SaaS financial projections: revenue, costs and cash

SaaS financial projections turn customer growth, churn, pricing and hiring assumptions into revenue, costs and cash. Start from a closed actual month, project each driver explicitly, and keep collections separate from revenue. Save the projection before comparing it with actual results.

Start with the exports and assumptions

Bring a customer activity export, revenue report, payroll or hiring schedule, operating expense ledger, receivables aging and bank-reconciled cash balance. Use a consistent customer identifier and effective dates. The wider SaaS financial management review covers how these schedules support recurring operating decisions.

Build monthly columns with assumptions separated from calculated rows. The SBA's business planning guidance calls for projected income statements, balance sheets, cash flow statements and capital budgets, with more detail in the initial year. A monthly operating schedule makes the links between them visible.

This illustrative US SaaS business has one monthly subscription price, no expansion revenue, no annual prepayments and no bad debts. January opens with 1,000 customers, receivables of $10,000 and cash of $500,000. December recognized revenue was $200,000. All figures below are USD unless labeled otherwise.

Roll customers into recognized revenue

Assume monthly customer churn of 2.0%, a monthly price of $200 and evenly timed customer movements. Customer losses are rounded to whole customers before the ending balance is calculated. In Excel, the ROUND function uses zero decimal places to round to an integer.

With January in column B, enter these formulas and copy across. February's beginning customers use January's ending balance.

B4 =ROUND(B2*B3,0)
B6 =B2-B4+B5
B7 =(B2+B6)/2
B9 =B7*B8
C2 =B6

Average customers approximate service delivered during each month. Use effective service dates when customer movements are uneven. An ending customer count multiplied by price would overstate revenue when many additions arrive late.

Add delivery costs and hiring

Assume delivery costs equal 20.0% of revenue, with other operating expenses of $40,000 monthly. Paid headcount is 10, 11 and 12, and fully loaded monthly payroll is $10,000 per employee. Each hire starts on the first day of the applicable month; all expenses are paid in the same month. The gross profit margin guide explains the delivery-cost boundary.

B10 =B9*20%
B11 =10*10000
C11 =11*10000
D11 =12*10000
B13 =B9-SUM(B10:B12)

Keep hiring dates and compensation assumptions in a separate input schedule in a larger workbook. Include employer taxes and benefits in the loaded cost. Add interest, taxes and noncash expenses when the business has them; this simplified illustration assumes none.

Build collections and prove cash

Assume 95.0% of each month's revenue is collected that month and the remaining 5.0% the next month. Capital spending is $10,000 monthly, with no financing flows. This timing assumption fits the example's monthly billing; it does not fit annual prepayments. The SEC's revenue guidance specifically identifies accelerating ratable revenue to the billing date as a potentially misleading non-GAAP adjustment.

B14 =B9*95%+200000*5%
C14 =C9*95%+B9*5%
B15 =SUM(B10:B12)
B16 =B14-B15
B19 =B18+B16-B17
C18 =B19
B20 =10000+B9-B14
C20 =B20+C9-C14

January's receivables check is 10,000 + 208,000 - 207,600 = 10,400. Its cash check is 500,000 + 26,000 - 10,000 = 516,000. Repeat both checks monthly and tie the starting balances to the closed accounts.

Compare the saved projection with actuals

For an illustrative January actual, new customers are 80 and losses are 30, giving 1,050 ending and 1,025 average customers. Price remains $200; delivery cost becomes 21.0% of revenue, payroll remains $100,000 and other operating expenses become $42,000.

Use =Actual-Projection for each variance. The profit check is -3,000 - 1,450 - 0 - 2,000 = -6,450. Review complete periods; the month-to-date reporting guide explains comparisons before close.

Where it goes wrong

• Churn uses the wrong base. Apply customer churn to beginning customers and distinguish it from revenue churn.
• Billings become revenue. Annual contracts need separate recognition and collection schedules.
• Hiring is undated. A start date changes both payroll and cash timing.
• Revisions erase the baseline. Preserve the original projection and label each updated version.

Covirage is not affiliated with Microsoft.

Compare your SaaS projection file in Covirage

Bring your prepared projections and actuals workbook or Google Sheet; Covirage maps the columns, and its tools compute and check the comparisons. The external AI model explains the variances with every figure traced to its rows. Create a free Covirage account and bring a sample of your own data.

See Covirage for SaaS teams for the industry context.