You Should Be Collecting At Least 100% Of Your MRR Each Month in Cash. Ideally, 110%+.

Cash collections is a topic we haven’t discussed much on SaaStr, but boy, it can be important all the way until you have a strong VP Finance / CFO. And often after.

What’s the issue? The issue is that most B2B start-ups are terrible at collecting cash that doesn’t come from a payment gateway. Just terrible.

And they often get worse as they go upmarket. They hook up a payment system when they start as self-service, and the cash magically flows into the bank account. But then they close some bigger customers. And add some services. Both of which require … invoicing. Which are often are paid “Net 30” or “Net 60” or “Net Infinity”. And no one follows up, because there is no finance team to follow up. The invoice is sent out, and … the start-ups just … wait.

50%+ of the time, those invoices don’t just pay themselves. You have to follow up. And those great annual deals? The cash that sounded so great from an annual deal just never comes. At least, not enough of it.

Let me suggest a basic KPI and goal — and a warning sign: You need to be collecting at least 100% of your MRR in cash each month. Ideally, 110%+.

How can you collect more than 100% of your MRR each month? It’s pretty easy in most cases:

1. Annual deals that pre-pay up front generate more than your MRR each month right there.
2. Pre-paid upsells and conversion from monthly to annual deals.
3. Annual renewals that bring in upfront cash.

What I see these days more and more is start-ups not paying attention to accounts receivable, invoicing, etc., and collecting 60%-70% of their MRR. Even worse, they pay the entire annual sales commission on these deals without getting the cash. Combined together, that’s like effectively only receiving 50% of your MRR in cash each month after paid commissions on unpaid deals.

Imagine your start-up is doing $100k in MRR ($1.2m ARR) with $200k monthly all-in spend and $1m in the bank:

• If you collect 110% of MRR, pay sales reps upon cash receipt, and grow at 8% a month, your net burn is ~$90k and your cash lasts 18 months.
• If you only collect 60% of MRR and pay reps upfront, your net burn jumps to $140k a month, shrinking your runway to just 6-7 months.

That’s going from Running Out of Money to Don’t Need to Worry on your cash runway with the exact same revenue, team, and expenses!

Action Steps:

1. Hire someone 4-8 hours a week dedicated to A/R collections.
2. Pay reps on cash receipt when cash is tight.
3. Set a clear goal of collecting 100%+ of MRR in cash each month.
4. Utilize AI agents integrated with accounting software to automate invoice generation and reminders.