Collaboration

5 Tips to Improve Cross Functional Collaboration in a Remote Team

Published

1 month ago

April 17, 2025

Cross-functional collaboration is vital for the success of a remote team. Unfortunately, according to a study published in the Harvard Business Review 75% of the time, a cross-functional team is dysfunctional.

Yet, OWL Labs claimed that in 2019, individual contributors in the United States were 20% more likely than average to work remotely full-time.

The rise of remote work has ushered in a new era of team dynamics where geographical distance is no longer a limitation in access to top talent. America is particularly fast-tracking through the curve in remote working. With that in mind, finding ways to improve cross-functional collaboration between the disciplines on your team becomes increasingly important as online workers’ demand and accessibility continue to increase. The ability to collaborate well across departments is now key to ensuring that virtual teams are not only productive but also innovative and adaptable.

Ultimately, strong cross-functional collaboration in remote teams leads to better problem-solving, faster decision-making, and a more cohesive working environment that can have a significant impact on the bottom line.

Importance of cross-functional collaboration

A cross-functional team is a group of team members from various departments that combine diverse skill sets to work on a project or pursue a shared objective.

Being in a cross-functional team has many advantages, but it also has drawbacks for any organization.

A cross-functional team may feature individuals who each bring conflicting work methods and working approaches to the table.

Cross-functional collaboration promotes efficiency within the company, lowers expenses, and fosters adaptability and innovative problem-solving. Most importantly, it keeps everyone focused on the long-term objectives of the business.

Project managers and team leaders must establish ground principles for the group, lay out a precise procedure for making decisions, and promote open communication and flexibility to overcome these obstacles.

However, it’s essentially important and advantageous if executed properly.

A cross-functional team collaboration can help team members achieve the following:

Teamwork makes the dream work
Team members are more productive
Team members learn from each other
Diverse ideas and skill sets are brought to the table
Employees can build better leadership skills

Tips on improving cross-functional collaboration

The reality is that an effective cross-functional team necessitates trust.

Building a trusting relationship with someone when you labor in the same space together is challenging enough.

When teams from various departments are working together, this challenge gets progressively harder.

We’ve compiled a list of 5 easy steps that have helped us create a genuinely collaborative environment to give you ideas on how you can improve cross-team collaboration in your company.

Clear task-handling guidelines

Clear guidelines on how to handle project tasks are vital for organizing a cross-discipline team and enabling them to collaborate effectively.

Simple organizational steps such as color-coding tasks in your team app based on ownership, or the skill sets required, and assigning sub-tasks to individual team members, help everyone know which tasks they need to focus on.

Additionally, you should also have a system in place that everyone follows for noting the priority and deadline of each task. This helps the team to work together on the most important tasks to ensure progress isn’t held up.

Similarly, get everyone on your team into the habit of updating tasks with the latest progress and marking tasks as in progress when they get started on them. This helps encourage a more proactive approach to cross-functional collaboration by keeping team members updated on what their colleagues are working on.

Chanty provides each team member with personalized feeds for their messages and tasks, making it easy to prioritize each individual’s workload while keeping them updated on other tasks that might need their skills.

Making sure everyone starts their day with clear tasks and priorities, and an awareness of their colleagues’ progress, enables them to work and collaborate more efficiently. Jumping between tasks can cost as much as 40% of your team’s daily productivity, so clear prioritization can have significant benefits.

Expand your communication methods

Your team can’t collaborate if they can’t communicate effectively. 30% of projects fail due to poor communication. There are a variety of methods remote teams can use to keep in touch. These include:

Team chat apps
Business messaging apps are crucial for the day-to-day discussions and updates that keep a project running smoothly. In addition to private and group messaging functions, team chat apps offer a range of tools and integrations that help you manage tasks and schedule work.

These features can help your team members take the initiative in organizing collaborative work by creating tasks themselves and inviting colleagues to them. For example, Chanty lets users turn any message into a task, making discussions and feedback flow seamlessly into collaborative tasks.

VoIP and video calling
VoIP and video calls can take up too much time as a daily communication channel, however in critical discussions and personal meetings these can enable team members to communicate with more clarity and understand each other better through intonation and facial expressions.

The ability to take screen recordings and share a screen over video calls is a vital collaborative tool, enabling team members to demonstrate features, changes and feedback visually to the rest of the team.

When you are talking and seeing the colleague you are communicating with, it is easier to get your point across. 87% of remote workers feel more connected to their team thanks to video conferencing.

Text messaging
Texting is very useful for sending out critical alerts, updates, and reminders to your team. In a study by West Virginia State University, participants were 4 times as likely to prefer receiving important updates and notices via text.

By scheduling important messages and integrating an SMS app with your other productivity tools, you can ensure team members never miss an important message. To avoid disrupting employees’ private time in a remote team, make sure to use a texting app that automatically takes time zones into account when scheduling messages.

Each communication channel offers unique benefits, so make sure you use each to its strengths.

Create a culture of knowledge sharing

A key component to successful cross-functional working is unobstructed knowledge throughout teams. Having members from each team contribute insight and expertise keeps the departments intertwined and avoids information becoming walled up within itself. This not only enables the information to be more shared, but also creates the team a more effective problem-solver and innovator. Each member brings something unique to the table, and the more that is shared around, the higher the collaborative decision-making.

One of the best ways to facilitate this is by setting up spaces for knowledge sharing. Experiment with establishing channels where people can share valuable articles, tips, or good project experiences. These could be as simple as a Slack channel for best practices or even something more formalized such as a knowledge base accessible to everyone. The idea is to make it easy for people to share and find what they need.

Incentivizing the practice will also increase participation. Recognition and rewarding people who contribute valuable information, either through shout-outs at team meetings or through a more formal reward system, enforces the notion that knowledge sharing is an important aspect of the team culture. When people understand that their contributions are valued, they’re more likely to continue sharing, and therefore it becomes an organic and sustainable aspect of team dynamics.

By building a culture where everyone shares knowledge, you build a better, more robust team that can bounce back from adversity faster and better.

Create teamwork opportunities for cross-functional collaboration

Improving cross-functional collaboration in a remote team requires proactively scheduling meetings and discussions between the different disciplines in your team. In addition to opening group discussions in your chat app to solve specific problems or work on tasks, give weekly updates on project progress.

Encourage team members to do the same, updating the team with their milestones and roadblocks. This makes it easier for employees to see where a colleague needs help and step in before the project falls behind schedule. A brief weekly check-in meeting with your team helps your team stay motivated in addition to avoiding delays.

An off-topic chat channel is also important in a remote team. It enables employees to build relationships with each other, which can impact their willingness to share ideas and feedback. Isolation can be a major communication challenge for remote workers, so encouraging friendly conversation is also important for maintaining a healthy and productive team.

Reward achieved milestones and goals within each project

Rewarding goals and milestones helps foster team spirit by giving the team opportunities to notice and congratulate each other’s work and achievements.

Everyone enjoys getting recognition for their efforts, and in addition to the boost to morale and productivity, this also helps team members see how their work fits into the bigger picture.

Furthermore, individuals will have more confidence to provide their input in group discussions, enabling the team to benefit more from their skills and perspectives. While you can’t always put every suggestion into practice, making it clear you value everyone’s input will lead to team members sharing their ideas more often.

Teams that communicate effectively are 4.5 times as likely to retain their best employees.

Encourage cross-department pairing or mentorship

Pairing team members from various departments is a good method to build a more unified and powerful team. When people of various functions meet and interact with one another, they have a firsthand understanding of the role, problem, and priority of one another. Such interaction not only generates mutual respect but also encourages better communication between departments.

Pairing or mentoring allows employees to leave their usual area of activity and get a broader idea of how the business operates. For example, a marketing individual is able to better understand the technical details of the business through being paired with a developer, and a finance staff member is able to understand more about what customers require through being paired with a sales person. These interactions create a more holistic view of the firm, encouraging workers to think beyond their own functions and collaborate better.

Mentorship initiatives are especially money well spent for establishing long-term relationships between departments. They provide a structured means through which workers can learn from each other, challenge things, and share pointers. Not only can a successful mentor advance the career of his or her mentee, but he or she also helps get his or her mentee oriented with the big picture of the company. This can lead to improved coordination between teams and improved cooperation.

Through buddy pairing or mentorship, the employees will be more at ease requesting help, sharing ideas, and stepping in where others require help. Such a collaboration creates a closer team relationship and eventually delivers better project outcomes.

Scheduling in a remote team

Remote teams give you access to talent across the globe, but you also need to consider time zones. In a small team, having a 10-hour time difference between team members could be a major productivity killer if their work needs lots of feedback or input from other team members.

Wherever your team members are located, try to coordinate at least a few hours of crossover between team members’ working hours. Otherwise, team members could be waiting until their next work day to get a reply to each of their messages.

On a cross-functional task or project, that can make even simple tasks take far longer than they should.

In a global team, holding meetings or group discussions can mean that someone has to get up early or attend the meeting late in the evening. To some extent, this is a necessary sacrifice, but don’t expect your workers in distant time zones to make that sacrifice every time.

This can leave them feeling treated unfairly or a less valuable team member, making them less willing to share ideas and collaborate.

Remote working technology potentially gives you 24/7 access to your team, but it might not be a good idea to use it this way. If your team members feel expected to be online and available to reply at any time, they could find it difficult to relax and recharge.

85% of remote workers chose remote work to have greater flexibility with their time, so avoid encroaching into your team’s offline time outside critical situations. According to a 2019 Buffer survey, unplugging after work is the biggest challenge for remote workers.

Why you should implement cross-functional collaboration

There are plenty of ways to keep a remote team focused and working together on a project. Improving cross-functional collaboration involves providing the tools to communicate effectively in every situation, setting clear expectations and responsibilities, and building an environment that encourages and supports open communication and discussion by recognizing and rewarding achievements.

When used correctly, cross-functional collaboration can significantly increase both productivity and innovation. It combines diverse expertise from multiple departments into cross-functional teams to creatively solve a given problem or project. Innovative ideas would be unlikely to come from a team made up of people from just one functional area. Collaboration makes participants work together for a common interest, which motivates individual employees with a heightened desire to participate in whatever is put forward.

With a global team, you can avoid potential efficiency problems by scheduling your team’s time so they can communicate and making sure everyone feels treated fairly to avoid demotivation. The cross-functional collaboration will also make the team more adaptable and flexible. Exactly for these reasons, cross-functional teams, with their wider access to people’s expertise and knowledge base, have the potential to respond to many different challenges and changes and adjust strategies as they are more resilient in times of change.

Besides, working across functions improves knowledge sharing and encourages continuous learning. When team members from different functions work together, they often get exposure to areas they would not normally be exposed to, thus widening their horizons about the business and developing their professional skills. This does not only benefit the individuals but also the team as a whole, making them more versatile and skilled.

Most importantly, successful cross-functional teams foster closer, less fragmented relationships within an organization, which can lead to a more inclusive and collaborative culture. Cross-departmental collaboration will also boost team morale; people get excited when they can work as part of a diverse mix, where many different kinds of people bring different kinds of strengths to their work.

Final note

Improving cross-functional collaboration between remote teams is the way to ensure productivity, innovation, and team spirit. You can keep your team aligned and motivated by establishing crystal-clear guidelines on each task, extending channels of communication, and holding regular check-ins. Recognizing achievement while respecting time zones further solidifies collaboration, building an effective, cohesive remote team. Armed with the right toolset and methodology, cross-functional collaboration could be your panacea for getting your remote team working at full capacity.

Ready to take your remote team collaboration to the next level? Try these tips today and your team will thrive, no matter where they are.

Collaboration

4 Common Problems of Virtual Teams are Solved

Published

5 days ago

May 19, 2025

Liza Hodun

Low-stress level, no commute, no shoes, PJs only, spending more time with family and friends, and so much more. Sounds neat right? According to some studies, remote work has brought higher productivity and a more positive work-life balance since the beginning of the pandemic. However, it’s not all rainbows and butterflies, is it? We have been facing some challenges, to say the least. We struggle with unplugging ourselves once the work is done for the day, we need our office gossip, and even though we don’t need to wear shoes, we still kinda miss them. Many problems can appear when we are managing virtual teams. However, does that mean we cannot ace a video meeting or have the same level of communication with our teammates as we did before? Never! All we have to do is get our hands to the right collaboration tools to manage our virtual teams. I give to you the solutions to the most common problems we’ve faced working from home. Trust me, it really is as easy as pie!

1. Communication breakdown: it’s not all about messages — it’s about meaning

The one most reported problem of remote teams is communication — or the lack of it. But it has nothing to do with missed messages. It has everything to do with lost context.

When you communicate face-to-face, 70–90% of what you intend is communicated through body language, tone of voice, and facial expressions. Remote workers lack that level. An urgent message meant to be productive will be cold. A wait in responding will be perceived as not caring.

That’s why business communications tools like Chanty, Google Chat, and GoToMeeting aren’t nice-to-haves, they’re must-haves. They facilitate teams to communicate in real-time, clarify their communication, and utilize richer media like voice and video. Still, the best tool is nothing without a shared communication culture.

HR comes into play here. Get teams to figure out how they communicate: messaging vs. meeting, how they handle urgency, and what “offline” means. Prioritize making voice notes and camera-on calls the new normal to bring back that human feel.

Communication isn’t only about words. It’s about being heard — and feeling connected.

2. Collaboration without clarity: the hidden cost of scattered work

In an office, things naturally tend to overlap. You stretch over a desk. You cut off someone at the coffee machine. You interpret a face at a brainstorming session.

In virtual teams, it doesn’t happen. And without the proper tools, folks will naturally feel like they’re working in solitude — despite being part of a team.

This is where Google Workspace, Microsoft 365, Dropbox, and OneDrive come in. These apps are not simply storage devices — they create a virtual workspace where collaborators can work together. Teams can work together on docs, comment in real-time, and have one source of truth.

But what really matters is psychological safety. If employees don’t feel free to give each other working drafts or ask for help, technology can’t fix that. HR leaders must create a space where collaboration means learning alongside one another, not just working alongside one another.

Technology reduces the friction. But humans reduce the fear. That’s how collaboration thrives.

3. Remote project confusion: why visibility matters more than ever

Without structure, remote projects can drift. Deadlines are missed. Jobs get blurry. Team members do not know what others are doing — or what they must do.

Project management tools like Asana, Jira, Basecamp, and SmartTask bring much-needed discipline. They break goals into doable pieces. They delegate tasks. They provide timelines and certainty.

But aside from task management, these sites are emotional clarity tools. When everyone can see who’s working on what, stress goes down. Nobody feels like they’re doing it all themselves. Nobody feels ignored. Transparency is peace of mind.

For HR, it’s a golden opportunity. Utilize these tools not just for productivity — but for inclusion. A reserved junior team member during meetings can spring to life when they are given clear guidance in a task board. A mute struggler might reveal to us their stress in overdue assignments.

Project management tools have secrets. Savvy HR teams listen intently.

4. Time and productivity tracking: from surveillance to self-awareness

Time tracking is one of the more controversial aspects of remote work. Done badly, it’s intrusive. Done well, it’s an amazing wellness and performance tool.

TimeDoctor, Hivedesk, Toggl, and PomoDone are some of the applications that enable teams to see how they spend their time. They show data on attention, idleness, and task-switching. To remote teams, this isn’t accountability — it’s awareness.

Most remote workers struggle to “switch off.” They work longer, take shorter breaks, and quietly burn out. HR can use time-tracking data not as a punisher, but as a protector. Recognizing overwork early is an act of care.

Furthermore, these tools empower people. People can look at when they’re most productive, or where they drift off course. They can set their own schedules, and build better habits.

The true value isn’t in tracking time — it’s in getting time to work more effectively for individuals.

Final Thought

No matter how many tools you bring on board, virtual teams will fail if their human needs are not met. The need to connect. To be seen. To understand. To trust.

Which makes HR’s role so critical. You’re not just choosing software —you’re developing culture. When you combine great tools with compassionate leadership, you don’t just solve issues — you create an environment where remote doesn’t equal removed.

Because in the end, remote teams don’t succeed because of technology.

They succeed because they care.

Collaboration

10 Pros and Cons of Working Remotely

Published

5 days ago

May 19, 2025

Liza Hodun

Work-from-home arrangements are most successful when employers set clear parameters and invest in technology, such as videoconferencing, to help remote personnel feel like they are part of the team, – McDonald

Remote working, working-at-home, telecommuting, and any other similar variations of terms that describe working outside the walls of a traditional office, are getting increased popularity in recent years. Before Covid 19 working from home was a luxury that many of us dreamed of. Seeing pictures of remote workers in some distant places was something that we all wished for (at least I know I did). But let’s be real. Not all that glitters is gold. Working from home has some pitfalls as well.

There are many studies and statistics that favor both ways but together with my team, we decided to make a pros and cons list that will take you in and help you investigate this way of working, letting you weigh the advantages and disadvantages of the same.

The psychological and practical benefits of remote work

Let’s be honest — commuting five days a week to gaze at fluorescent lights while battling back-office gossip and surprise meetings isn’t necessarily a productivity dream. Remote work isn’t a trend — it’s a work life upgrade. And no, not because you can go to meetings in your pajamas (although we wouldn’t judge either).

This is what really makes remote work a game changer — for employees and HR teams.

**1. You might actually get more done**

Working remotely usually means fewer distractions. No watercooler conversation, no spontaneous 45-minute “quick syncs,” and none whatsoever heating fish in the break room.

How it works: When you’re in charge of your surroundings, you focus more. It’s not anecdotal— psychologists call this lower cognitive load. Your brain isn’t spending energy repressing distractions.
HR tip: Time to move beyond “Are they online?” to “Did the work get done well?” Focus on results. Trust trumps micromanagement.

2. Autonomy = Motivation

When people have control over how, when, and where they get their work done, magic happens. Self-Determination Theory (Deci & Ryan) is a reminder that autonomy is a strong psychological driver of motivation and engagement. In plain English? People want to be trusted adults.

In the wild: Remote workers are more likely to feel happy to be responsible — not less. When employees take ownership, they’re apt to deliver.
HR tip: Grant autonomy, but don’t lose sight of the map. Flexible policies work best alongside clearly set goals and accountability. Freedom thrives with structure — not chaos.

3. Work-life fit wins over work-life “balance”

“Balance” is such a misnomer, as if the work and life are two even weights on the scale. Come on — it’s more like thrashing about with fiery torches. Remote work allows us to glide between roles so seamlessly: parent, partner, pro.

Psychological perk: It enhances cognitive flexibility and reduces role conflict. In other words: fewer meltdowns between meetings and school runs.

HR tip: Foster healthy boundaries. Asynchronous options and thoughtful communication windows prevent burnout while keeping the momentum going.

4. No commute = time (and sanity) regained

Let’s do the math. If your one-way commute was 45 minutes, that’s 90 minutes a day—7.5 hours a week. That’s nearly a whole workday stuck in traffic or wedged between strangers on public transit.

In practice: People use that time to sleep more, eat well, exercise, or spend time with loved ones. All of which results in better work performance.
HR tip: Sponsor wellness initiatives that capitalize on this gained time. Maybe offer fitness app stipends or reward morning mindfulness routines.

5. A Personalized workspace reduces daily stress

Office thermostats are the holiest workplace battleground. In your own home, you can finally tailor your seat height, control the volume, and sport fuzzy socks without worry.

Science claims: Reducing “micro-stressors” (like ambient noise or inadequate lighting) supports emotional control and cognitive concentration.
HR tip: Don’t simply send a laptop. Offer ergonomic advice, remote office stipends, or even workspace setup courses. Help people craft a space where they can actually thrive.

6. Alignment with natural productivity rhythms

Some of us are most productive at 6 a.m. Others discover their creative rhythm after dinner. Chronobiology confirms: people have different natural rhythms. And no, early risers aren’t “better workers” — they’re just wired differently.

Real-world win: Writers, coders, and designers often say their best work happens outside the 9–5. Letting people match tasks with energy leads to more “flow” and better output.
HR tip: Embrace results over rigid hours. Define collaboration windows, but let people control when they dive into deep work. You’ll be surprised at the quality that comes out of a 10 p.m. burst of genius.

7. Improved retention and organizational commitment

If people feel they’re trusted, respected, and able to manage their own lives, they’ll stay around. Happiness isn’t an amenity — it’s a retention device.

Brain boost: Happy workers are healthier, more engaged, and more productive. It’s basic psychology — having control reduces stress.
HR tip: Offering remote opportunities and flexible work schedules makes your company’s employer reputation shine. It’s no longer an incentive — it’s the standard.

The quiet challenges of working remote: What we don’t talk about enough

Remote work can be empowering — but it’s not always easy. While convenience and adaptability are the touted benefits, many remote workers struggle with issues that quietly undermine focus, engagement, and productivity. Some are personal. Some are structural. Either way, they’re real — and HR leaders need to see them if they want to make remote work truly work.

Here’s a closer, more honest look at why remote work is difficult—and how it isn’t.

1. Lack of structure can derail your day

Without the outside rhythm of office life, it’s easy to get in late, take too many breaks, or succumb to multitasking wicked habits. That much freedom is disorienting. Projects are delayed. Focus drifts. The line between “working” and just sitting in front of a screen becomes muddled quickly.

Why it happens: Our brains need context and environmental cues to stay task mode. Working in bed or jumping straight from breakfast to meetings can lead to decision fatigue and confusion.
What helps: Morning routines, blocks of time, and shutdown ceremonies. HR can step in with digital calendars, self-management training, or apps that allow employees to schedule their days with purpose — not anxiety.

2. Loneliness isn’t just emotional — it’s cognitive

Yes, home working makes room. But excessive isolation depletes its benefits. Studies reveal that loneliness engages the same brain mechanisms as physical pain. Over time, loneliness anaesthetises the mind, causes reduced motivation, and increases stress.

Even introverts report they feel a kind of “post-slow disconnection” from their company culture and team. And when lines between home and work begin to blur, it’s easy to just continue working past dinner time — not because you’re being productive, but because there is no off-switch. And so the line blurs even further.

What helps: Authentic connection — not forced “fun.” HR can create room for real moments: peer sharing, learning circles between peers, or relaxed check-ins human and not required. Encourage hard stop times and authentic lunch breaks, too.

3. Visibility is a real problem

When no one sees your work, it’s natural to question whether it makes a difference. For remote workers, that “out of sight, out of mind” effect is more than intuition. It’s an obstacle to visibility, project work, or career advancement.

Mind over matter: Motivation theories like Drive by Daniel Pink posit that advancement and acknowledgment are key to motivation. When feedback disappears, so does motivation.
What helps: Maintain an achievement log. Send regular (but short) reports. Managers have to be trained by the HR function to hold people accountable for results, not effort. Peer feedback and formal performance reviews help contain bias.

4. Not all home offices are equal

One employee might have a bright office and noise-cancelling headphones. Another could be clacking away in a shared living room or splitting time caregiving in the background. Remote work isn’t one-size-fits-all — and when the setup isn’t optimized, performance and well-being suffer.

For some employees, particularly those with caregiving responsibilities, disabilities, or tiny spaces, remote work creates friction, not freedom.

What helps: HR must touch base on working conditions often, not just on productivity. Offer coworking allowances, ergonomic gear, or hybrid flexibility to those in need of a new set-up. This isn’t logistics — it’s inclusion.

5. Communication gets hefty — and sometimes off the target

Remote teams rely on text, video, and scheduled syncs. That’s work. Tone is lost. Slack is overwhelming. Zoom is exhausting. Without low-stakes moments — like those spent in the hallway or lunchroom — collaboration becomes less adaptive and more transactional.

Why it matters: Improvisational communication drives creativity. Without it, groups tend to work in silos, and problem-solving happens slower.
What helps: Implement async-first workflows. Use tools like Loom, Notion, or update recordings to cut down on live meetings. Reward for clarity over speed. HR can shape these by modeling them in leadership teams and documentation practices.

Remote work: ideal in theory, challenging in reality

So home working is the perfect idea — no daily commute, flexible working hours, your own coffee. But this until you experience the reality, and remote work has very real challenges: distractions, loneliness, blurred boundaries, and the sense of invisibility.

Without routine, days become chaotic. Without informal conversation, collaboration breaks down. And not everybody has a quiet, comfortable home office. For many, working remotely can blur the line between independence and burnout.

But here’s the good news: these aren’t personal deficits — these are fixable design problems. With the right support, remote work can work.

HR teams have a responsibility to perform. It’s not just a question of offering remote choices —it’s about creating the appropriate arrangement. That means:

Prioritizing outcomes, not time spent on the web
Enabling breaks and clear-cut closing times
Providing instruments, touch-bases, and adaptable customs
Empowering managers to practice trust, not command

Remote work isn’t going away. But if we’re ever going to make it a success in the long run, we must get better at how we facilitate it.

Collaboration

Top 6 Financial Tips Every SaaS Founder Should Know

Published

6 days ago

May 18, 2025

Liza Hodun

Starting your own software as a service (SaaS) business is an appealing way to become an entrepreneur. Just come up with your software solution, deploy it, and become indispensable to fellow business owners everywhere — right?

Of course, it’s never that simple. Coming up with and creating your software is the easy part. The hard part is turning your idea into an actual business that enough customers are willing to pay for.

With that in mind, once they finalize their business concept, SaaS founders need to immediately turn their attention to their business’s finances. Building a solvent business model depends on you figuring out the numbers early.

Not sure where to start? Here are six financial tips every SaaS should keep in mind when building out their business.

Validate your idea before committing real funds

Lots of articles on the web will convince you that all you need to start your SaaS or other ecommerce business is an MVP — minimum viable product — that you can start selling. You can always tweak your MVP later as you garner feedback and experience.

Even spending that much of your resources and time, however, can be wasteful. If you build an MVP without a real understanding of whether people will pay for it, you’re essentially throwing money away unless you’re lucky enough to strike gold on your first pass.

You don’t need to build your software until you can demonstrate interest from potential customers. To measure that interest, use landing pages to gauge whether people want to learn more about your idea.

The process is fairly simple:

Set up several versions of a landing page describing what your software does, how it works better than that of competitors, how much it costs, and other pertinent info that can fit “above the fold” of the page. Use a service like Unbounce or Instapage to set up A/B tests.
Spend a few bucks on advertisements on Google and Facebook, drawing the attention of users outside your inner circle.
Test to see how many not only click your ads, but complete your “call to action” (CTA) on each page, such as signing up for the company newsletter, or gaining “early access” to the product.
Continue to tweak and test your landing pages for optimal copy, page layout, and CTAs until you’re confident you are doing the best job possible marketing your software.

If your CVR (conversion rate, or the percentage of people who complete your call to action after clicking your ad) is higher than a few percentage points (2% on mobile, 4% on desktop), you’ve got enough data to move ahead and build out your service with the confidence that people are willing to pay for your solution, and you itself can increase your business valuation. Another thing that can help improve your finances and the quality of your products is bottom-up budgeting.

Learn and track the important SaaS metrics

Lots of businesses know they need to hit certain metrics in order to remain profitable and keep the company going. Lots of these metrics are the same across the board, for almost every business — CVR, for example.

If you’re wondering what is the purpose of a business plan, it’s to provide a clear roadmap for your business’s strategy, finances, and goals, helping guide decisions and attract investors.

When writing your business plan — a must-have document for a business at any stage — keep in mind the following metrics and how you plan to perform well on each of them:

LTV: Lifetime value, or a prediction of the net profit you’ll get out of your relationship with a customer.
CAC: Customer acquisition cost, or the total cost of turning someone from a lead to a paying customer. Things like the cost of running an ad campaign, or how much you spend on CRM software, is factored into this metric.
MRR: Monthly recurring revenue is the income a company can reliably expect every month.
ARR: Annual recurring revenue is the income a company can reliably expect each year.
ARPA: Average revenue per account, or your monthly or yearly recurring revenue divided by the number of customers you have.
Churn: This isn’t an acronym—your churn rate is the percentage of customers you lost during a certain time frame, such as per month or per quarter.
NPS: Net Promoter Score, or a measurement of the loyalty that customers feel toward your business, based on the question “How likely is it that you would recommend our company to a friend or colleague?”

When presenting a business plan, you can use professionally-designed business presentation templates to outline all the key steps to launch your idea and present the plan to an audience.

You can use a service like ChartMogul to get help tracking and measuring your metrics performance on a recurring basis.

Lock in your customer base with annual plans

Pricing strategy is one of the more difficult aspects of being a business owner. In a perfect world, we’d know the maximum value we could charge without losing a single prospective customer — but it’s never that easy.

To start, do research and see what your competitors charge for similar services — and try to beat those prices, if possible. If you lack competition (a rare occurrence), use your landing page tests to see what people would be willing to pay for your solution.

Once you choose a price (or several price tiers), annual subscriptions are the most efficient way to bill your customers. Even if you have to offer these plans at a discount, this billing method has two major benefits.

For one, annual billing locks in your customers, giving you consistent cash flow. Consistency is one of the most important aspects of healthy business cash flow — without it, you won’t be able to weather financial setbacks or bridge cash flow gaps that arise when your own bills come due before your revenue comes in. Knowing what will end up in your bank account every month beats up-and-down cash flow.

Secondly, focusing on annual subscriptions will get you out of the mindset of needing to always acquire new customers. That’s not where long-term profitability lies. As we’ll discuss below, you should look toward retaining customers, not finding new ones.

Venture capital is difficult to obtain

In 2021, U.S. venture capital investment peaked at over $345 billion, fueled by pandemic-era tech growth and low interest rates. However, by 2023–2024, that trend sharply reversed. With rising interest rates and investor caution, VC funding in the U.S. dropped to approximately $170 billion in 2024 — down nearly 50% from its high. The environment in 2025 remains tight, with VCs scrutinizing startups more rigorously and favoring profitability over rapid scale.

If you’re a SaaS founder and believe your idea deserves venture backing, timing and positioning are everything — but the odds remain steep.

Less than 1% of startups secure venture capital. The process is demanding, highly competitive, and typically requires warm introductions, insider networks, and a compelling growth story.

And if you’re a woman or a person of color, the odds shrink even further. As of recent data, women-founded startups received just 2% of VC funding, and founders of color continue to face systemic barriers in accessing capital.

In some situations, for some businesses, venture capital is an important tool for staying afloat while deferring profitability. The trade-off is that venture capitalists expect the business to provide a 10x return, at least, on their capital. That will put the business on a different path than if the goal was to be healthy and profitable from day one.

Venture capital makes for splashy headlines, but it’s not often a real option for most businesses, even SaaS businesses.

Debt financing is a common path to funding

If you are seeking business funding to help cover working capital shortfalls or to take advantage of a growth opportunity that requires investment beyond your profit margins, debt financing is a much more common route for small business owners. Make sure to prepare compelling documentation for your investors, one of the tools you can use is a pitch deck maker.

Using a small business loan, SBA loan, line of credit, credit card, or even a personal loan can give you access to a pool of funds to help grow your business responsibly while maintaining control of the company.

Taking on debt is always a risk in any context, but it’s a much more attainable and practical move for small business owners. Only take on debt if you have done the research to prove you can repay your loan (which may be required by some lenders before you are approved).

Build towards monetization and retention

As mentioned above, your primary financial consideration once you get your business up and running should be turning your attention to monetization and retention, rather than acquisition.

When you first start your business, acquisition is crucial. It’s how you build a customer base. But it reportedly costs five times as much to acquire a new customer as it does to retain an existing one. Existing customers are also easier to sell to than new customers, and they’re more likely to spend more money and try new products.

Eventually, you’ll find that you will get more value out of marketing to, addressing the needs of, and improving your SaaS for your existing customers than you would making your pitch to yet another new customer.

Conclusion

From the very beginning of your time as the owner of a SaaS business, you need to have money on your mind. Whether you’re testing different business model variables, comparing performance metrics to industry ideals, or calculating the APR on a business loan, the numbers must inform your decisions.

Without keeping a close eye on your bottom line, even the SaaS business with the lowest overheads can face rocky cash flow periods that can lead to early failure. Keep these tips in mind as you grow your business and you’ll be much better prepared when a cash crunch hits.

If you have additional tips on what SaaS should know from a financial standpoint, I’d love to hear them in the comments.