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How Animalz streamlined their Account Receivables at a cost of less than 1% of their annual recurring revenue, using Chargebee
Chargebee helped bring accuracy to Animalz’ accrual accounting process with its compliant Revenue Recognition Reporting
| Tech Stack | |
| Finance | Stripe (credit cards & ACH), Chargebee |
| Sales & Marketing | Airtable, HelloSign, Intercom, ConvertKit |
| Operations | Slack, Front, Quip |
| Analytics | Profitwell |
| Success | Intercom |
Chargebee has been really valuable in this fundamental thing, which is getting the data layer really good and strong and trustworthy. Because everything else is built on top of that
The Problem
Having a seamless Finance Operations right from the early stage is not something most Founders focus on. It was no different for the Founder of Animalz — Walter Chen. That was until he saw his financial statements to understand their profitability, and noticed that his revenue data was all messed up.
Having outsourced their finances to a back-office team, Walter realized that the primary reason that the numbers were messed up was that the accrual accounting was done incorrectly.
As a result, the recognized revenue was also recorded inaccurately.
The basic understanding of how recurring revenue operates was now under question. "A long time ago, I would just look at the bank account and every month and if the bank account was going up, then I could safely assume that we are profitable. But when you introduce stuff like invoicing and prepaid plans, then, the cash-in-cash-out gets a lot lumpier."
Accrual accounting solves for this spike-and-trough in showing revenue numbers by helping you match up the revenue and expenses better. They hired an extensive back-office team that did reconciliation and revenue recognition on a spreadsheet — this was erroneous and expensive.
This issue in this fundamental aspect of the business was throwing everything off the rails for Animalz. Walter soon realized that fixing their accrual accounting revenue recognition was the first order of business, and without doing that, every other business decision for all the teams would be for nought.
The Solution
Before Chargebee, Animalz used Stripe for credit cards and direct debit payments via ACH and Bill.com for invoicing, which he recalls was “the single worst piece of software I've ever used”.
Notwithstanding the pain of manual reconciliation process, the Success team would also end up spending hours in setting up payment during onboarding and following up to get paid on time. Managing multiple processes and systems let important details fall through the cracks.
They discovered Chargebee through Flightpath Finance that specializes in financial modeling software for SaaS.
From a systems point of view, Chargebee was a huge contrast to the existing practice with spreadsheets and manual reconciliation. With all the billing details consolidated in one place, Animalz had a very reliable view and audit trail of their accounts receivables.
The Payoff
- Accurate Revenue Recognition: According to Walter, “Nothing is going to be good unless we get the accrual accounting revenue recognition done correctly. We started using Chargebee, we back-imported invoices, so that Chargebee could singularly have all the data. That's how we ended up deciding to fix this problem with Chargebee”.
- Accepting payments from high-value ACV customers reliably: Dealing with high-ACV customers, Animalz is able to allow offline payments and reconcile them easily with Chargebee’s support for Stripe's ACH Credit Transfer.
ACH Credit Transfer via Stripe creates virtual accounts for each customer through Stripe, allowing for easy tracking of payment status for offline payments. Chargebee updates payment due invoices (offline) accurately and eliminates any manual effort required to search and update them. For Animalz, this method accounts for 95% of their payments, making it easier to track and reconcile offline payments. - Consolidated view of AR and Ageing Report: With Chargebee’s APIs and a simple script, the team at Animalz is able to generate a report on pending and paid invoices, with details on due dates corresponding to specific invoices. “The reason why this is super useful is because it's a place to have some kind of discussion to understand what's happening with the invoices to actually act on them”, adds Walter.
At a cost of investment that is less than 1% of the revenue, Chargebee has proved to offer far more value and accuracy than an outsourced finance team for Animalz.
Chargebee saves us a lot of time. Of course, it facilitates, collaboration and autonomy within the team. A lot of this is about getting higher quality data. We had a back-office team and we paid them around $3,500 a month. And part of their job was to do accounts receivable. And once we had Chargebee, we really didn't need them to mediate the accounts receivable process. We could just pull reports directly and follow up directly and I get it a lot better because it's not done manually.