<img height="1" width="1" style="display:none;" alt="LinkedIn" src="https://px.ads.linkedin.com/collect/?pid=1310905&amp;fmt=gif">


Explore CloudZero

Overview Icon

Discover the power of cloud cost intelligence.

Services Icon

Give engineering a cloud cost coach.

Pricing Icon

Learn more about CloudZero's pricing.

Demo Icon

Request a demo to see CloudZero in action.

About Icon

Learn more about CloudZero and who we are.

Connect With Us

Got questions? We have answers.

Questions Icon

Speak with our Cloud Cost Analysts and get the answers you need.

Get in touch arrow-right


How SeatGeek Decoded Its AWS Bill and Measured Cost Per Customer

Read customer story arrow-right
User Icon

By Role


Enable engineering to make cost-aware development decisions.


Give finance the context they need to make informed decisions.


Decentralize cloud cost and mature your FinOps program.

Use Case Icon

By Use Case

Provider Icon

By Provider

Amazon Web Services (AWS)

Measure, monitor, and optimize cloud spend on AWS.


Combine cloud cost intelligence from AWS and Snowflake.

Resources Icon



Discover the best cloud cost optimization content in the industry.

Cloud Cost Assessment

Gauge the health and maturity level of your cost management and optimization efforts.

Content Library

Browse helpful webinars, ebooks, and other useful resources.

Case Studies

Learn how we’ve helped happy customers like SeatGeek, Drift, Remitly, and more.


Guide: How To Overcome Tagging And Accelerate Cloud Cost Allocation

See guide arrow-right

What Is SaaS Finance? 12 Metrics You Must Follow

Follow along as we cover what SaaS finance is, the keys to successful financial modeling, and the metrics that all SaaS finance teams should be following.

Is your current cloud cost tool giving you the cost intelligence you need?  Most tools are manual, clunky, and inexact. Discover how CloudZero takes a new  approach to organizing your cloud spend.Click here to learn more.

One of the most important things SaaS companies need to think about in order to be successful is financial modeling.

To succeed in the increasingly competitive SaaS space, finance teams need to carefully consider a wide variety of KPIs and find ways to effectively manage both present and future cash flows. Cash flows and liquidity are two of the most common challenges faced in this industry — if effectively addressed, your company can position itself for long-term success.

Having a robust SaaS financial plan can help give your business a lasting competitive edge.

In this article, we’ll discuss the most important things you should know about SaaS finance, including the keys to financial modeling and the financial metrics that all SaaS teams need to pay attention to. Additionally, we will discuss some of the most useful software that can help your team address its growing financial needs.

Table of Contents

What Is SaaS Finance?

SaaS Finance is a term used to describe the financial plans and operations of any company involved in the SaaS space. Many of the companies in this space offer software that is billed on a monthly or annual basis. Regardless of the pricing model employed, SaaS Finance remains abundantly important to ensure profitability. 

Two key components of SaaS finance are financial modeling and key performance indicators (KPI). As the terms might suggest, financial modeling helps firms forecast future financial changes and discover ways to improve their bottom line. Furthermore, KPIs can be used to help firms develop a greater insight into their financial operations and identify opportunities to change for the better.

As stated by the Corporate Finance Institute, “Building a financial model for a Software as a Service (SaaS) company typically requires creating a monthly model that forecasts users, subscription rates, churn rates, and average revenue per user (ARPU).” These models are designed to address the unique challenges inherent to the broader SaaS industry.

SaaS finance, like most types of professional finance, relies on three key accounting statements: the income statement, the balance sheet, and the statement of cash flow

Each of these statements plays a crucial role in the reporting and decision-making process and can help enterprises address various challenges, such as liquidity, profitability, tax obligations, expansion, and more.

Ideally, a good SaaS financial model can help firms answer a variety of important questions:

  • What is the cost of acquiring a new customer? What is the cost of maintaining an already existing customer?
  • What are the costs and benefits of switching from a licensing to a subscription payment model?
  • What are the marginal benefits of obtaining a new subscription?
  • How financially sensitive is our company in the status quo?
  • What is the current value of our organization?
  • What are the most obvious changes our organization can make to create a better financial position?

Of course, answering each of these pivotal questions is not always easy. Sudden changes in supply and demand, new regulations, and other variables can all make it difficult to predict what the future has in store. 

However, what remains clear is that with better data, finance teams can put themselves in a position to make better long-term decisions. This is why financial modeling for SaaS firms is so fundamentally important.

What Financial Models Are Used in SaaS?

As suggested, the basis of financial modeling in the SaaS industry — as is the case in most industries — will typically require the use of the three key financial statements. 

The balance sheet offers a “snapshot” of the company’s assets (which can include subscriptions, licenses, patents, and other “digital entitlements”), liabilities, and equity. The income statement will report the company’s revenue and expenses over a specific period of time, typically the year. The statement of cash flows will illustrate how cash has moved into and out of the company and will categorize each of these cash flow movements.

From there, the company will need to forecast its future activities, including changes in users and subscribers (whether positive or negative), churn rates, and expected revenues from each user. 

It is not always possible to know these figures with certainty, but a good model will make it possible to “plug and chug” different scenarios and see how your business might be affected. For example, suppose your company was to double subscribers. Would that also double your bottom line?

Sensitivity analysis is a key component of SaaS finance. Essentially, the purpose of sensitivity analysis is to determine how changes in one variable (the input) will cause changes in another variable (the output). In some cases, this sort of analysis is called the “What-If” analysis.

Discounted Cash Flow Valuation is also commonly used by CFOs and other key decision-makers within the SaaS industry. DCF valuation accounts for the value of all expected future cash flows, adjusted for the time value of money (TVM). Because the subscription model used throughout the SaaS industry causes cash flows to be rather predictable, DCF valuation is usually rather straightforward.

Having reliable financial models will not only make it easier for companies to make better internal decisions, but these models will also be used by other relevant parties, such as venture capitalists, lenders, tax authorities, investors, and more.

What SaaS Finance Metrics Should Finance Teams Monitor?

By now, it should be clear that what enables SaaS finance to thrive is monitoring the right financial metrics. Though the metrics that make the most sense for your business will depend on your specific needs and business model, these are twelve of the most common:

1. Monthly users

For your financial models to be accurate, you will need to accurately forecast how many people will be subscribed to your SaaS in any given month.

2. Churn rates

The churn rate is the percent of customers that abandon (or unsubscribe from) the service within a given period of time. High churn rates might indicate there is something fundamentally wrong with the software.

3. Average revenue per user

Understanding the revenue that each user typically provides will make it easier to make decisions regarding expansions, entering new markets, and consumer outreach.

4. Customer acquisition cost

Customers, unfortunately, are not free. How much is your business spending for one additional user?

5. Customer lifetime value

Higher lifetime customer values will make it easier to expand the company and find new opportunities for growth. 


The ratio between the lifetime value (LTV) and the customer acquisition cost (CAC) is a crude way for CFOs to determine the return on investment for each customer.

7. Payback period

The payback period, simply, illustrates how long someone will need to remain a customer in order for you to “break even.”

8. Market size

While some software might be used by just about everyone, others will have a much more targeted possible audience. Understanding who might eventually be a customer can help you develop a better marketing model.

9. Discount rate

Applying an industry-consistent discount rate will help make it easier to determine how much future cash flows are worth in the status quo.

10. Net profit margin

Ultimately, your enterprise was created to someday produce a profit. Even if you won’t break even for several more years, net profit margin is always something that is worth keeping in mind.

11. Unit cost

For SaaS, unit cost may include cost per feature, per customer, per product, per message, or even cost per dev team. It’s important to understand the unit metrics that matter to you most and how they map to your cloud costs so your team can make engineering decisions that ensure profitability.

Whether your bill goes up or down is meaningless without business context.  CloudZero offers a simple and flexible way for you to group and measure costs  by whatever metrics make sense for your business (e.g., cost per customer, per  feature, per product, per team, and more).Click here to learn more.

12. Cost of goods sold (COGS)

Finding ways to reduce the cost of goods sold is often one of the most effective ways to improve profit margins and potentially lower prices.

The more data your business can use, the more accurate your financial models will be.

SaaS Finance Software to Explore

Anyone who is familiar with SaaS knows just how valuable software can be. Here are some of the most popular platforms used across the industry:

1. For SaaS accounting: Quickbooks


As the most popular accounting software currently in use, QuickBooks makes it easy to generate financial statements, track accounts, plan your taxes, and plan for the future.

2. For understanding SaaS COGS and unit metrics: CloudZero


Cloudzero’s cloud cost intelligence platform enables SaaS companies to understand exactly how their AWS costs drive their specific features and products. By mapping cloud costs to products, features, dev teams, and more, engineering and finance alike can identify unit cost like cost per customer (e.g., answering questions like, “Who are our most expensive customers?”) and understand their SaaS COGS.

3. For building flexible financial models: Microsoft Excel

Microsoft Excel

An oldie but a goodie, Microsoft Excel is a standard tool for anyone hoping to build flexible financial models and test various “What-If” scenarios.

4. For analyzing invoices: Oracle NetSuite

Oracle Netsuite

Oracle NetSuite is useful for analyzing invoices, streamlining compliances, making calculations, and adjusting your general ledger.

5. For monitoring SaaS metrics: ChartMogul


ChartMogul, which uses a monthly subscription model, is a useful platform for tracking key SaaS metrics, such as LTV, MRR, cashflows, and churn rates.

Take Control Of Your SaaS Brand’s Finances

As the SaaS industry continues its impressive rate of growth, more financial software and tools are likely to emerge. The industry presents a tremendous amount of potential and those who are willing to invest in better financial models, will be in a position to succeed.

Using some or all of the tools mentioned above will help put your brand in a position to have a strong understanding of the financial metrics that matter to you most. When it comes to identifying unit cost, SaaS COGS, and seeing how your AWS bill maps to your specific products and features, CloudZero’s cost intelligence platform provides SaaS teams the data and cloud cost visibility to find the answers they need.

Request a demo today to see how CloudZero can help your team answer questions about your cloud spend and uncover the cloud cost metrics that matter to your bottom line.


Join thousands of engineers who already receive the best AWS and cloud cost intelligence content.