraction, says Kat.
'All our clients are on Xero. And the seamlessness with which Float works with it just makes things that much easier,' she explains.
'We can work directly in Xero. And then, when we need the level of detail Xero can't give us — the actual cash flow elaboration — we bring up Float and it's already all there. There are no spreadsheets to move around and little to no duplication.'
More relevant to Fractional Finance's work with growth-stage SaaS businesses, Float's Scenario Planning feature has become an essential part of their toolkit.
'That kind of analysis is incredibly useful and very, very difficult to create in Excel,' Kat says. 'Even just from a management aspect. If you're running through different scenarios, and you update something, you've then got to remember to update it everywhere, or it will throw everything off.'
With Float, that's not an issue. When you change a variable, this is automatically reflected in the analysis, so there's no risk of presenting a strategy based on numbers that haven't been updated or flowed through from the base scenario to other possible scenarios.
So, in what ways has Float impacted the quality and value of the service Fractional Finance provide to their ambitious growth-focussed SaaS clients?
The time savings, Kat says, are huge.
'Float allows us to deliver something that would take us a lot longer if we were producing it in Excel,' she explains. 'Onboarding would be a lot more time-intensive, because we'd have to build spreadsheets.'
There's also the ongoing aspect.
'Say I have a client meeting, and I know we'll be discussing the cash flow forecast,' Kat continues. 'With Float, making sure the forecast is updated and ready to go is my last task for the day. Once my team has updated Xero, I log into Float, sync it, and just make sure everything looks OK. I don't need to spend an hour moving things around.'
But Float has also delivered a benefit that is much harder to quantify the value of: peace of mind.
'When you investigate a spreadsheet, you'll inevitably find a variety of things that are wrong with it,' Kat says.
'Maybe somebody's accidentally changed the formula, forgot to input a two-week delay to an invoice payment, or that an invoice has been paid. It all adds up and creates avoidable inaccuracies that skew the analysis.'
Float, by contrast, enables Kat and her team to give clients confidence in the accuracy of the information. And, in an environment where everything needs to be finely calibrated, that's an invaluable thing to be able to offer.
