What Does a SaaS CFO Do? And Why You May Want One

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Thinking about hiring a SaaS CFO?

You’ve come to the right place!

My name is Connor Gillivan. I’m an Entrepreneur that’s been scaling companies to 6, 7, and 8 figures since 2009.

Today, I run a portfolio of 3 companies and finances is a big part of the success my business partner and I have been able to create over the years.

In this article, we’ll break everything down you need to know about SaaS CFOs.

Here’s what we’ll cover:

What Is a SaaS CFO?
What Does a SaaS CFO Do?
How Can a SaaS CFO Help Your SaaS Business?
Fractional CFO vs Full Time CFO
Where Can You Hire a SaaS CFO?
Frequently Asked Questions

What Is a SaaS CFO?

A SaaS CFO, or Software-as-a-Service Chief Financial Officer, is a financial professional who specializes in managing the unique financial needs of SaaS businesses.

They bring expertise in financial planning, analysis, and strategy specifically tailored to the SaaS industry.

A SaaS CFO plays a crucial role in ensuring the financial health and success of a SaaS company by providing strategic financial guidance, optimizing revenue streams, managing costs, and analyzing key SaaS metrics.

They work closely with the executive team to develop financial strategies, create budgets, forecast revenue, manage cash flow, and make data-driven decisions to drive growth and profitability.

Ultimately, a SaaS CFO is a key partner in helping SaaS businesses navigate the financial complexities of the industry and achieve their financial goals.

How a SaaS CFO Differs from a Traditional CFO

You may be wondering how a SaaS CFO differs from a traditional one. Although both are responsible for financial management, strategic direction, and compliance, their approaches differ due to the recurring revenue model of a SaaS business.

Let’s see how:

SaaS CFO	Traditional CFO
Focused on subscription-based, digital products with recurring revenue.	Focused on one-time sales of a physical product or service.
A forward-looking, long-term approach toward sustainable growth.	Financial management is more short-term and based on historical trends and numbers.
Specialized knowledge about SaaS industry dynamics, trends, KPIs to track, and best practices.	More generalized knowledge.
Strategic business partners responsible for investor funding.	A more contained role limited to analyzing and sharing financial reports.
Forecasting is based on key SaaS metrics.	Uses sales and inventory cycles to forecast.
Might incur a high customer acquisition cost (CAC) to have a high future customer lifetime value (LTV).	Might prioritize high cash flows and high profitability without incurring high costs.
Reconciliation of cost and revenue occurs over a longer period, based on bookings, ARR (annual recurring revenue, and MRR (monthly recurring revenue).	Cost and revenue are straightforward and linear.
Tracks key SaaS finance metrics like ARR, MRR, bookings, churn rate, retention rate, CAC to LTV ratio, SaaS quick ratio, and revenue retention rate.	Tracks mostly cash flow, gross margin, and EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization).
Uses technology to streamline financial data collection from multiple sources and analysis for real-time reporting.	Depends more on traditional, linear accounting systems and software.
Focused on fast scalability.	Scalability is a slow and steady process.

What Does a SaaS CFO Do?

The CFO of a SaaS company takes on multiple responsibilities, like:

1. Automate Financial Processes

A SaaS CFO can help streamline and automate your financial processes, such as invoicing, billing, and revenue recognition.
They can implement accounting software or systems that integrate with your SaaS platform to capture and track financial data more efficiently.
This automation not only saves time but also reduces the risk of errors and provides real-time visibility into your financial performance.

2. Own Your SaaS Metrics & Reports

A SaaS CFO takes charge of understanding and monitoring your key SaaS metrics, such as Monthly Recurring Revenue (MRR), Customer Lifetime Value (CLTV), and Customer Acquisition Cost (CAC).
They create customized financial reports and dashboards to help you track and analyze these metrics effectively.
With their expertise, they can provide insights into trends, identify areas of improvement, and make data-driven decisions to optimize your SaaS business.

3. Work With Your Bookkeeper & Accountant

A SaaS CFO collaborates with your bookkeeper and accountant to ensure accurate and compliant financial records.
They provide guidance on proper revenue recognition, expense categorization, and tax considerations specific to SaaS businesses.
By working closely with your financial team, they help maintain financial integrity and provide strategic advice on financial matters.

4. Identify Areas of Growth & Opportunity

A SaaS CFO analyzes your financial data to identify areas of growth and opportunity.
They conduct financial modeling and scenario analysis to evaluate the impact of different strategies or pricing models on your revenue and profitability.
By identifying potential risks and opportunities, they help you make informed decisions to drive growth and maximize your SaaS business’s potential.

5. Set Your SaaS Business Up for Scale

A SaaS CFO plays a crucial role in preparing your business for scalability.
They help create financial forecasts and budgets that align with your growth goals.
They establish financial controls, processes, and systems that can handle increased transaction volumes and complexities as your business expands.

6. Stay On Top of New Accounting Standards

A SaaS CFO keeps abreast of the latest accounting standards and regulations that impact SaaS businesses.
They ensure your financial practices comply with these standards, minimizing the risk of non-compliance or financial misstatements.
Their expertise in evolving accounting practices helps you stay ahead and adapt to any changes in the industry.

How Can a SaaS CFO Help Your SaaS Business?

Having a dedicated CFO for your SaaS business is essential, since they ensure a smooth running of the business.

Here are some of the ways they help smooth functioning:

1. Reduce Costs

A SaaS CFO can analyze your expenses and identify areas where you can optimize costs without sacrificing quality or performance.
They can help negotiate contracts with vendors, evaluate pricing models, and implement cost-saving measures.
By strategically managing your expenses, they contribute to improving your profitability and cash flow.

2. Accelerate Growth

A SaaS CFO plays a crucial role in accelerating your business’s growth by providing financial insights and strategies.
They help you understand the financial impact of various growth initiatives, such as entering new markets, launching new products, or expanding your customer base.
Their expertise in financial modeling and analysis enables you to make informed decisions that drive sustainable growth.

3. Forecast Budgets & Revenue

A SaaS CFO can assist in creating accurate and realistic financial forecasts for your budgets and revenue.
They consider factors such as market trends, customer acquisition rates, and pricing models to develop forecasts that align with your growth objectives.
By having reliable forecasts, you can better allocate resources, manage cash flow, and make informed decisions to achieve your financial goals.

4. Plan & Save on Taxes

A SaaS CFO can collaborate with your tax advisors to develop tax planning strategies specific to SaaS businesses.
They can help identify tax incentives, credits, and deductions that can reduce your tax liability.
By proactively managing your tax obligations, they ensure compliance while optimizing your tax position, resulting in potential savings for your business.

5. Find New Funding

A SaaS CFO can assist in fundraising efforts by providing financial projections, investor-ready financial statements, and valuation analysis.
They help you articulate your financial story to potential investors, increasing your chances of securing funding.
Their experience in dealing with investors and understanding the metrics that matter to them can greatly support your fundraising endeavors.

6. Build Your Finance Team

A SaaS CFO can help you build a high-performing finance team that aligns with your business’s needs and goals.
They can advise on hiring key finance roles, such as controllers, analysts, or accountants, ensuring you have the right talent in place.
By developing your finance team, they strengthen your financial operations and provide ongoing support in managing your company’s financial health.

Fractional CFO vs Full-Time CFO

Unsure whether to onboard a full-time or a part-time CFO?

Let’s understand both roles so you can decide what you need:

Fractional CFO:

Pros:

1. Cost-effective: Hiring a fractional CFO is often more affordable than bringing on a full-time CFO, especially for smaller or early-stage SaaS businesses with limited budgets.
2. Flexibility: Fractional CFOs work on a part-time or project basis, allowing you to scale their involvement as needed. You can adjust their hours or engagement level based on your business’s requirements.
3. Diverse expertise: Fractional CFOs often have experience working with multiple SaaS businesses, bringing a breadth of knowledge and best practices from different industries and scenarios.
4. Access to specialized skills: You can tap into the specific expertise you need, such as financial modeling, fundraising, or SaaS-specific metrics, without having to hire a full-time resource.

Cons:

1. Limited availability: Since fractional CFOs work with multiple clients, their availability may be more constrained compared to a dedicated full-time CFO.
2. Potential lack of long-term commitment: Fractional CFOs may not be as deeply invested in your company’s long-term success as a full-time CFO. They may prioritize short-term projects over long-term strategic planning.

Full-time CFO:

Pros:

1. Dedicated focus: A full-time CFO is fully committed to your business, providing consistent attention and focus on your financial strategy, planning, and execution.
2. Deeper integration with the team: Being an integral part of your team, a full-time CFO can develop a deeper understanding of your company’s culture, operations, and goals, enabling them to provide more tailored financial guidance.
3. Strategic leadership: A full-time CFO can take on a more strategic leadership role, influencing decision-making across various departments and driving financial initiatives throughout the organization.

Cons:

1. Higher cost: Hiring a full-time CFO typically involves higher salary and benefits costs, which may be a significant financial commitment, especially for smaller SaaS businesses.
2. Overqualified for certain tasks: A full-time CFO may be overqualified for routine or day-to-day financial tasks, which could result in underutilization of their skills and potential.

When deciding between a fractional CFO and a full-time CFO, consider the stage and size of your SaaS business, your budget, and the specific needs of your finance function.

Fractional CFOs are a great option for cost-effective, specialized expertise, while full-time CFOs provide dedicated focus and strategic leadership.

Key SaaS Metrics a CFO Should Own

The four main areas a SaaS CFO should focus on are recurring revenue, customer acquisition, retention and expansion, and cash flow and profitability.

Based on these areas, the following are the key metrics they should own:

Bookings: These are the committed spends by customers that predict long-term revenue and growth.
ARR: Annual recurring revenue is the yearly revenue from customers. It predicts cash flow, profitability, and the company’s financial health. It’s often the first metric that any investor checks to assess a SaaS business for investment.
MRR: Monthly recurring revenue shows the immediate, short-term cash flow potential of the company. It’s one of the key SaaS metrics a CFO should own to understand customer sentiments and dynamics.
Expansion MRR: The additional revenue from cross-sells or upgrades by current customers. It shows their willingness to invest more in your product and suggests long-term profitability.
Contraction MRR: The downgrades from current customers that adversely affect cash flow, profitability, and growth. It’s used by a SaaS CFO to improve product and/or pricing strategies.
CAC: Customer acquisition cost is the cost of goods sold (COGS) or the sales, marketing, and other expenses used to acquire a customer. A SaaS CFO should also own this metric to evaluate if the return on investment is worth it. A low CAC is ideal for scaling and profitability.
LTV: Customer lifetime value measures how much a customer is worth before they cancel the subscription. This metric helps SaaS CFOs to understand which customer segment needs more (or less) attention and investment.
ARPU: Average revenue per user is a measure of the revenue generated per customer on average. Depending on this monetary value, a SaaS CFO can strategize pricing, promotion, expansion, and customer retention programs.
Churn Rate: The rate at which customers discontinue using the product. CFOs in the SaaS industry use this important metric to guide product development strategies and forecast cash flows, both of which impact profitability.
Involuntary Churn: This refers to customers discontinuing their subscription due to external factors beyond the business’s control. E.g., expired credit card. SaaS CFOs track this metric as it directly affects LTV, cash flow, and recurring revenue.
Recovered Customers: Customers who unsubscribed but then re-subscribed. An important metric for SaaS CFOs who can suggest better product development and customer experience strategies.
Gross Margin: The ultimate finance metric for CFOs that indicates the profitability of the company.
Burn Rate: The rate at which cash flows out as expenses versus cash flowing in as revenue. CFOs of SaaS companies keep a close eye on this metric to ensure they don’t fall short of cash reserves.
SaaS Magic Number: It calculates the return on sales and marketing investment against the revenue growth rate. A SaaS CFO monitors this metric as it impacts CAC, which, in turn, affects the company’s profitability and scalability.
Customer Payback Period: This is the time it takes to recover the investments made to acquire new customers. A key SaaS finance metric, it shows how efficient the customer acquisition strategy is and whether cash management needs attention.
The Rule of 40: This metric adds up growth rate and profit margin to get at least 40. SaaS CFOs track this metric to ensure there is the right balance between the two.
NPS: Net Promoter Score measures the willingness of current customers to recommend the SaaS product to others. It’s a key metric SaaS CFOs should own to understand customer satisfaction and loyalty, which, in turn, affects revenue growth and retention.

Further Reading:

Where Can You Hire a SaaS CFO?

Here are five websites and platforms where you can find SaaS CFOs or fractional CFO services:

CFO.com – CFO.com is a comprehensive resource for finance professionals, and they have a CFO Services directory where you can find fractional CFOs with SaaS expertise. You can search for CFOs based on their industry specialization and location.
Toptal – Toptal is a platform that connects businesses with top-tier freelancers, including SaaS CFOs. Their rigorous screening process ensures that you can find highly skilled and experienced professionals. You can post your job requirements and review the profiles of available CFO candidates.
Upwork – Upwork is a popular freelancing platform that offers a wide range of services, including fractional CFOs. You can post your job listing, review proposals from CFOs, and assess their qualifications, experience, and client reviews before making a selection.
CFO Alliance – CFO Alliance is a network of finance professionals that offers fractional CFO services. They have a directory where you can find SaaS-focused CFOs. Their website provides detailed profiles and contact information for CFOs, allowing you to directly connect with potential candidates.
FlexCFO – FlexCFO is a platform that specializes in fractional CFO services. They have a network of CFOs with expertise in various industries, including SaaS. You can browse their roster of CFOs and reach out to discuss your specific requirements.

Remember, when hiring a SaaS CFO, it’s important to thoroughly review their qualifications, experience, and client testimonials.

Conduct interviews and discuss your business’s needs to ensure a good fit.

Additionally, consider seeking recommendations from industry peers or leveraging professional networks to find reputable SaaS CFOs.

What to Look for in SaaS CFO Services

Now that you know where you can hire a SaaS CFO, let’s see what you should look for in SaaS CFO services:

Data-Driven Decisions: Before hiring, check if the SaaS CFO services use data to drive business decisions. The SaaS environment thrives on hard data, and it’s essential to know that the CFO can utilize analytics for forecasting, budgeting, making business decisions, and attracting investments.
Test the SaaS CFO on key metrics they should monitor.
Proven Track Record: Hire only those SaaS CFO services that have a proven track record of scalability, sustainable revenue growth, and profitability.
Probe into the tools they used, the automation and outsourcing systems they put in place, and how they used the analytics to steer the company towards success in the shortest time.
Customer-centric Approach: SaaS startups are customer-centric. Every decision taken must be tied back to customer acquisition, increasing customer base, customer recovery, and retention, and ensuring customer satisfaction and loyalty in an endless loop.
CFO services for SaaS companies should always put the customer first.
Knowledge of Financial Automation: SaaS CFOs should know the importance of automating financial processes, such as billing, payroll, and real-time reporting and dashboards. They should be fully aware of and knowledgeable about the best financial automation tools to utilize their time well.
Networking Skills: SaaS CFOs need networking skills to access and approach potential investors, partners, or clients to grow the company.

Frequently Asked Questions

Now, let’s look at some commonly asked questions related to this topic:

Should Your CFO be a CPA?

While it’s not a strict requirement for your CFO to be a Certified Public Accountant (CPA), having a CPA designation can bring valuable expertise in accounting and financial reporting to your SaaS business. A CPA’s knowledge of accounting principles and regulations can help ensure compliance, accurate financial statements, and effective financial management. However, it’s essential to consider the specific needs of your business and the skill set of the individual when making this decision.

When to Hire a CFO for Your SaaS?

Hiring a CFO for your SaaS business is typically recommended when you reach a stage of significant growth, complexity, or when financial management becomes a strategic priority. This could be when you have a substantial customer base, recurring revenue streams, multiple pricing plans, complex financial reporting requirements, or when you’re preparing for fundraising or scaling your operations.

How Much Does a SaaS CFO Cost?

The cost of hiring a SaaS CFO can vary depending on factors such as their level of experience, expertise, geographic location, and the scope of their involvement. On average, fractional SaaS CFO services can range from $1,500 to $5,000 per month, while full-time SaaS CFO salaries can vary widely but generally fall within the six-figure range annually. It’s important to consider your specific business needs and budget when determining the cost of hiring a SaaS CFO.

What’s the Difference Between a SaaS CFO and a Controller?

A SaaS CFO is responsible for financial strategies that set the course of the company. On the other hand, a controller relies on historical financial data to ensure accurate reporting and compliance and does not contribute to strategic decision-making.

A controller has bookkeeping expertise and is skilled at compiling accurate and complete GAAP-compliant financial statements. A SaaS CFO has in-depth knowledge and hands-on experience of business operations, strategic planning, financial forecasting, and financial analysis.

What Financial Mistakes Do SaaS Startups Make Without a CFO?

Financial mistakes that SaaS startups make without a CFO include:

Poor cash flow management
Incorrect budgeting and forecasting
Not tracking key metrics
No financial strategic planning
Hiring too soon or not the right resources
Poor pricing strategies
Neglecting tax filing and compliance standards.

Is a CFO Necessary for a Bootstrapped SaaS Company?

No, a CFO is not necessary for a bootstrapped company, especially at the initial stages.

A fractional CFO can do the job until the startup reaches a certain size, revenue, and complexity that calls for a more specialized financial role.

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