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SaaS financial software proves to be right-size ERP replacement

A SaaS analytics vendor itself, Market6 decided the cloud technology enabled it to add the revenue recognition and financial management features it needed, without ERP.

A little over five years ago, Jason Kasallis, then-CFO at Market6, was faced with a dilemma: how best to manage the financial aspects of a growing business that provides retailers and consumer goods companies with SaaS-based retail analytics applications.

The technology its own products run on proved to be the answer for Market6, which is based in Deerfield, Ill. SaaS financial software provided just the revenue recognition and other financial management capabilities the company needed, without the overkill of a full-blown ERP system.

"In late 2011, as we were creating the company, we went through the process of coming up to speed; we built the infrastructure, we built the product and then we started selling to customers," Kasallis said. "And then we start selling them more and more and more."

While that was a good thing, Kasallis had some things to figure out, including how to calculate revenue correctly on the customers' recurring contracts. Initially, he created a Microsoft Excel spreadsheet to compute all the different components, such as accrued revenue, deferred revenue, actual revenue for the period, when should you bill, etc. And it worked -- for a while.

"Part of the process when we were looking at comparing what our sales were versus what we should be recording was taking data from Salesforce.com, comparing it to our Excel sheets and saying, 'OK, did we have everything captured?'" Kasallis said.

Doing all that would take a week, and it was a very inefficient process. It just became unwieldy to handle in Excel, according to Kasallis.

"It was really an issue of scalability," he said. "The more and more customers I had, the longer this was going to take."

Right about then, Kasallis realized that he had to find something new that was going to help Market6 grow. As he evaluated his options, he asked himself, "'Do I throw more bodies at it? Do I parse this to different pieces and still use Excel?'"

SaaS financial software takes place of ERP

ERP was one option.

"We first looked at full-fledged systems, including Microsoft Dynamics and some other big ERP groups," Kasallis said.

However, that would mean deploying a whole new set of everything, not just one component. But did Market6 truly need that? Kasallis and his team soon determined that they didn't need a full-blown ERP system after all.

At the time, Market6 was using QuickBooks Online and Salesforce.com, which was decent enough for the company's SaaS-model business, according to Kasallis.

"The linchpin was really handling the customer contracts and that volume of the revenue piece of it," he said.

After researching vendors, Kasallis and his team found SaaSOptics, which offered a new version of what his Excel sheet was doing, except somebody else was processing it using their own cloud-based servers.

"It was much quicker and much more efficient. At the same time, we didn't have to house any of this; it was all kept for us. And the reporting was there," he said.

But it was the scalability factor that really made a big difference for Market6.

SaaSOptics doesn't provide a full suite of integrated SaaS financial software. Rather, the vendor takes what it calls a best-of-breed approach to the financial aspects of a SaaS business, said Tim McCormick, CEO of Atlanta-based SaaSOptics LLC.

SaaSOptics specializes in targeting companies on the lower end; the emerging and growth-oriented SaaS vendors with $2 to $100 million in revenue -- companies that are growing fast and adopting these technologies.

"What we find in our customer base is they don't really have a lot of IT resources at those stages, nor do they have a lot of resources on the finance team," McCormick said.

Through its Open API for Analytics tool, McCormick said SaaSOptics gives SaaS businesses of all sizes access to accurate financial views and visibility in real time.

The SaaS financial software helps companies to better manage their customer subscriptions by performing the revenue recognition that is often done in spreadsheets, and by delivering the comprehensive analytics and metrics such companies need, according to McCormick. That includes tracking monthly and annual recurring revenue, customer churn and retention rates, as well as doing customer lifetime value analysis, in addition to cohort reporting, which is important for SaaS businesses.

McCormick said SaaSOptics makes use of best-of-breed technologies, such as Salesforce on the CRM side, and it also supports Intuit's QuickBooks -- both products Market6 uses.

Kasallis said SaaSOptics' API can bring a sales opportunity closed in Salesforce into the SaaSOptics software, where users can review contracts and line items, schedule invoices, and handle the revenue recognition process. The SaaS financial software can handle any volume of business that Market6 closes in Salesforce.

We started off at a couple hundred transactions a year and went to a couple thousand transactions a year.
Jason KasallisFormer CFO, Market6

"We started off at a couple hundred transactions a year and went to a couple thousand transactions a year," Kasallis said. "All that was working beautifully and, at the same time, I was able to reduce staff.

"At Market6, we were doing a sizable amount of reoccurring revenue per year, and I only needed one person to support that. There were tens of millions of dollars and I didn't have to increase my headcount. That made it very efficient and very scalable."

Kasallis said Market6 also took advantage of additional functionality that SaaSOptics rolled out, including e-invoicing and payment integration.

"SaaSOptics made everything all very efficient and cost-effective," he said. "In a matter of one year, I saved hundreds of thousands of dollars."

Next Steps

Get tips on complying with revenue recognition rules

Learn how CFOs are addressing revenue recognition

Read what an SEC accountant said about revenue recognition standards

This was last published in November 2017

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