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The risk of legal penalties and monetary fines are a cause for concern with compliance failures. But often the biggest danger relates to how it affects business growth.
Just think of what happens when a thriving B2B SaaS business accidentally leaks the personal data of its customers, including full names, birth dates and Social Security numbers. Or consider another scenario where it inadvertently skips paying local sales tax for years on end.
Apart from facing the ire of regulatory agencies, such issues result in bad publicity and anxious customers, and investors. Before you know it, a small compliance mistake will snowball into stalled businesses expansion plans, product launches, and funding rounds.
So, how do you avoid the risk of compliance chaos?
The simplest answer is: you need an actionable compliance framework from quote to cash. And a B2B subscription management software can help with that.
In this blog, we’ll cover how compliance enables business growth and share best practices for the same.
Why does a growing business need to be compliant?
Growth and compliance go hand-in-hand.
It's a non-negotiable for your SaaS business especially if you are considering growing your business via:
- Expanding to new geographies: You can avoid fines and disruptions in operations by being mindful of global accounting standards and regional payment regulations, tax laws, and data regulations.
- Raising a new round of funding: Potential investors will always run checks on your business for compliance issues. If your reputation is not intact and books are not in order, you are likely to lose out on the financial boost.
- Adding more third-party integrations: More external app integrations means more breach points for data security. This is why it's essential to protect data in your CRM.
- Offering new product and pricing combinations: As you grow your business and add new clients, you will want to offer discounts, new products, and different pricing for different customers. Also, you need to be aware of different invoicing requirements. All of this makes subscription revenue recognition very complex and difficult!
Compliance is a business driver that builds trust and confidence amongst customers, investors and other stakeholders.
It cannot be a one-time affair as the business environment and regulations keep changing and evolving. So you need to repeat this compliance exercise over and over again.
But with so much else happening in your business’ growth spurt, it is hard to decide whether to focus on business operations and finances or regular compliance checks. This is where subscription management software can be harnessed to automate financial compliance.
Case Study: How a SaaS business ramped up compliance
One of our clients, a high-potential SaaS company, was struggling with compliance issues across the board.
Here are four areas in which using a subscription management software, like Younium, helped the business rethink compliance and support growth:
1. Problem: The B2B SaaS business wanted to offer a complimentary month of services to their client. This meant that they started the contract only one month after the client was onboarded. The challenge here is that the business was handling customer data even before the contract, which wasn't legal or compliant.
Solution: Younium separated the charge date from the contract start date. This made it possible for the business to legally handle the customer’s data, while also delighting the client with that free month of services.
2. Problem: One of the SaaS businesses’ clients wanted to pay only after onboarding, which meant that project implementation happened even before agreement. This raises two important questions: How does the company predict the go-live date for the project so as to raise the contract with the correct costs? And how can they safeguard the business revenue if the client chooses to up and leave any time during the onboarding?
Solution: Younium allows for the creation of milestones by the customer success team, eg: finish onboarding. Once that milestone is achieved, Younium will calculate all the prorated charges until the subscription end-date. This will ensure no revenue loss.
3. Problem: MRR fluctuations were seen throughout the year due to daily prorated revenue recognition. For example, a client that was being billed €100 per month, the MRR changed based on the days in the month. In Jan the MRR was €102, in Feb it was €92, and so on. This was spreading confusion across the business, and investors began to think that the company was not stable.
Solution: As per the revenue recognition standard ASC 606, Younium helped the business recognize real MRR. This, in turn, offered internal and external stakeholders a realistic picture of how the SaaS business was growing.
4. Problem: Some of the SaaS businesses’ customers (especially government clients) wanted support with the PEPPOL format of e-invoicing.
Solution: Younium’s accounts receivable functionality enables sending and receiving e-invoices in a PEPPOL-compliant way. It integrates with billing gateways such as VISMA (auto-invoicing platform) and APIX so that the SaaS business can send e-invoices with the latest updates.
The technology allows users to send their e-invoices to the ERP. And Younium will interact with the ERP to understand which product to bill to which client, based on which agreements. Or they may directly send e-invoices to the customer via Yonium and also handle accounts receivable processes via Younium.
5. Problem: In the USA, each state levies different sales taxes. The SaaS business from our example, which has a legal entity in the US, was concerned about which sales tax should be applied when sending invoices.
Solution: Younium, thanks to its integration with TaxJar, intuitively adds the relevant sales tax to the invoice before the client sends it onwards.
Aside from formulating a strong compliance framework and strategy, it is essential that you automate billing, invoicing and revenue recognition.
You need a subscription management software that allows you the bandwidth to focus on growth instead of revalidation for reconfiguring your billing/revenue recognition system.
Younium talks to your CRM, ERP and own systems to manage all the relevant data and ensure compliance with the relevant regulations. Here is a video that shows how we also give your business access to relevant compliance requirements, full audit trail for all contracts, and reduce efforts during audit season.
Watch our on-demand webinar 👇