There are tons of reports that one could create to manage a SaaS business. Any company’s CRM, accounting, and BI systems are usually littered with reports that may not even see the light of day. Focusing on just a few reports can be challenging with so much data to process. Having said that, quite a few reports must always be included in your monthly financial and operational reviews. Read on to find out which ones are a must!
Table of Contents
Critical Reports for your SaaS Business in 2022
Below is a list of “must have” reports, which are the building blocks to financially manage your business. There might be several others, but the fundamentals are where you should start.
Bookings Report
Bookings are the lifeline of every SaaS business. A booking report tracks new and expansion business. Usually, the focus is on ARR bookings, but you should also track service bookings. Bookings data gets stored in the CRM software. A booking is an executed contract between you and your customer for software and/or services. Customers sign formal master services agreements, common when selling into mid-market and/or enterprise customer segments with more significant deals. Your customer contract usually consists of several documents –
- Enterprise Contract
- Master services agreement (MSA)
- Purchase or sales agreement
- Product/service-specific addendums
Even though your customers won’t sign formal contracts, they sign up online and pay with a credit card which is kind of the same thing. You must track and figure out the source of new and expanded business. Instead of a booking report from your CRM data, track sign-ups from your payment data or revenue reporting engine. Instead of the bookings report, try using the SaaS Quick Ratio to track the net inflow/outflow of MRR. It’s a great report and metric for tracking higher volume low price point revenue models. Bookings reports are vital because they help you understand the inflow of MRR or ARR into your business. Apart from tracking new business, you can also track expansion businesses by two segments – cross-sell and upsell bookings.
- Cross Sell- Customers who have product A and now you sell them product B
- Upsell – Customers have product A, and you sell them more seats/modules within product A
Combine your bookings report with churn, and you’ll figure out your business’s monthly net inflow or outflow of ARR.
SaaS P&L Report
A proper SaaS P&L is a must-have report for you and your SaaS management team. A SaaS P&L is the gateway for proper SaaS financial management, accurate SaaS metrics, and proactive decision-making. If done incorrectly, your P&L becomes a dump of your general ledger. The revenue streams are not clearly defined, and there are too many expense categories. With a poorly formatted P&L, you will never figure out your gross margins, expenses by department, and cash flow margins. Producing an accurate SaaS P&L must have the following –
- Proper revenue recognition.
- Coding expenses for the department level.
- Proper structure and definition in the chart of accounts (COA).
- Diligence in the monthly close process.
It is okay to have an unusable P&L in the early stages because you don’t focus on finance and accounting. You are neck-deep in building products, finding clients, keeping cash in the bank, and hiring people. However, like any other department in your organization, your finance and accounting team needs to scale and mature as your business grows. Your finance department is always about people, processes, and technology. Your accounting process evolves over time. Producing a SaaS P&L can help you understand your revenue streams, margins, and profitability. Using that data, you can calculate accurate and reliable SaaS metrics.
Churn/Retention Report
Churn and retention reports are very important because you can’t operate a SaaS business without understanding how healthy your revenue is. Retention reports are vital because your recurring revenue is complex. Several forces at play affect the trajectory of your main revenue stream and cash source.
Layers of Subscription Revenue
Subscription revenue consists of opposing forces or layers. The good layers are new and expansion businesses (upsell and cross-sell) which boost revenue. The bad layers include downgrades and churn, which bring down revenue. Without diving into these layers, you won’t understand why your recurring is increasing or decreasing. You may track the health of your recurring revenue using three primary SaaS metrics, including logo churn, gross dollar retention (GDR), and net revenue retention (NRR)
Logo Churn
Logo churn measures customer retention through customer counts instead of dollar counts. Lost customers divided by total customers throw up this figure. The inverse of this figure is logo retention. Logo churn is measured on a monthly and annual basis.
Gross Dollar Retention
This measures lost dollars from your existing customer base. Lost dollars imply downgrades and churn. It doesn’t factor in any new business. Your maximum GDR can be 100\%.
Net Revenue Retention
NRR takes GDR one step further. NRR explains the net movement within your current customer base. The components of GDR (downgrades and churn) are combined with expansion business. You need expansion to offset your churn and downgrades. With NRR, you can have retention rates exceeding 100\%. This is called net negative churn.
Professional Services Backlog and Utilization Report
Your professional services team plays a vital role in your customer success. If your product requires setup, configuration, and training, your services and finance teams shall track services backlog and billable utilization. These are two vital metrics to understand your services team’s workload, capacity, and staffing.
Services Backlog
A backlog gets created when a customer contract is executed for services. Backlog is drawn down by invoicing the customer Invoicing for services is usually triggered by either time and material billing or milestone billing.
Billable Utilisation
Next, it is imperative to understand the productivity of your services team. This is measured via hourly utilization. Whether you charge your customers for each billable hour or a fixed fee, you need to track the hours your service staff spends to complete the project. To calculate your services team utilization, track the time each services staff spends on customer projects. You may measure staff, and team utilization with sufficient tracked billable hours data. Once you have a utilization number, you may create a lot of transparency. Utilization allows you to compute how much project work may be completed in a month and how much revenue may be “pulled through”. You may also forecast revenue delivery and staffing requirements for said delivery.
Headcount Report
This often overlooked report is vital in forecasting, calculating metrics, variance analysis, etc. Headcount can be tracked by month by department and role. This should be a simple report with data from your HRIS or payroll system. It may simply be tracked in Excel.
Conclusion
Excellent reporting and analysis take time. Focus on one report at a time before moving on to the next. All SaaS reports are critical to helping you manage your business. However, these five reports are crucial for a well-structured organization.
