Boost Your Business Success: Top 7 Subscription Accounting Software KPIs

Welcome to my blog post on the top seven accounting software on subscription KPI metrics. As a serial entrepreneur who has run multiple businesses, I understand the importance of tracking and calculating metrics that can make or break a company's success.

Accounting software has come a long way, and with the rise of cloud-based solutions, it's easier than ever to track key performance indicators (KPIs) that can help you make informed business decisions. In this article, we're going to dive into some of the core KPIs you should track to measure the health of your business.

• Monthly recurring revenue per customer: This metric tells you how much revenue you're generating each month from each customer on average. Tracking this KPI is crucial for forecasting revenue and understanding your revenue streams.
• Customer acquisition cost: This KPI tells you how much it costs to acquire each new customer. By tracking this metric, you can adjust your marketing and sales efforts to ensure you're getting the most bang for your buck.

Ready to learn more about KPI metrics for accounting software? Keep scrolling to explore the core metrics we suggest to track to help you make informed business decisions.

Monthly Recurring Revenue Per Customer

As a business owner, one of the most important key performance indicators (KPIs) to track and measure is monthly recurring revenue per customer. This metric allows you to understand the average amount of money each of your customers is generating for your business on a monthly basis. By tracking this KPI, you can make informed decisions regarding pricing, promotions, and overall customer retention. Here is a detailed explanation of how to calculate and use this crucial KPI:

Definition

Monthly recurring revenue per customer is a KPI that measures the average monthly revenue generated by each customer. It is calculated by dividing the monthly recurring revenue (MRR) by the total number of customers during the same period. This metric helps businesses to understand the value of each customer to their business.

Use Case

Monthly recurring revenue per customer is a critical metric for businesses that operate on a subscription-based model. This KPI helps businesses understand how much revenue they are generating from each customer on a recurring basis. It also helps businesses to identify upsell and cross-sell opportunities for their existing customer base.

How To Calculate KPI

To calculate monthly recurring revenue per customer, you need to:

• Determine your monthly recurring revenue (MRR)
• Count the total number of customers during the same period
• Divide the MRR by the total number of customers

Calculation Example

Suppose you operate a SaaS business that generates $50,000 in monthly recurring revenue and has 500 customers. To calculate monthly recurring revenue per customer, you would divide $50,000 by 500, resulting in an average monthly revenue of $100 per customer.

KPI Advantages

Monthly recurring revenue per customer provides businesses with valuable insights into the value of their customer base. By understanding how much revenue each customer generates on a monthly basis, businesses can make informed decisions about pricing, promotions, and customer retention strategies.

KPI Disadvantages

While monthly recurring revenue per customer is a valuable metric, it should not be used in isolation. This KPI does not account for differences in customer acquisition costs, which can have a significant impact on overall profitability. As such, it is essential to consider this metric in conjunction with other KPIs, such as customer acquisition cost and customer lifetime value.

KPI Industry Benchmarks

The industry benchmark for monthly recurring revenue per customer varies depending on the industry and business model. However, it is generally accepted that a higher monthly recurring revenue per customer is better, as it indicates higher customer value and profitability. As such, businesses should aim to track this metric over time and strive to improve it through targeted pricing and promotional strategies.

Customer acquisition cost

As a serial entrepreneur who has started and run many businesses, I know firsthand just how important it is to keep track of KPIs like customer acquisition cost. Let's take a closer look at this KPI, including what it is, its use case, how to calculate it, the advantages and disadvantages of using it, and industry benchmarks.

Definition

Customer acquisition cost (CAC) is a KPI used to measure the total cost a business incurs to acquire a single customer. This includes all marketing and sales expenses, as well as the salaries of those involved in these processes over a given period of time.

Use Case

Calculating CAC allows businesses to determine how effective their marketing and sales efforts are in attracting and retaining customers. This KPI highlights areas where a business may need to adjust its strategies and can also help businesses stay competitive in their industries.

How To Calculate KPI

There are a few different ways to calculate CAC, but a common formula is:

For example, if a business spent $1,000 on marketing and sales and paid $5,000 in salaries for these processes over a three-month period, and acquired 50 new customers in that same time frame, their CAC would be:

Calculation Example

Let's say you're a business owner who wants to calculate your CAC for the past quarter. To do this, you'll need to determine your total marketing and sales expenses for the period and add up the salaries of those involved in these processes. Next, you'll divide this total by the number of new customers you acquired in that time frame. This will give you your CAC.

KPI Advantages

• Highlights areas where a business may need to adjust its strategies
• Helps businesses stay competitive in their industries
• Allows businesses to better allocate resources for marketing and sales efforts

KPI Disadvantages

• Can be impacted by external factors beyond a business's control
• May not take into account the lifetime value of a customer
• Can be time-consuming to calculate

KPI Industry Benchmarks

While benchmarks can vary by industry, a good rule of thumb is that a CAC should not exceed the lifetime value (LTV) of a customer. This means that if a customer's LTV is $500, a business should aim to have a CAC that is less than $500.

Churn rate

As a serial entrepreneur who has started and managed multiple businesses, I can confirm that tracking key performance indicators (KPIs) is essential for the success of any business. One crucial KPI that every business should track is the churn rate, which measures the percentage of customers who stop using your product or service over a given period.

Definition

The churn rate, also known as the customer attrition rate, is a KPI that measures the number or percentage of customers who have stopped using a company's products or services during a given period. This period could be a month, a quarter, or a year, depending on the nature of the business.

Use Case

Tracking the churn rate is crucial for every business, as it helps you identify the reasons why customers are leaving, and come up with strategies to keep them engaged. A high churn rate could be an indicator that your product or service is not delivering value to customers, and you need to make improvements to meet their needs better.

How To Calculate KPI

To calculate the churn rate, you need to divide the number of customers who stopped using your product or service during a given period by the total number of customers you had at the beginning of that period. You can use the following formula:

Calculation Example

Suppose you had 500 customers at the beginning of the quarter, and 50 of them stopped using your product or service by the end of the same quarter. You can calculate the churn rate as follows:

Therefore, your churn rate for that quarter is 10%, meaning that 10% of your customers stopped using your product or service.

KPI Advantages

• Helps you identify the reasons why customers are leaving
• Allows you to measure the effectiveness of your customer retention strategies
• Helps you focus on improving customer satisfaction and engagement

KPI Disadvantages

• Does not provide insights into the reasons why customers are not satisfied
• May not give a comprehensive view of the entire customer base
• The period for calculating churn rate may not be sufficient to detect trends

KPI Industry Benchmarks for the KPI: 'Churn rate'

The churn rate varies across different industries, and it's essential to know the industry benchmark to determine whether your business is performing well or not. According to a study by Invesp, the average churn rate across all industries is about 5-7% per month. However, some industries have higher churn rates than others, such as the telecommunications industry, which has a churn rate of about 25% per year.

Customer lifetime value

As a pro serial entrepreneur, I understand the importance of subscription KPI metrics. One of the most significant KPIs in this field is Customer Lifetime Value (CLV). Here is a detailed explanation of its definition, use case, calculation method, industry benchmarks, and advantages/disadvantages.

Definition

Customer Lifetime Value (CLV) is a metric that calculates the total worth of a customer for a business over the duration of their relationship. It measures the revenue generated by a particular customer, minus the cost of acquiring and serving them. In simple terms, it determines how much value a customer brings to the business over time.

Use Case

Businesses can use CLV to determine how much they should spend acquiring new customers. If a new customer has a high probability of generating a significant revenue, a business can afford to spend more on customer acquisition. CLV provides businesses with a long-term perspective on their customer acquisition strategy. By identifying high-CLV customers, businesses can focus their resources on retaining them.

How To Calculate KPI

The following formula can be used to calculate CLV:

Where:

• Customer Value is the average revenue generated by a customer.
• Customer Lifespan is how long a customer continues to make purchases.
• Total Cost of Acquisition and Service includes the cost of acquiring a customer and providing service over their lifetime.

Calculation Example

Let's take an example of a business that has a customer value of $100, a customer lifespan of 3 years, and a total cost of acquisition and service of $50. The CLV can be calculated as follows:

This means that the average customer is worth $250 to the business over the three-year period, and the business can use this information to make strategic decisions around customer acquisition and retention.

KPI Advantages

The advantages of CLV are:

• It provides businesses with a better understanding of the value of a customer relationship.
• It helps businesses allocate resources more effectively.
• It supports effective customer acquisition and retention strategies.

KPI Disadvantages

The disadvantages of CLV are:

• It can be a time-consuming process.
• Predicting customer behavior and determining lifespan is challenging.
• It can be inaccurate if customer data is incomplete or outdated.

KPI Industry Benchmarks for CLV

Industry benchmarks vary based on the sector, but an average CLV for an online retailer is around $300.

Average revenue per user

As an entrepreneur, one of the most important metrics to track is the average revenue per user or ARPU. It provides valuable insights into the health of your business and can help you make informed decisions around pricing strategies and product offerings.

Definition

At its core, ARPU is a metric that calculates the average revenue generated by each user or customer over a specific period of time. This can be calculated for a particular product or service or for your entire business. It takes into account all revenue streams, including subscription fees, add-ons, and one-time purchases.

Use Case

ARPU is particularly useful in subscription-based businesses, where a reliable stream of revenue from existing customers is essential. By tracking ARPU, you can quickly identify trends and patterns in customer behavior, such as changes in purchasing habits or the impact of pricing changes.

How To Calculate KPI

The formula for calculating ARPU is relatively simple:

Calculation Example

Let's look at an example. Say your business generated $100,000 in revenue over the past month, and you have 1,000 customers. Your ARPU for that period would be:

This means that, on average, each of your customers generated $100 in revenue for your business over the past month.

KPI Advantages

• ARPU provides a clear and concise metric for measuring the revenue generated by your business.
• It helps identify trends in customer behaviour and purchasing habits.
• ARPU can be used to make informed decisions around pricing strategies and product offerings.

KPI Disadvantages

• ARPU can be impacted by outliers, such as high-spending customers or one-time purchases.
• It does not take into account factors such as customer acquisition costs or marketing expenses.
• ARPU should be used in conjunction with other metrics to gain a more comprehensive picture of your business’s financial health.

KPI Industry Benchmarks

ARPU can vary widely depending on the industry and type of business. Here are some industry benchmarks for ARPU:

• Software-as-a-Service: $100-$300
• Mobile games: $1-$5
• Online marketplaces: $20-$30

Time to Customer Onboarding

As a serial entrepreneur, I know the importance of optimizing customer onboarding to drive business growth. One key metric that businesses need to track is the time it takes to onboard a new customer. This metric helps in identifying areas that need improvement and fine-tuning to ensure customers are onboarded quickly and efficiently.

Definition

Time to customer onboarding is the duration from when a customer signs up for a service or subscribes to a product until they are fully onboarded and using the product/service.

Use Case

The time to customer onboarding metric is particularly useful for SaaS and subscription-based businesses that want to optimize the customer experience. A shorter onboarding time ensures customer retention and satisfaction, thereby boosting revenue. It also helps in identifying customer issues, allowing support teams to take appropriate actions and reduce churn rates.

How to Calculate KPI

To calculate the time to customer onboarding, use the following formula:

Calculation Example

Let's say that your SaaS business has a sign-up date of January 1st, and the customer completes onboarding on January 10th. The time to customer onboarding would be:

KPI Advantages

• Helps in identifying gaps in the onboarding process
• Enables quick identification of customer issues and reduces churn rates
• Improves the overall customer experience
• Boosts customer retention and revenue

KPI Disadvantages

• May not provide a comprehensive view of customer satisfaction
• Calculation may be affected by factors outside the company's control, such as legal or regulatory constraints

KPI Industry Benchmarks

The time to customer onboarding may vary across industries. On average, successful onboarding for SaaS businesses takes anywhere from 5 - 14 days. Typically, a faster onboarding time is better in this industry.

Net promoter score

Net promoter score (NPS) measures customer satisfaction and loyalty in a business by asking one simple question: 'How likely are you to recommend this product/service to a friend or colleague?' The ratings are given on a scale of 0-10, with 0 indicating that the customer would not recommend the product/service, and 10 indicating that they would highly recommend it.

Definition

NPS is a metric used to measure customer loyalty based on the likelihood of recommending a product/service to someone else. It helps businesses understand how satisfied their customers are and how likely they are to spread positive feedback about the company.

Use Case

NPS is commonly used as a KPI in subscription-based businesses to analyze customer satisfaction over time and identify areas for improvement. It can also be used to track the success of marketing and advertising campaigns to see if they are driving customer loyalty and engagement.

How to Calculate KPI

To calculate NPS, businesses must take the percentage of customers who give a rating of 9 or 10 (promoters) and subtract the percentage who give a rating of 0-6 (detractors). The final score can range from -100 to 100.

Calculation Example

If 60% of customers were promoters and 10% were detractors, the NPS score would be:

KPI Advantages

• NPS is a simple and easy-to-understand metric.
• It can be used to track customer satisfaction over time.
• It can help identify areas for improvement in the business.

KPI Disadvantages

• NPS is based on a single question and may not provide a complete picture of customer satisfaction.
• The scale used to measure customer satisfaction may vary between industries, making benchmarking difficult.

KPI Industry Benchmarks

The average NPS score varies widely between industries. According to a 2020 survey by NICE Satmetrix, the average NPS score by industry is:

• Airlines: 39
• Automotive: 48
• Financial services: 31
• Healthcare: 31
• Insurance: 31
• Retail: 43
• Technology: 43

In conclusion, tracking key performance indicators (KPIs) in your accounting software can provide valuable insights into the health of your business. By tracking monthly recurring revenue per customer, you can forecast revenue and understand your revenue streams. Additionally, tracking customer acquisition cost allows you to adjust your marketing and sales efforts to maximize your return on investment.

With the rise of cloud-based accounting solutions, tracking KPIs has never been easier. Implementing a system to track these metrics can make or break the success of your business. Other important KPIs to track include churn rate, customer lifetime value, average revenue per user, time to customer onboarding, and Net promoter score. By monitoring these metrics, you can make data-driven decisions about how to grow and improve your business.

Overall, understanding and utilizing KPIs is essential for running a successful business. By keeping a close eye on these metrics, you can make informed decisions about the direction of your company and ensure that you're maximizing your potential.