How to Increase Your SaaS Cash Flow in 2023

Down Economy
Jan 23, 2023 · by Alisher Akbarov
How to Increase Your SaaS Cash Flow in 2023

Cash flow management is vital to SaaS businesses in any industry. It’s important to keep an eye on the cash flow within the company and manage it mindfully. The rule of thumb: control your expenses, track where the money is going, keep overspending down to a minimum. Basic measures like these may be enough for keeping your business afloat, but surely are not close enough for a company’s revenue growth.

To grow sustainably, businesses that rely on annual or monthly recurring revenue must work hard to improve cash flow and convert into a profitable company. Here we give you 5 ideas on how to increase your SaaS cash flow in 2023 and become cash flow-positive faster.

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5-Step Guide on Revenue Growth for Bootstrapped & Seed Stage Startups in 2023

1. Enterprise Companies as Customers

Land a few big companies with whale-sized budgets if the current state of your solution allows you to. Easier said than done, but it’s worth it. We all know the Pareto Principle of 80/20 — about 20 percent of your customers produce 80 percent of your sales. Enterprises become the small subset of big-spenders that account for the majority of business revenue.

These companies are good for boosting business and cash flow growth, they have big budgets and are perfectly fine prepaying a year or multiple years of cash in advance. Your business is going to get that huge sales boost when you land a mega-client. However, don’t solely rely on ‘landing whales’. They can indeed help with cash flow, but your business might be hit as hard by the loss of a few top customers.

2. Optimized Invoice and Recurring Payments

Being a subscription-based SaaS company, you can benefit hugely from simply invoicing on a regular basis. So, we recommend optimizing your billing. Schedule withdrawals from client bank accounts for the same day each month, send out digital invoices at the same time every month, and integrate payment links for your customers’ convenience. The easier you make it for subscribers to pay for your product or service, the better your retention is likely to be. It also helps increase customer satisfaction. Remember to systematically reconcile payment transactions in your accounting software. These simple steps improve cash flow noticeably.

To avoid the possibility of exceeding customer credit limits or incurring excessive fees, collect pre-authorized direct debit payments. Have clients authorize you to automatically charge their credit or debit cards. Setting up and automating recurring customer payments makes planning around your business’s forecast easier and provides your business with better cash flow predictability.

3. Incent Annual & Multiyear Prepayments

In scaling the cash-flow side of SaaS, you want customers to purchase annual contracts over monthly. You get all the cash up-front, and your churn drops almost by definition. However, customers need the incentive to choose an annual subscription over a monthly one.

Due to the way procurement and budgeting processes work, bigger companies look to sign annual contracts. Nothing is a bigger inconvenience for an enterprise than having to go back to procurement every single month to get an invoice approved. At the same time, small companies look for discounts to reduce expenses.

Offer desired discounts to get customers to prepay for a year, and even bigger discounts for two years or more. Often a discount of around 10–20% is enough to entice clients to opt for annual subscriptions. Another option is to provide multi-year subscriptions for customers who have worked with you for a number of years, offering them to lock in the fixed price for several years and protect them from the annual price increases. Whatever option you choose, remember that multi-year deals need to be what the customer wants.

4. Upgrades and Upsells

Upgrading helps balance demand and supply by shifting excess capacity of high-value products to low-value products with excess demand. The upgrades allow the company to get consumers to commit to purchases at lower prices and then extract additional revenue with the upsell.

Rather than trying to reel in new customers, increase your business cash flow by marketing towards the current customers by emailing and texting upgrade offers and new products that they would use. Sending special offers for better service and creating new products and features for existing customers increase the company revenue, which is much easier than convincing someone new to buy a product or service.

Regardless of whether you’re looking to convert free trial users into paying clients or you want to upgrade loyal customers to a higher tier, the trick is making it as tempting and easy as possible for customers to upgrade with contextual, timely, self-service prompts.

5. Customer Retention and Customer Churn

Customer retention is the key to building reliable cash flow in business. The cost of retaining an existing customer is usually lower than acquiring new ones. Excluding marketing costs and sales commissions, renewals are almost pure profit. In order to maintain the revenue stream generated by customers purchasing your product or service, your clients must be nurtured to ensure that they’re getting the full value of it. By keeping track of customers and connecting with them regularly, they become a recurring revenue source for the business.

Get client feedback and analyze metrics like churn and customer acquisition cost. Identify the reasons behind customer churn rates. Remember: every client you lose reduces revenue, has a significant impact on your business as it lowers cash flow and profits and makes it harder to cover costs like marketing expenses. Make improvements based on the feedback before upping your sales and offering upgrades. Contact the clients at least 60 days ahead of their subscription expiration. That helps you get renewals earlier and paid on time, increases retention rates and improves cash flow directly.

Another great way to reduce customer churn is to split payments with Comfi. If you offer a high-grade product or service with high prices or your clients are small startups who cannot afford purchasing your products right away, Comfi can help your customers to instantly buy your product or service and still get the discount for choosing annual subscriptions.

Comfi allows your customers to split the annual subscription cost into 4 or 12 interest-free tranches over 4 or 12 months and purchase your product right away with no hesitation. Comfi upsells your existing customers by offering them annual subscriptions with the convenience of paying monthly. As a result, more customers will commit to you for longer periods, allowing you to strengthen your business with ease, increasing your cash flow.

As a BNPL company Comfi bears credit risk of not meeting contractual obligations, manages all credit decisioning, and is responsible for collections, at the same time making the net terms process easier and faster for end customers. Comfi doubles your annual plan sales, increases conversion rates, improves customer LTV, and grows business revenue.

To Sum Up

Increasing SaaS cash flow is crucial for sustainable growth and thriving of business. Even though new customer acquisition is a priority growth activity for most SaaS businesses, after month 24 or so, renewals and upgrades / upsells combined will make the majority of cash flow.

So you must provide excellent customer service and take care of your clients extremely well. Cash flows straight from that, as this is your highest margin activity after the first year of operation.

Offer your clients split annual payments with Comfi today and get loyal clients for years to come, increasing your cash flow from today on.

Let’s talk your revenue together
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Amal Abdullaev

Co-founder at Comfi

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Alisher Akbarov

Alisher Akbarov

Co-founder, COO

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