Dean Kaplan is president of The Kaplan Group. He writes about business debt collection & contract negotiations & provides financial advice.
Nearly two decades have passed since the advent of cloud-based services that, one by one, have transformed the way we do business. The startups that pioneered subscription-based software services helped us streamline customer care, boost team collaboration, host live meetings across time zones and much more. One look at the financial statistics for these companies tells a story of innovation and rapid growth.
However, many software-as-a-service (SaaS) startups emerged from this blaze of success to find themselves engulfed by new challenges. Sound cash management is just one of the disciplines they’re racing to master in increasingly volatile times.
Efficiency And Revenue Health: Top Priorities
Paddle, a U.K.-based provider of billing and operations solutions for SaaS providers, conducts frequent surveys on industry trends. In a 2023 report, SaaS companies shared pressing concerns about revenue health. One-third of all companies said they would focus on operating efficiencies that could trim costs and extend their cash runway to 18 to 24 months.
Research by my company suggests that SaaS companies have acted on these concerns by improving processes that turn sales into cash. The study found that two key accounts receivable (AR) metrics—days sales outstanding (DSO) and AR-to-sales ratio—have improved dramatically among top SaaS providers.
How Billing And Payment Efficiencies Fuel Progress
With venture capital tight and the cost of borrowing consistently high, AR efficiency has become a key priority for SaaS leaders. The industrywide average DSO dropped from 58.7 days in 2020 to 54.03 in 2024, a compound annual decline of 2.17%.
A prime example is Salesforce, which reduced its DSO score by an impressive 20.6% from 2022 to 2024. While its current score of 139 days is higher than average among other SaaS leaders, this may reflect the company’s drive to add enterprise clients, whose credit and procurement practices dictate longer collection cycles.
Another standout: Zoom Communications Inc., which experienced a 1,269.7% surge in revenue from 2019 to 2024 yet maintained an average DSO of 51.4 throughout. An amazing result, especially considering the range of clients Zoom serves—from home-based distance workers to solopreneurs to giants in virtually every industry. AR efficiency, as one part of the company’s disciplined approach to operations, helped Zoom post net profits of $1.75 billion in FY25.
How Leading Companies Meet Their AR Objectives
Specific AR practices vary from business to business, and there are numerous key performance indicators (KPIs) to help measure success. But the positive results seen among SaaS companies reflect core disciplines that are essential for progress. These steps prevent, rather than heal, costly losses that weaken a company’s cash position, especially in turbulent times.
1. Consistent Credit Policies
When companies are managing AR carefully, a thorough credit investigation of each potential creditor is always the first step. An applicant’s financials and payment history may also be compared to profiles of existing customers to predict default risks before credit is granted.
2. Advanced Billing Systems
Artificial intelligence (AI)-driven systems can help assure speed and accuracy while allowing clients to specify what details they need to approve and pay invoices. Since (in my experience) the majority of late payments stem from misunderstandings between customer and supplier, a system that anticipates questions and concerns is essential.
3. Predictive Data
Powerful billing systems supply real-time indicators that specific accounts, or groups of accounts, may soon fall behind. Keeping a daily eye on these trends empowers AR teams to respond quickly, moving problem accounts into a secondary process of outreach, negotiation and resolution.
4. Customer Care
Retention of clients who consistently pay on time is a goal shared across operating teams. Billing teams contribute to this goal by offering impeccable service for customers who get in touch with questions or disputes. They can also identify and reward loyal customers who have earned more generous terms or higher credit limits.
5. Payment Convenience
Offering multiple payment channels accelerates receivables. Clients who need to finance payments should be able to do so easily—and those who wish to negotiate directly with the receivables team know exactly how to get in touch.
The Reward Of Healthy Receivables
Paddle’s survive-or-thrive recommendations seem especially urgent as SaaS companies of all sizes navigate choppy waters. Global unpredictability calls for strength and steadiness—not only as a way of staying afloat but as the necessary course for future innovation. Healthy cash flow will fuel fresh ideas to carry the SaaS industry into the next chapter of growth.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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