Finance tech stack adoption is increasing. The evidence lies in the fact that the tech stack report has grown to accommodate many finance tool categories over the past 4 years. And for each of these 16 categories, there are myriad options available. 

But the economic uncertainty is forcing businesses to scrutinize each spend  - is this additional tool really necessary? Should you consolidate tools and choose a SaaS suite?

Let’s find out how other businesses are making these decisions. 

Financial Planning & Analysis (FP&A)

FP&A remains a hot category for Mergers & Acquisitions activity and we see a lot of tools being bought. But spreadsheets still dominate this space because most businesses start out with them. 

The shift to formal software like Planful, Mosaic and Forecastr, happens gradually once they hit $11M  to $51M ARR and above. 

Reporting complexities increase once you hit $10M ARR because you have more product lines, you are hiring more, either you are acquired or you are acquiring. Your investors want more data and its hard to keep up with just spreadsheets.

Invoicing

Core accounting software like Quickbooks, Sage and Netsuite are a major players for invoicing as well. Companies also look into point solutions that can be integrated with core accounting software to get the added invoicing flexibility for SaaS.  

Stripe is also emerging as a big player in SaaS invoicing because it allows you to embed it within the product. Maxio is used for invoicing and eventually for revenue management. 

One interesting trend this year is the emergence of homegrown invoicing software. There are so many upcoming revenue models - PLG, consumption-based pricing etc. And finance needs to keep up with how sales wants to sell the product and how the product team wants to deliver it. Their invoicing is, probably, so complex that none of the other solutions solve their use case. And they decided to build their own!

At less than $1M ARR, we see Quickbooks and Stripe as the major invoicing tools. But $11M ARR and above Quickbooks usage drops because invoicing becomes more complex;  more product lines and revenue types come into play as you scale.  We see more ERP solutions like Netsuite, Sage Intacct coming in at $11M and above. 

Revenue recognition 

Revenue recognition must be bullet-proof in SaaS companies because you need to trust the recurring revenue you put in your P&L every month.

Spreadsheets are predominant but we also see core accounting software and ERP solutions like Sage and Netsuite competing neck and neck. 

We have new entrants like Maxio, Chargebee and Younium entering this category this year. While invoicing customers we need to apply the revenue recognition framework - sometimes it is a function within our core accounting solution or a bolt-on like Maxio. 

Spreadsheets dominate at < $10M ARR. Once you cross $10M ARR, you’ve got to pass audits and provide GAAP and IFRS financials to the board and potential investors. I suggest invest in a revenue rec tool as early as $3M ARR but post $10M it is absolutely critical to have it in place.  

If you have services revenue, it is important to have a Professional Service Automation (PSA) hooked on to your accounting system, so it knows when to invoice. You can’t afford to forget the services are in revenue rec because it is scrutinized in audits. Get  that integration to your project management tool so you know when to invoice services and know how to recognize it.

Business intelligence and analytics

Spreadsheets are still dominating this space but Power BI and Tableau are holding in as well. There are many other players too like Domo, Looker, Metabase, Younium and ChartMogul. 

There’s no surprise that at < $10M ARR we’re slicing and dicing our data predominantly on spreadsheets. Power BI is also prevalent because any business that uses Microsoft Office can inexpensively add it to their tech stack. 

As you cross the $10M ARR there is a lot of data to crunch and you see companies shifting to Tableua and Power BI. There’s a lot of data trapped in SaaS businesses that can be leveraged using good solutions. You can either choose to use your Microsoft Licenses and access Power BI or evaluate if you need specific point based solutions integrating with all your sources. 

Accounting

Sage and Netsuite are chipping into Quickbooks’ market share and Xero is trailing. We also noticed that Quickbooks is prevalent in the US and Xero in other countries.  

Microsoft Dynamics is emerging as a player in this category this year. 

On the backdrop of the economic uncertainty in 2023, there is a huge debate between choosing a best of breed point solution or an ERP. Surprisingly, according to the report, most still prefer best of breed solutions across all ARRs.  

So integrating all the point solutions to get a central view for overall business is important. 

Quickbooks dominates the accounting software industry at <$10M ARR. It continues to exist above $11M ARR but we see Netsuite and Sage Intacct enter the arena. 

A common question I get is how long can you use Quickbooks and Xero. Should I add point solutions to them or move on to an ERP solution? SaaS businesses become more complex once they breach the $10M ARR. So we see a clear change at $11M ARR. 

Tech adoption vs spend control

The annual finance tech stack report confirms that companies prefer best of breed point solutions in order to better perform specific functions. But it also means that internal software tools grow to 60+ tools with over $300k in SaaS spends. 

It becomes hard for a CFO to monitor all the tools that are being used across teams. Some businesses use spreadsheets and Notion documents to manage them. But SaaS spend management solutions can handle it with more sophistication. It is an emerging category of tools, especially in 2023, when everyone’s looking to cut expenses. 

Managing SaaS spends

Spendflo not only provides a centralized view of all SaaS spends across teams but also negotiates the contracts to bring in price control. All CFOs want to see ROI for tools but don’t have the bandwidth and SaaS pricing benchmarks to optimize SaaS spends. So get a free savings analysis done by Spendflo to understand how much you can cut on your SaaS costs.

Access the full annual finance stack report to get more details. 

Ben Murray
Founder, The SaaS CFO
Karthikeyan Manivannan
Design

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