How is Legacy Accounting Software Falling Behind the Needs of Modern CFOs

Written by David Appel and Eric Sleeth

As a SaaS CFO, you’re far more than a number-cruncher. You’re strategically vital to your organization.

And a huge part of that is ensuring your finance tech stack can support the caliber of results you need to deliver.

If you’re using legacy finance tools, you’re holding your organization back in a number of costly ways.

In this blog, we’ll explore 1) The difference between legacy and modern finance tools, 2) How legacy accounting tools are failing to meet modern SaaS CFOs’ needs, 3) The operational limitations presented by outdated tools, and 4) Why SaaS CFOs need a modernized tech stack to support their financial operations.

Let’s get started.

Understanding legacy finance tools

Legacy software solutions have some key differences from more modern cloud-based tools.

In order to better understand your finance tech stack and its impact on your organization, it’s important to be aware of these points of departure between the two systems.

For one thing, legacy tools require onsite installation, often with the assistance of an entire team of IT pros.

It’s a complex and often costly process.

Beyond this, when compared to their cloud software, legacy finance tools are:

  • Not scalable: Legacy systems are unable to scale with you as your company grows. You’ll always hit a point where the software’s utility tops out as your transactional load increases. Especially for early stage SaaS organizations, this is a huge problem.
  • More expensive overall: Legacy software tends to be pricier than cloud-based subscription options. This makes sense when you consider licensing fees, higher maintenance costs, and the fact that you’ll be replacing individual components of your legacy tech stack at different times.
  • Less operationally effective: Modern cloud solutions frequently feature artificial intelligence (AI) and other advanced functionality that legacy tools can’t support. Because of this, legacy software is associated with much higher rates of manual errors and other operational problems.

Now you know more about legacy accounting tools, let’s take a closer look at the workplace limitations of a manual finance tech stack.

The limitations of legacy accounting software

Legacy accounting software, once a staple of finance teams, is struggling to keep up with the evolving needs of modern SaaS CFOs.

These legacy finance tools lack the operational efficiency and real-time insights that SaaS CFOs require to generate subscription revenue.

Let’s delve deeper into the limitations of legacy accounting software and how it impacts the day-to-day operations in your finance department.

Inefficient financial operations

For SaaS CFOs, your finance tech stack is the cornerstone of your department.

It can determine the accuracy of your reports and forecasts, your access to the latest technology, and even your ability to remain compliant.

Today’s SaaS CFOs are responsible for ensuring that their departments–and, by extension, their companies–are equipped with the most effective finance tools possible.

By definition, that’s an impossible standard to achieve when you rely on legacy accounting solutions.

To be more specific, the operational shortcomings of legacy SaaS finance tools include:

  • Lack of automation capabilities: Legacy accounting software lacks AI features, forcing finance teams to rely on error-prone, costly, and inefficient manual processes. This point is especially important because as finance tech stack automation becomes more sophisticated, the distance between companies who embrace AI and companies who stay manual will grow larger, with the former group gaining market share as the latter loses it.
  • Inadequate financial reporting tools: Legacy software doesn’t provide real-time financial reporting with role-based dashboards, making it difficult for SaaS CFOs to gain a comprehensive view of their company’s performance.
  • Error-prone revenue recognition: Manual revenue recognition performed with legacy software is prone to errors that result in persistent revenue leakage. That’s only natural since manual revenue recognition involves tediously reconciling multiple data sources. However, for early stage SaaS companies, leaked revenue and non-compliance fines are an even bigger problem–those seemingly small losses quickly add up and impede your ability to scale.

How else can a legacy manual tech stack keep you from winning your market?

Lack of forward-facing financial strategy

A key responsibility of a SaaS CFO is to develop and execute a forward-facing financial strategy that drives revenue growth and long-term subscriptions.

However, legacy accounting software often lacks the tools and features to support this crucial aspect of the CFO role, hindering your decision-making.

How do outdated accounting systems limit your financial planning and analysis (FP&A)?

Legacy finance tools have limited SaaS forecasting capabilities

Legacy software doesn’t provide robust SaaS forecasting features, and certainly won’t provide AI forecasting functionality.

Compared to more modern tools, this makes it challenging for CFOs to accurately project revenue growth and engage in detailed scenario planning.

There are two primary pieces to the CFO role:

  • The transactional, backward-looking aspect
  • The forward-facing part that handles FP&A.

Legacy forecasting tools make it hard to execute effectively on the second piece of that equation.

They require labor-intensive and error-prone forecast assembly, and are limited in range and accuracy.

Succeeding in the competitive SaaS space requires highly accurate scenario planning around budgets and expenditures, churn levels, different pricing strategies, and much more.

Unfortunately, legacy tools aren’t up to the task, limiting your ability to map out your company’s financial future.

Quarterly and annual budgeting is much more difficult with legacy solutions

We just covered the lackluster forecasting capabilities of legacy tools above, and that also has major implications for your corporate budgeting.

Effective SaaS budgets often require extensive forecasting to answer important questions about allocations and their downstream impacts.

Legacy tools require you to build a new manual forecast to assess each allocation scenario in your budget.

This is expensive, impractical, and risky.

Remember, manual accounting workflows are error-prone.

SaaS budgeting is a tightrope walk for the modern CFO, and legacy tech makes it hard to properly balance your resources.

In addition to that, SaaS budgeting requires intense collaboration between stakeholders. Legacy accounting tools don’t feature data centralization, meaning budgeting back and forths must take the form of email chains.

Hardly ideal in the age of cloud technology.

Legacy tools lack predictive analytics, making your company more vulnerable to churn

For recurring revenue CFOs, churn avoidance and cash flow generation are two sides of the same coin.

A high signup rate doesn’t mean much unless you have strategic follow-through.

Can you keep customers engaged and loyal once they’ve been onboarded?

Just as critically, does your tech stack give you the ability to gauge your users’ likelihood of churning, renewing, downgrading, or upgrading?

Predictive analytics involves analyzing data and using detected patterns to make informed business decisions.

Legacy tools tend to lack robust SaaS analytics functionality. This can lead to CFOs failing to spot profitable or risky data patterns in time to react appropriately.

The end result, whether in the form of missed cash flow or higher churn rates, is a hit to your bottom line.

Difficulty in cash management

Efficient cash management is a crucial piece of winning your market.

However, legacy accounting software poses challenges for SaaS CFOs when it comes to optimally handling cash.

Some recurring problems include:

  • Limited visibility into cash flow: Legacy software doesn’t provide real-time visibility into your company’s cash flow, making it difficult to effectively monitor and manage cash. When your tech stack fails to deliver data in real time–especially with an issue such as cash management–you run the risk of operating on outdated data and making costly mistakes.
  • Lack of automation in cash management processes: Legacy software typically lacks automation capabilities, leading to manual and time-consuming cash management processes that hinder efficiency. Over time, this robs you and your team of strategic bandwidth by keeping you bogged down in financial busywork.
  • Inadequate support for SaaS industry cash management needs: Legacy software may not provide features specifically designed to address the cash management requirements of SaaS companies, such as integrated subscription billing or churn analysis. For early stage companies seeking to gain ground, this is a sizable competitive disadvantage.

Now you have more awareness of the risks and shortcomings of legacy finance tools, let’s look in the other direction.

How can you equip yourself with technology that’s suited to your role and responsibilities?

Today’s SaaS CFOs need a modernized tech stack

As legacy accounting software continues to fall short in meeting the evolving needs of modern SaaS CFOs, a modernized tech stack becomes the clear solution.

The CFO role hinges on data, and your ability to work effectively with data at scale depends on your tech stack.

SaaS finance leaders require a tech stack that offers customization, real-time visibility, and automation capabilities to support their financial operations.

With a modern tech stack, SaaS CFOs can overcome the limitations of legacy software, gain a comprehensive view of financial performance, and drive strategic financial decision-making.

Let’s explore the specific needs of SaaS CFOs that a cloud-based tech stack can address.

The need for real-time financial data

Legacy finance tools are notorious for data lag.

A modern tech stack provides SaaS CFOs with real-time financial data, allowing them to access up-to-date financial information at any time.

And with cloud-based software, you can even view your organization’s finances remotely and on mobile.

By leveraging cloud accounting tools, SaaS CFOs can:

Access dozens of SaaS metrics without the data lag

Cloud accounting software offers seamless integration with dozens of financial SaaS metrics.

From annual and monthly recurring revenue to churn, customer lifetime value, customer acquisition cost, and hundreds of other indicators, cloud tools give finance leaders the data they need to generate cash flow.

It’s incredibly difficult to get your financial bearings without trustworthy real-time SaaS metrics.

In the best-case scenario with legacy tools, you’ll be working much less efficiently than you could be.

In the worst case, your financial strategies will fall flat because they’re based on old data that no longer reflects reality.

Identify trends, patterns, and potential problems as they arise

Since today’s SaaS CFOs are central to revenue generation and churn prevention, trend detection is all-important.

Without real-time financial data, you’ll be left playing catch up instead of proactively positioning yourself to take advantage of profitable patterns or avoid looming risks.

Benefit from centralized data in a highly collaborative environment

SaaS CFOs frequently need to collaborate or reliably share data with stakeholders in other departments.

In one way or another, most teams within your company rely on data from the finance department in order to function optimally.

Cloud finance tools break down data silos, helping SaaS companies’ different departments smoothly operate in tandem with centralized data.

Traditionally, the SaaS CFO role wasn’t highly collaborative, so siloed legacy solutions weren’t a large strategic problem.

Today, however, it’s a different story.

The highly collaborative nature of your job calls for an equally collaborative tech stack.

Beyond real-time data and collaborative capabilities, what else are modern SaaS CFOs looking for to help counter the ineffectiveness of legacy tools?

Desire for a conveniently integrated solution

Tech stack integration is one of the foremost best practices among leading SaaS CFOs.

For companies who want to scale in a big way or even go public, the drawbacks of a piecemeal tech stack are too costly to ignore.

Different tools have different levels of functionality and interconnectivity.

And getting all the moving pieces to work together can be a logistical nightmare requiring heavy IT investment.

Sometimes, it’s downright impossible. But you only find that out after you’ve thrown valuable time and cash down the drain.

With an integrated cloud accounting solution, SaaS CFOs can:

  • Eliminate the hassle and cost of piecing together a finance tech stack from different products.
  • Enjoy centralized automation for the full scope of departmental tasks, from revenue recognition to SaaS billing, forecasting, and more.
  • Put an end to the discrepancies and errors that arise from moving between different apps and systems.

Now you’re aware of the shortcomings of legacy SaaS finance tools for modern SaaS CFOs, and you know more about the advantages of cloud-based tools.

But to make the most of the CFO role, you need a tech stack strategy.

As the person spearheading your department, what should you look for in a tech stack to achieve market-winning results?

What to aim for in your SaaS finance tech stack

Modern SaaS finance tools cater to the specific needs of today’s CFOs, offering advanced features that legacy software lacks.

That’s why it’s so important to take a step back, assess your updated responsibilities as a SaaS CFO, and select a finance tech stack that actually meets your needs.

In light of the updated professional demands placed on you, what should you demand of your tech stack?

21st-century tech stack integration

Today’s SaaS CFOs are not just number-crunchers. You have a crucial role to play in everything from customer retention to cash management, regulatory compliance, and so much more.

And you need a tech stack that’s prebuilt to handle that reality.

The gold standard is integrated, cloud accounting software that handles reporting and forecasting, expense tracking, payables and receivables, subscription management, rev rec, SaaS billing, and more.

This is an especially critical point for younger SaaS companies and their CFOs.

Your time, capital, and mental resources are all at a premium right now as you try to establish a foothold in your market.

Tech stack integration is more technologically reliable, scalable, and cost-effective than a legacy or homegrown tech stack assembled from multiple apps.

Streamlined workflows for operational efficiency

As the CFO of a SaaS company, you need to prioritize workflow accuracy and efficiency in everything you do.

For finance leaders, there are really only two kinds of work: truly strategic work and busy work.

Modern cloud accounting suites can eliminate the latter and free you up for the former by:

  • Automating financial reporting: SaaS CFOs can generate detailed financial reports with just a few clicks, eliminating the need for manual data entry. Cloud tools can quickly produce even complex multi-entity reports.
  • Leveraging AI-powered analytics: Cloud finance tools use AI to analyze large volumes of financial data much more effectively than a human could. This is integral to identifying trends and providing intelligent insights for performance management and financial strategy development in today’s competitive SaaS market.
  • Closing your books continuously: The monthly close is probably one of your department’s most labor-intensive tasks. Instead of waiting for the end of the month, modern accounting software closes your books with each new transaction, eliminating the month-end stress and manual mistakes.
  • Making billing and subscription management a breeze: For early stage SaaS companies, billing and subscription management are often tedious and error-prone manual operations. Especially when you’re a newer company with less marketplace clout, accidental overcharges or similar billing inaccuracies are serious problems. An automated tech stack with touchless invoicing and subscription management AI can put those fears to rest.

What else should you expect from your SaaS accounting software?

Algorithmic scenario planning for future visibility

FP&A enablement is one of the hallmarks of a great SaaS tech stack.

After all, forward-facing financial strategy is part and parcel of your role.

Whether you’re running forecasts to find the most profitable billing method for your SaaS business or trying to figure out budget allocations, you need to be able to quickly and accurately model the impacts of different financial decisions.

Cloud accounting tools use ML algorithms to produce if-then forecasts in real time that can automatically adjust to altered scenario inputs.

This is a massive strategic advantage over legacy tools, which require a fresh forecast to be assembled for each change in your initial data.

Automated forecasting allows CFOs to:

  • Keep a firm grasp on your company’s future financial health
  • Slash the busywork of forecast assembly to focus on revenue-driving strategy and leadership
  • Test the effectiveness of different growth strategies on your cash flow, net margin, the size of your customer base, and more.

Another benefit of cloud accounting software is that it automatically supplies and stores all the documentation you need for your ML-based financial models. This is crucial for passing an audit if you’re using ML forecasting.

Tech stack optimization is even more critical for early stage SaaS

CFOs of young SaaS organizations have the daunting task of ensuring the financial success of a fledgling company in a highly competitive market.

Your tech stack is an integral part of that equation and goes a long way toward determining your end results.

Leaning on legacy tools is a risky choice at best, and a financially disastrous one at worst.

They lack the SaaS billing customizability that modern companies need.

They leak revenue due to manual ASC 606 management.

Their forecasting results are highly variable, and assembly is inefficient and costly.

And that’s just the beginning.

Sage Ahead is a fully integrated and automated finance tech stack built for early stage SaaS.

Equipped with the latest AI, ML, and generative AI technology, it enables finance leaders to expedite all their core workflows with confidence and peace of mind.

Fully integrated and automated, Sage Ahead features advanced subscription management, flexibility for usage and subscription billing, automated rev rec, forecasting, and everything else you need to grow your organization.

To learn more about how TimeLinx can help your business, contact us today.
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TimeLinx delivers innovative project & service management software as a complete solution that perfects the sell-track-manage-support-bill cycle that services organizations must have to delight their customers; TimeLinx brings the cycle together in a single application that offers less frustration, better project management, complete reporting, and improved profitability – all specially designed for Infor and Sage.

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