Why be Conventional

As a CFO I have always been a strong believer in creating the sort of management reports that work for you. In the SASS an AI environment, the conventional P&L doesn’t really work which is why I’ve designed my own P&L. The format brings out the information from which many SASS metrics can be measured.

Firstly I split out the revenue between recurring (subscriptions, usage maintenance etc.) and non-recurring (consultancy work and other one offs). Then I apply cost of sales deductions being careful to include customers success costs that apply to the delivery of revenue in order to come down to a gross margin line so far so conventional.

Here’s where I differ: then I separate out what I call recurring costs which are the typical administration costs of running the business, property, professional fees, travel, and sub assistance, with the result and net position of what I call pre-contribution. This is important because it shows the sustainable position in the business before growth costs kicking below that line. I bring out all my sales and marketing costs in order to derive an EBITDA. You won’t find this P&L presentation in any accounting manual.

It’s a world away from any kind of generally accepted accounting practice (GAAP) but what I do is to drive information financial document highly relevant to SASS and AI companies. However if your businesses needs a P&L, or other reporting make-over to give you the kind of financial analysis that you require to understand the true underlying position, then let me know. Don’t be conventional get the kind of financial reporting you need.