Quick Fix #2: Finance for SaaS Founders: Meryl Johnston - MicroConf Remote

0:00[Music] hey everyone i am meryl johnston and here today to talk about business finances and specifically how to become a financially savvy sas founder i always like to ask why should i listen to someone on a particular topic and here's a little bit about me i come at business finances from both an accounting perspective if i'm a trained accountant a child accountant which is like a cpa in the u.s but i'm also a founder and i've scaled my business binges up to a team of 15 people over the last five years i realized this is a virtual event i i add a couple of extra things

0:46about me particularly when it's an in-person event and then we can connect and chat over something that might not be accountable and maybe it's surfing or parenting or something different so feel free to connect with me afterwards and to have a chat about either this topic or something else that about this that is uh that you're interested in the way that i thought we'd frame this is to look at four different stages of business of particularly related to sas and look at what the financial challenges are related to these millionaire mary we're going to leave for today the financial challenges that i would normally talk about there

1:31are related to preparing business for exit and instead we're going to focus on ceo carl who is building a leadership team and really in the process of scaling and he's ready to be adopting best practices when it comes to the finance function in his business but we're also going to have a look at hustling hector and stressed out susie her a bit earlier stage and look at what are some things that they could implement or take action on today that are going to help them build out this best practice finance function and also have a look at or why would you even care about business finances in your business

2:13so senior carl he's been in business for a while now and he's he's got a team and really trying to build out a leadership team so that you can take a bit more time away from business you can take a day off here and there but it's still quite difficult for him to to take a week or two weeks or a month off and so he knows that he needs to get his financial house in order there's three main things that he needs to do in order to assist with that the first is making sure that there's a clear set of deliverables and a timeline so what actually needs to happen what

2:52are the deliverables or the results that we're aiming for and this would be similar that would be a marketing and sales function in the business as well and again it'd be a clear set of deliverables might be writing a blog post or whatever it is the next component of that is having documented sops so that it's really clear about how these things need to be done and that they can be done consistently and you've got backups in place if something's happened to different team members and then the last is looking at well what financial reports should you be looking at as a founder and how can you use

3:30dashboards right let's start off with the bookkeeping timetable and really here i'm interested in who needs to do what by when and the deliverable is typically month end reports that would include a profit and loss of income statement and a balance sheet and there's probably some other more specific reports that are customized to your business as well and in order to do that there's a number of steps that need to be completed before we can get to the reports so we need to know what are those steps who needs to do them and and when they need to be completed by and the way i like to break it down is

4:06to look at well what are some of the monthly tasks okay in order to finalize in a month then there's a number of steps that we need to do you might pay your suppliers and your team fortnightly right so that's in the fortnightly category there might be some weekly tasks and then daily this is just a template you would adapt this to your business as i said what's really important here is getting clear on what the deliverable is and then who needs to do what by when in order to achieve it the next part of that is the how which is the standard operating procedures and due to time constraints i won't go

4:44into examples of standard operating procedures but the finance function is very similar to other areas of your business and then you would have a defined way of doing things whether it was a defined way of paying your suppliers a defined way of preparing your end-of-month reports to find a way of chasing out customers if you're doing something like enterprise sales rather than having customers on direct debit or they're paying for implementations the next thing i wanted to talk about is having as a founder having access to metrics and some kind of weekly dashboard that really helps you keep a finger on the pulse typically even though we're aiming for monthly

5:25reports typically many founders that i speak with and not actually getting reports on a timely basis which is making it hard for them to make decisions so on the one hand i encourage you to get your your bookkeeper or your accountant to get reports to you quickly within 10 business days after the end of each month but the other component of that is what metrics can you track on a regular basis to get a feel for what might lie ahead and these are metrics that i track this report i get this report on a weekly basis and that goes to my management team and this really helps us from a sales

6:02and marketing perspective we have an idea of the pipeline from a delivery perspective we can track how we're going and then also looking at onboarding and cash flow too so the metrics and the key drivers of your business will be different for example if you're offering free trials and then you've got an idea around conversion rate there you might be tracking how many new people signed up for a free trial or if you're doing enterprise sales then you might have a sales section that looks a bit like this where you know that typically 10 calls results in two customers of a certain dollar value of revenue

6:42and so this really gives you an idea of how you're tracking these dashboards can be they can be tracked in excel in google sheets i think that that's fine it's a good way to start out and there's also dashboarding tools where you can bring in data sources from multiple different platforms and i think brian who's also in this community has i hope i'm getting the name right here i think it's called sunrise kpi where you can track kpis as well so that's another option for you too the key steps in in this being meaningful or giving you meaningful information uh one actually figure out what metrics

7:20uh the drivers of your business and it may be different and then what's an effective way to track them and then three carving out time to look at the numbers coming to you now i wanted to go back a step so we've looked at carl and really what a best practice finance function would look like where there's a really clear set of deliverables everyone's clear on who needs to do what by when the how is documented in sops and then there's financial reports coming in within 10 days after the end of each month and there's a dashboard that's being looked at on a weekly basis with the king metrics of the business

8:01that's where we're aiming for but if you're just starting out you're probably not at that point yet and actually you probably should be focused on other things like making sales and trying to increase mrr monthly recurring revenue but there definitely are some simple things that you can do today to help with the financial side of your business if you're hustling hectares are you just starting out don't have any employees yet you've got some freelancers that are helping to build your product some of the things that you can do uh to implement client accounting software i use xero then there's other tools like quickbooks out there what's important here is that

8:41it connects to your bank account and also has the ability to connect to other apps or add-ons too so that you're reducing the amount of data entry required and eliminating risk of errors so having xero setup really helps but also being disciplined with firstly setting up business bank accounts and then using them only for business purposes personal bank accounts for personal business bank accounts for business and it sounds quite simple but i often this is often where i see a bit of a mess when people are just getting started with building their finance function and then the third receipt management again it sounds simple and it should be simple but again

9:25something that typically isn't done well particularly by founders in their first couple of years just pick a receipt management process and stick to it you might pick dropbox or google drive it might be an email but something all of your receipts should be going to one location typically travel costs are handled poorly we're doing less of that at the moment so if you've got physical receipts from buying meals out hotels things like that take photographs and again save them to whatever system that you're using and that will save you a lot of headache at tax time dressing out suzy sorry stressed out sophia is she's a little bit further along than

10:09hector she's starting to transition her team of freelancers into a team of employees she's scaling up the businesses growing she's got more customers and really for her the main issue is around cash flow there's more pressure on her to make sure that there's enough money to pay her employees some of the things that she can do assuming that she's already put in place the the three points that we talked about with hector which we're getting zero or other cloud accounting software using business bank accounts and receipt management so she's got all of that happening really she should then be able to review a set of reports the profit and loss and

10:48balance sheet at a minimum every month and she should be able to have those reports come out of something like zero and either work with a bookkeeper or an accountant or someone in-house or maybe it's her to to check those numbers and make sure that they're accurate the last thing you want to do is make decisions based on what you saw in your financial statements and for them to have not been accurate and there's checks and balances that you can do and my second dot point here around financial literacy skills also really helps and i think every founder should have a baseline level of finance skills some knowledge of

11:28accounting and bookkeeping and some knowledge of taxes as it applies to the country and the location that you're in and there's books you can read courses that you can do and i think every founder should invest in building some of these skills and enough to know that when you are hiring an accountant or bookkeeper you can ask the right questions and you can know that they're doing a good job and also it gives you confidence in when you're reviewing financial reports that you can use that information to make good decisions not relying on other advices so if we do a little bit of a recap we

12:05spent most of today talking about ceo kyle and what a best practice finance function looks like and the reason i wanted to do that was to paint the picture of as your business where when your business scales up what it can and should look like so something painful but i also wanted to talk about some earlier stages of business and we talked about hustling hector and stressed out sofia who were at the early stages of their entrepreneurial journey and some of the things more simple things that they could implement today to really help them on that path to where ceo and carl is that's it for me i'd love to connect i'm

12:47definitely more active on linkedin than i am on twitter but here are the options if you would like to connect