5 Steps for CFOs Evaluating Payments Software

Turn payment processing from a burden into an advantage.
5 Steps for CFOs Evaluating Payments Software

Software payments are unlike other business expenses. With many companies paying for more than 65 SaaS subscriptions already, it’s easy to see how paying for the software your teams need has become some business’s second or third-largest expense behind payroll.

At Cledara, we see which tools scaleup finance teams and their leaders are using and payments are a critical financial management function they purchase SaaS for. 

Startup and SaaS payment processing spans many business-critical activities, such as:

  • paying employees and suppliers
  • keeping accounts receivable (AR) current
  • reimbursing employee expenses 
  • accepting customer payments
  • and meeting various tax obligations.

Payment processing is highly complex. And for a long time, it’s been a largely manual process too. For startup CFOs and tight-knit finance teams, manual payments can be a brake on productivity and innovation. 

Startups and SaaS firms must evaluate payments differently 

And for SaaS companies, in particular, payments infrastructure can be key to growing revenue around SaaS operating principles, such as recurring billing, plan upgrades, and renewals. The right payment infrastructure can also help SaaS businesses to address revenue leakage from failed payments and customer churn.  

Failed payments cost the global economy almost $120 billion in fees, labor, and lost business in 2020. Today, a range of payment providers are attempting to solve customer billing problems for startup founders and SaaS companies, and the CFOs, AR professionals, and bookkeepers who run their finances. 

But how do you know what’s important, especially given that many of these vendors are targeting much larger enterprises than startups or scaleups like yours? 

You need your own unique process for evaluating payments SaaS, when leading the finance function in a startup or scaleup. Tech-savvy CFOs are well placed to set the bar for efficient payment processes. Here are our five tips to help you evaluate payments SaaS.

1. Learn about payments infrastructure

Payments infrastructure has become a key part of the finance department’s software stack, but your choice of payment provider will have wide-ranging implications for how efficiently you can move and manage funds inside and out of the business. 

Having a solid B2B payment infrastructure supports the timely collection of your receivables, cash flow monitoring, and income and expense tracking for tax reporting purposes. In 2022, payments infrastructure includes:

  • Payment processing companies like Square, PayPal, and Wise who manage and transfer finance data between banks and card providers to facilitate transactions 
  • Payment gateways, which link e-commerce store checkouts with merchant accounts
  • Your business’s merchant account for accepting customer payments and paying fees to card networks such as Visa, Mastercard, and American Express
  • Digital wallets for holding and moving funds and currency balances
  • Identity verification, encryption, tokenization, and data security
  • Bank account linking and accounting software integrations.

In the past, companies had to manage each of the activities in a manual way, sometimes even developing their own IT infrastructure to do so. The likes of Stripe, Paypal, and Wise have since bundled many of these services together to facilitate and process payments on your behalf. But like any other SaaS you use, payment providers need to be actively managed and evaluated for both their usefulness and their ROI. 

2. Consider cross-border payments

While the number of payments technology companies is growing by the day, some only have capabilities and licenses to operate in certain parts of the world.  

  • When assessing potential payment providers, be sure to check if their services (and fees) have the ability to scale and internationalize with your startup. 
  • This is particularly important for startups that were established in one region, but have plans to go to market in another. While payment rules are becoming more and more standardized in the EU, elsewhere they remain fragmented. 
  • There is no global standard for international B2B payments, despite payment systems like SWIFT, IBAN, and ACH being widely used by finance teams across the globe. This can often result in hidden fees from either the payee or payer bank.

See how Cledara helps you evaluate, manage, and pay for SaaS. Book a demo today.

3. Pay attention to FX and currency fees

As you expand intentionally, you’ll likely need to work with more than one payment provider, hold funds in multiple currencies, and offer your customers localized checkouts, in their own language and with their own preferred payment methods. 

Offering customers a wide range of payment methods and localized billing experiences is great for acquisition and retention. 

  • But these offerings will have implications for processes like your collection time frames, order-to-cash cycles, and banking and transfer fees. 
  • Some payment processing companies begin to charge a monthly fee for holding currency balances over certain thresholds. 
  • These fees may seem small in isolation — but they soon become a problem when you scale up in many different markets, with many different currencies. 

Be sure to understand the fee schedules of any payment processing partners, and remember, you can often secure preferential rates once you begin to achieve higher average transaction volumes (ATVs). Understand what those rates are upfront so you can plan ahead and ensure a provider will scale with your needs. 

4. Assess compliance standards 

Payment localization and sales tax compliance adds complexity to your financial management processes. Globally, there is a bewildering different number of tax codes for an activity like sales. 

For the most part, your startup needs to collect sales tax in the country where your customer makes a purchase, not where your HQ is. Your business can be a merchant of record (MoR) and take on these responsibilities internally, or it can work with a payment processing partner who will ‘white label’ the process.

Be sure to assess each payment processing company and payment gateway’s compliance features. That means ensuring that they can help you meet anti-money laundering legislation (AML), know-your-customer (KYC) obligations, and the Payment Card Industry Data Security Standard (PCI DSS). 

5. Explore financial automation

Lastly, weigh up how your payment infrastructure will affect your finance team, and you, as the CFO. The more sales channels you have, the more involved your accounting processes become. The right payment processing partners will complement key financial processes like accounts receivables, accounts payable, and cost management. 

The most useful payment processing companies and payment gateways should also:

  • sync with cloud accounting software, to help you reconcile transactions
  • automate bill reminders, subscription renewals, and failed payment alerts
  • support double-entry bookkeeping so your books remain clean and accurate.

Payments that scale

By better evaluating how your finance team and the wider company use payments SaaS, you can turn payment processing from a business annoyance into a business advantage. For CFOs, that journey starts with getting up-to-speed with modern payments infrastructure, and how it can help (and hinder) your scale-up ambitions. 

See how Cledara helps you evaluate, manage, and pay for your software.
Book a demo today.

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Jenny Liu
Director of Finance @ Napo