Days Sales Outstanding
Many companies celebrate closing a sale with the signing of a big contract. However, closing the sale isn’t enough to keep a software company running. Collections are critical to cash flow, enabling businesses to make timely payments and investments. The faster companies are able to collect from their customers, the more successful the business is. Many software companies include negotiated payment terms in their contractual agreement with their customers and have a dedicated collections team that focuses solely on receiving timely payments to optimize days sales outstanding.
- 102 days
- 69 days
- 57 days
- 45 days
"As companies of all kinds increasingly rely on business applications to manage and inform day-to-day tasks, the value of embedded analytics will only grow.”
To read more about embedded analytics, check out this article.
Revenue growth is a key indicator of successful software companies making adaptations to new trends and technology in the ever-changing software space. The ongoing shift from traditional on-premise software to cloud-based and subscription services has put pressure on software companies to maintain steady revenue growth from their cloud offerings. This has forced traditional software vendors to shift focus and allowed the entry of new cloud first businesses in to the marketplace. Companies that can maintain a steady recurring revenue growth rate are the ones that will stand out in this increasingly competitive space.
The Software as a Service model dominates today’s software industry, so renewals are the ultimate measure of success. Renewal rates indicate how satisfied your customers are with your product and how sticky your product is. Other important metrics derived from renewal rate include attrition and customer lifespan. A lower attrition metric means a longer customer lifespan and more revenue for years to come. Renewal rates can be calculated based on the count of customers or the value of contracts. Many software companies calculate the renewal rate in several ways to get a full picture.
- > 95%
Time to Close
Finance FTEs per
HR to Employee
Ratio per 100
% of Total
Source(s): APQC, SPI, Finlistics
Your business may just be beginning to track this metric, perform this business function or identified this as a problem. Improved execution in this area should be a high priority.
Your business is competitive in this area, but there’s still room for advancement. Consider investments to improve related operations to achieve better results.
Best in Class
Your performance in this area is considered best in class and is superior to the average company in your sector. You’ve laid a solid foundation in this business function, and the next step is optimization.
You’re achieving the optimal results for this metric. Your business processes in this area are highly efficient and stand out against competitors. Keep investing in this area to maintain these results.