Do you heavily rely on spreadsheets for critical business processes? You know this is a bad idea, right? Spreadsheets are time consuming, inefficient, labor intensive, and create risk due to lack of controls and plain old manual user error.
Anyone who is in finance for a subscription business is all too familiar with the realities of spreadsheet hell. But what can you do about it?
If you do a quick google search for help, you’ll come across a bunch of superficial suggestions for dealing with the problems of spreadsheets: suggestions for speeding up spreadsheet entry or ensuring spreadsheet integrity, creating process consistency, version control, and spreadsheet import tools.
But you don’t need a better way to do spreadsheets. You need to eliminate spreadsheets altogether.
Here we look at the 4 critical finance functions for a subscription business to see how and where spreadsheets are failing you—and how you can fix this for easier, more accurate subscription billing.
With a subscription business, you have to do a lot of manual calculations in spreadsheets. When it comes to downgrades, renewals, cancellations—any change to a subscription—there’s always a new calculation that arises. With all the possible variables, everything’s like a custom charge. This is complex, time-consuming, and prone to user error. It’s also not scalable. The more customers you add, the more changes to their plans, the more your spreadsheets become unmanageable. It’s not practical to add a new billing person for every X new customers you add, but without automation you will need more hands on deck.
Solution: What you need is a system that can automatically calculate prorated fees without manual calculations.
If you do usage based billing, you have to download your usage data from your product (or some other database warehouse), aggregate that data in your spreadsheet at the end of the billing period insofar as what a customer has actually used, then calculate usage fees based on all that data. If you have an included plus overage model this further complicates the calculation: you need to add up usage, compare it to what’s in the contract (to determine what’s included versus what is an overage amount), and then calculate the overage fee. Again, the increase of inputs leads to an increased chance that your spreadsheets will fail.
Solution: You need a system that can ingest customer data from your product or whatever database is storing customer usage data, and then automatically calculate fees at the end of the week, month, quarter…whatever billing frequency you want. Your workflow should take into account any variation upon a usage based pricing model, including units, tier based pricing, rolling periods, and more.
When you’re working in a spreadsheet, there’s great complexity to adding different offerings. For example, if someone has a license fee for purchased software, but also an add in (such as a reporting tool or professional service fees), these additional line items need to be maintained and calculated for. This leads to more spreadsheets — or sometimes QuickBooks or your general ledger, which can produce a pretty invoice and send it out if you tell them exactly what needs to be billed, but they can’t perform complex calculations.
Solution: A system that can perform complex calculations, accounting for the fact that proration is a package adjustment while still maintaining pricing adjustments.
Your business (and board) need key metrics like MRR, renewal rates, churn rates, net retention rates, and CLV to measure how your business is doing. The problem is that these kind of essential SaaS metrics are super hard to calculate with just spreadsheets. You can’t completely trust your data because it’s all coming from disparate systems rather than a single source of truth. And you have to come up with complicated formulas to calculate the SaaS metrics that subscription companies need. For example, the formula to calculate CLV is huge and factors in a number of other metrics. If any of those calculations are off, it all falls apart.
Solution: You need a system that’s dependable, one in which you can trust that the numbers are accurate. You also need a system that will automatically calculate all the essential metrics without the need for you to develop complicated formulas for each.
Do you see a theme here? Manual = bad. Automation = good! In the early stages of a company, a spreadsheet might suffice—though still not the most efficient means of managing your finance functions. But as your company grows, it’s just a constant slog and struggle.
What you need is a system that enables automation and consolidation, streamlining your workflow and enabling the business processes that will allow your business to grow — a system that empowers you to automatically perform complicated calculations to manage different billing models, obtain essential subscription metrics, run necessary reports, and more.
In the end, the only way out of spreadsheet hell is to say goodbye to your spreadsheets.