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.
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.