Successful SaaS companies know how to invest their capital efficiently to drive business growth. And your P&L statement is a gold mine of opportunities — if you know where to look. Learn how to turn your income statement into a strategic asset that helps you drive growth for your business.
Profit & loss (P&L) are the core vital signs of a SaaS company. But in today’s world, accurately tracking P&L in a time-sensitive manner is one part balancing act and one part straight magic. Without efficient processes — and the tools to help — finance teams are left treading water in a sea of fragmented financial data.
Effective P&L management starts with income statement basics. But with the right approach, you and your SaaS company can turn your profit and loss statement into a strategic asset for business partnership.
Table of Contents
What Is P&L Management?
Profits and loss management refers to the strategic management of costs in relation to generating profits. While much of P&L strategy gets boiled down to “cutting costs” and “increasing sales,” P&L management encompasses a broader and deeper set of practices and surgical-level financial oversight.
Finance teams that have mastered P&L management don’t just deliver accurate income statements and variance reports —they dig into the numbers, identify opportunities to drive growth with influxes of cash, find areas where they can efficiently pull back spending, and come up with fixes for issues in sales and marketing spend.
In other words, effective P&L management helps you elevate your role from basic reporting to true strategic partner for the business.
The Importance of P&L Management for Any Business
P&L management for SaaS finance lives by the same principles as most other businesses. Along with your cash flow statement and balance sheet, your P&L statement (also known as your income statement) is one of three financial statements that make up the core of financial management and forecasting. It shows you three components of a business’s financial health:
- Revenue:Sales of products or services (in SaaS cases, subscriptions, tiers of product/feature access, or overall seats/users).
- Expenses:Cost of goods sold (COGS) or, for SaaS businesses, cost of revenue.
- Net income: Business revenue minus business expenses or the bottom line.
Your P&L statement provides insights into your business’s profits by detailing the revenue you’re generating and the expenses incurred to achieve those profits (or losses). From there, you can determine how long the company is viable and operational before running out of money.
Where your business stands on the P&L statement should influence your ongoing operational and sales strategies. The P&L management breaks down into one part sales, one part operating cost management, and one part bookkeeping.
P&L for SaaS Businesses: Special Considerations
There are certain qualities that are unique to SaaS companies that leaders in other industries don’t have to worry about. The typical SaaS pricing strategy relies on subscriptions for a company’s revenue, and subscription models vary depending on the service, customer, and other factors. So understanding SaaS income and expenditures is complicated.
And since VC-backed SaaS companies operate at a loss to drive rapid growth, they have a shorter cash runwaythan other businesses that operate at a profit or have at least hit a breakeven point. That money raised in your Series A is really only meant to carry you 12-18 months. The countdown begins before the money hits the bank — you’ve got to get your team to the next growth milestone if you’re going to make it through a Series B and beyond. And at this point, you should be aiming for a runway of 24-36 months through your growth stage rounds.
Strategic management is about optimizing costs to ensure you stay on track. And when handled with efficiency in mind, effective P&L management should easily translate into a high-level and thorough story of the business’s capital efficiency to investors.
Check Out Our Waterfall Chart Guide Here
Income Statement (Profit and Loss) Waterfall Chart Guide
Common P&L Challenges
The common challenges of P&L management align with the typical hurdles finance teams face on a daily, weekly, and monthly basis. Highly manual, time-intensive workflows prevent you from making the shift from just getting the financial statements out the door to really understanding the “why” behind them (and communicating that to the business).
Teams that effectively manage the following P&L challenges are the ones that the business sees as true strategic partners.
Time Suck
Managing the enormity of company spending through spreadsheets — so-called legacy processes — is a cumbersome nightmare. It’s not the data’s fault. Businesses, especially VC-backed SaaS startups, are complicated beasts. It can take days to weeks to create an accurate and thorough report. And by then, the data is already stale.
Stale Data
That stale data can still give your team insights into financial efficiency, operational efficiency, and overall sales. But it’s too old to have offered you insight to prevent a problem before it starts.
Error Prone
Speaking of spreadsheets, how sure are you that no one fumbled a cell and broke the subtotals? How sure are you that no one mistyped a formula? Finance teams pride themselves on avoiding tiny mistakes like these. But human error is unavoidable. Even the best teams are prone to it, and even the best teams have suffered.
Interdepartmental Collaboration
When creating the P&L statement, you rely on other teams to submit their numbers accurately. So when something looks off, that means you have to track people down before you can even begin to figure out what went wrong, which further delays the report by hours or days depending on the other department leader’s availability.
Cumbersome Variance Analysis
Even when you don’t have to wait for a department head to answer a Slack message, analyzing budgeting variances is still tricky with legacy processes. How quickly can you drill down into the numbers? With spreadsheets, this process can take hours simply due to the sheer file size of the spreadsheet.
How to Improve Your P&L Management in 4 Steps
Finance teams can improve P&L management through best practices and culture shifts. But it will also depend on other department leaders’ availability for collaboration to ensure opportunities for improvement are surfaced as soon as possible.
1. Build a Finance Team Full of Investigators
The easiest way to optimize a finance teamis to build a culture of investigation. The mindset of finance team members needs to be 100%t detective. P&L statements aren’t a wash of numbers — they offer a unique way of looking at the entire business, boiled down to the numbers.
Finance teams have a unique vantage point within the SaaS business: the 30,000-foot view plus the ability to drill down into the details. When finance teams see themselves as investigators, they are more likely to get to the bottom of things. And that’s how 10x growth happens.
2. Surface the Problems
The P&L statement focuses on questions around generating revenue and the profitability of the business’s revenue strategies. But you can drill deeper into these questions by asking:
- Are profits lower than expected?
- Are trends moving in the right direction?
- Are costs higher than necessary for this campaign?
- How can you improve sales funnel metrics and move potential customers to the next level of the sales funnel faster?
- How much should you spend on adsfor the quarter?
The P&L shows the whole business simultaneously, which means the finance team is typically the only department that can see the big picture. And it’s up to finance to bring that picture to the appropriate department managers in a language they understand, such as a graph or written paragraph, to get the answers that lead to strategic insights.
3. View Problem-Solving as a Collaborative Exercise
A successful SaaS company is not run by finance teams alone. Though finance teams are essential to making strategic business decisions, they need to work with the sales and marketing teams, for example, if they’re going to find solutions to grow revenue via the sales funnel and pipeline. And they’ll need everyone onboard and dedicated to operational efficiency to ensure as lean a function as possible.
4. Make Recommendations and Follow-Up
After solutions have been identified and strategies are drawn up, it’s time to follow the numbers throughout the implementation process and build out initiatives. This is where finance teams answer the questions, “How well did we solve the problem?” and “What needs more attention?” It may result in sales and marketing departments especially looking into other metrics, such as ramp rate to full productivity, whether they need more headcount to accomplish goals, or where they can cut some spending to optimize other opportunities. While these changes may take a period of time for full fruition, the P&L statement may look to be on the rise over the next month to quarter to the next board meeting.
P&L Management with Mosaic
In a world of processes that take hours to complete and result in stale, error-prone data, Mosaic dashboards are breaking traditional P&L management processes (in a good way). The Mosaic platform lets you unlock the potential of business finance automation.
How are customers using Mosaic to improve P&L management? Let’s take a closer look.
Time Savings
What used to take a week of Excel data-wrangling is gone. Mosaic automates that work and can generate financial reports in seconds. All you need to do is integrate your current systems, and Mosaic does the rest of the minutia for you so your team can focus on digging into what those numbers mean for the business.
How do you “dig in” with Mosaic? By using a grab-and-go template. The income statementis an out-of-the-box template. Once your data syncs with Mosaic, all you have to do is click on the template, and it’s ready for you to analyze.
Efficiency
Mosaic’s automated reporting keeps you on top of what’s happening and lets you drill down into the details without going through departmental gatekeepers. So when numbers look off, you can click on the line to dig deeper and find the source of the problem.
Not to be looked over, Mosaic also offers operational efficiencies. Those person-hours spent compiling spreadsheets and tracking people down cost precious business resources. People are the highest cost at most SaaS companies, after all. Mosaic reduces these costs significantly.
Accuracy
You can’t fat-finger anything or mistype with Mosaic because it’s automated. When you know you can trust your numbers — and they’re updated in real time — you can stop worrying about a tiny human error derailing your business strategy.
And, when it comes time to present your findings to department heads, C-level executives, business owners, or investors, Mosaic allows you to create accurate shareable P&L reports in seconds. You gain more time to focus on your financial storytelling and making your team shine like the finance stars you are.
Strategic Finance Software for CFOs & Finance Teams
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Bottom Line: Mosaic Makes Proactive P&L Management Easy
For teams stuck managing data collection, P&L management is no more than a Sisyphean task. But teams who leverage a Strategic Finance Platform like Mosaic go from managing the numbers to transforming them into a strategic growth strategy.
Let our team show you how Mosaic can help. Get a demo.
P&L Management FAQs
Whose responsibility is it to manage and monitor the P&L?
In most cases, the CFO or head of finance is responsible for monitoring a company’s P&L. But, the whole finance team — and to various degrees, the entire organization — has a stake in efficient P&L management. The most successful companies build a sense of P&L responsibility company-wide.
How do you forecast P&L?
You forecast P&L by reviewing past financial performance, creating benchmarks based on that performance, and predicting future outcomes, including:
- Future revenue
- Variable costs
- Gross profit
- Net profit
You can base these figures on several assumptions, including using your annual growth rate (if you have one). But it’s always a good idea to forecast for best and worst-case scenarios. Forecasting with hiccups and roadblocks in mind can help you create a more agile strategy and, thus, a resilient business.
Whatis a P&L statement?
The P&L, or profit & loss statement, is a financial document that includes information vital to a company’s profitability. It’s often boiled down to three essential numbers: revenue, costs, and net profit. But there’s so much more to be found.
Operating expenses can be broken down so your team can see where the money is going. Your finance team can use the numbers found on the P&L to generate several vital business metrics, including profit margin, gross margin, and net burn.
