How SaaS metrics are reconciled to the ledger before diligence
Deck metrics and statutory financials disagree because they are built by two different processes from two different systems, and the fix is to define each metric explicitly and then derive it from the ledger, so the two reconcile by construction rather than by explanation. This is an illustrative example of how Salt approaches fundraise preparation, using a US SaaS startup between seed and Series A as the profile.
Scenario — an illustrative example of how Salt approaches this problem. Not a description of a specific client engagement.
The business shape it describes: US startup, seed to Series A, around 1,800 transactions a month.
- Scenario covers
- Fundraise preparation: metric definition, billing-to-ledger reconciliation and data room assembly, with controller support
- Jurisdiction
- United States
- Sector
- SaaS
- Take a US SaaS startup at around 1,800 transactions a month, where the founder tracks ARR, churn and CAC in a spreadsheet built from the billing system while the accountant produces financials from the ledger.
- Diligence asks for a reconciliation between the two. There has never been one, and the two numbers have been drifting apart for eighteen months.
- ARR in the deck including one-off implementation and onboarding fees, which are not recurring revenue and inflate the figure a Series A investor will normalise anyway.
- Churn calculated on logo count rather than revenue, which understates the impact of losing larger accounts and overstates the health of the base.
- CAC excluding founder time and contractor marketing spend, so the payback period is shorter on paper than in cash.
- No documented definition for any metric, so the same label means different things in different board decks.
- Define each metric explicitly in writing, including what is excluded, and store the definition next to the number rather than in someone's memory.
- Rebuild the metrics from the ledger so that financials and metrics reconcile by construction instead of being reconciled after the fact.
- Reconcile the billing system to the ledger first, because a metric derived from an unreconciled billing system inherits its errors.
- Assemble a data room containing the reconciliation itself, not just the outputs, so an investor can follow billing to ledger to reported metric.
- Restate prior periods on the corrected definitions so the growth trend is comparable rather than an artefact of the change.
- Reconciling a billing system to a ledger starts with agreeing what each metric means. ARR, churn and CAC each have a defensible definition and a flattering one, and decks tend to take the flattering one every time.
- Building metrics from the ledger rather than alongside it is what stops the two sets of numbers drifting apart again after the round closes.
- The founder would be able to answer a diligence question from one reconciled source rather than defending two different sets of numbers.
- Every reported metric would carry a written definition, so an investor is testing the number rather than the vocabulary.
- The reconciliation would be a standing monthly output, so the position does not decay between the raise and the next one.
What we'd flag
Corrected metrics are almost always less impressive than the originals, and the deck has to be revised before it goes out again. Finding that internally is far better than an investor finding it, but it is still a worse-looking number in a worse-timed conversation.
How SaaS metrics are reconciled to the ledger before diligence
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