Growing companies need to process transactions accurately, close the books on time, generate financial statements, and deliver precise investor reporting. However, it’s cost-prohibitive to build the people, processes, and systems to achieve this, leaving financial leadership bogged down by day-to-day details and tactical tasks.
To overcome this, nearly 4 in 5 CFOs at investor-backed companies are turning to the Finance as a Service (FaaS) model, a cloud-based service that provides access to top financial talent, technology, and infrastructure on a subscription basis.
The FaaS model is like an out-of-the-box finance and accounting team, in which businesses outsource their finance function to a third-party to handle accounting, transactional bookkeeping, clean-up, financial planning and analysis (FP&A), and CFO support at a fraction of the time and cost of building in-house.
FaaS offers growth-stage companies several advantages, but not all providers are created equal. Here’s how it should work.
How Finance as a Service Helps Companies
Many are familiar with outsourced accounting, but a Finance as a Service (FaaS) company is not like a typical outsource finance and accounting firm. The best FaaS companies leverage standard operating procedures, scalable systems, and advanced cloud software that make them agile enough to meet the needs of any business, while providing easy-to-read financial dashboards along with statutory and custom reporting.
Let’s start with the common tactical challenges that lead financial leaders to turn to FaaS:
- Finding, hiring, onboarding, and training the right employees for the department.
- Whenever you are hiring, onboarding, training, and performing other tasks related to people management, there are a lot of inefficiencies.
- Keeping up with the rapid advancement of technology.
- Companies often use disparate tools for the general ledger, electronic payment processing, accounts receivable processing, budget and forecasting, etc. These tools, and the information they collect, needs to be unified to create a complete financial report.
- Researching the right tools and implementing them takes time and effort, and are often difficult for non-financial professionals to use and interpret.
By outsourcing finance and accounting tasks with a capable provider, small and medium-sized companies integrate their financial, accounting, and business strategy streams seamlessly to achieve:
- Offloaded back-office tasks that frees financial leadership to focus on execution
- Full-scale service of an entire in-house finance department at a fraction of the cost
- Consolidated value streams under one roof
FaaS also offers growing businesses several advantages over in-house development.
Benefits of Finance as a Service
The core benefits that have led to more companies adopting the FaaS model include:
1. Cost savings
Signing up for FaaS services instead of building an in-house finance department can bring 30-40% cost savings. Even as companies continue to grow and develop, those savings can last indefinitely because:
- Many manual activities get automated
- FaaS providers’ expertise enables them to address companies’ unique needs and determine the best processes for each one of their clients
- FaaS providers have a bigger pool of trained and skilled finance experts your company can tap into
2. Improved financial reporting
When a company has a controller or accountant but doesn’t have a CFO, their reporting is rarely up to the level it needs. In other words, improved reporting and data are essential for any type of business because data, analytics, and metrics are used to drive company growth.
With a FaaS provider, companies won’t feel the lack of analytics and metrics because the provider will leverage enterprise-level finance and accounting software to provide better data and reporting in an easy-to-read format. Owners and CEOs can use the data to understand what is going on with the business, where it stands financially, and bring better decisions that will improve the company.
3. Scalability
FaaS providers are appropriately structured and can give you the right level of resources for a specific task. By helping you set up the right systems and getting you streamlined and on the same process, FaaS providers can quickly jump in and help, allowing your company to be scalable (more than it would be with an in-house department).
For example, Gimmal, a PE-backed software company, successfully leveraged Consero’s Finance as a Service model to scale their operations and reduce their costs by 25%.
4. CFO support
In case your company doesn’t have a Chief Financial Officer (CFO), your FaaS provider can offer one. For example, Consero offers CFO support – a financial expert who becomes part of your team and is there to provide financial guidance.
Many companies consider the FaaS model as CFO insurance. Offloading daily back-office repetitive tasks reduces your time needed with tactical administration, providing your financial leadership with more time for deep analysis of the numbers. The CFO comes into play to help you focus on the growth of the business and more strategic aspects of the job.
5. Enhanced financial visibility
Using paper-based systems and collecting and analyzing data on spreadsheets increases the chance of human error and is very time-consuming. As your company grows and evolves, CEOs and stakeholders need to be able to see the dependencies and interactions of all business segments. In other words, they must get a clear picture of their business as a whole.
The FaaS model allows companies to get financial reports in a unified and easy-to-read form that clearly presents the opportunities ahead as well as current challenges. Improved financial visibility will help companies:
- Understand your current financial position and cash flows
- Track ongoing account profitability and monitor customer acquisition costs
- Demonstrate performance gains to investors
- Detect frauds and errors faster
- Improve the accuracy of your business forecasts, predictions, and goals
- Evaluate service line performance in real-time
- Make strategic business decisions with more confidence
With improved financial visibility through financial management guidance and connected data, your company will be able to mitigate risks and build a long-term strategy for the future. It will give you a birds-eye view of the entire company’s performance as well as the ability to zoom in on the details. Otherwise, depending on data stored in multiple disconnected systems prevents you from getting a view of unified information, which is required for bringing data-informed decisions.
6. Speed to optimization
When business leaders are focused on growing a company as quickly as possible, the finance and accounting department often hinders their company’s growth. This happens because:
- The CFO splits time between tactical & strategic initiatives
- The finance and accounting department employees don’t have the right skills
- The department hasn’t set up the right systems or doesn’t have processes that will help them achieve exponential growth
- Inability to produce timely and audit-ready financials
- Inability to produce forward-looking projections
- F&A organization operating with manual, error-prone processes
Whenever there is a problem in the finance and accounting department, companies often follow the same procedure – they hire a finance team that researches systems and pick the one the fits best.
Next, they configure the system, implement it, and train all the employees to use it. This process takes longer to achieve because most organizations need 18-24 months to optimize their finance function. And to get to the final point of implementation, a lot of time and energy needs to be spent, which takes away from the management of daily operations and other core functions.
With the FaaS model, you can optimize your finance function in up to 60 days, making the FaaS solution more cost-effective and less time-consuming than an in-house department.
7. Reduce fraud and increase efficiency
In a growing enterprise, trying to improve productivity and control while using paper-based processes and various apps can be a challenge. On the other hand, reducing the risk of fraud and errors is essential, but difficult when you have several employees entering data manually into several different systems. Instead of spending their time on value-adding activities, they are wasting their time.
Finance as a Service brings integration in financial management systems, which can help reduce duplicate listings and repetitive tasks, allowing staff to handle higher transaction volumes.
Moving to a consolidated financial platform that unifies your financial data and eliminates paper-based processes will improve financial reporting, expedite collections, and reduce the chance of fraud. Segregation of duties and critical performance metrics are also supported by integrated financial management, which leaves your staff with more time and energy to focus on core tasks and value-adding work.
8. Prioritize growth by reducing distractions
Business leaders should be concerned with finding ways to differentiate the business, distinguish it from the competition, improve customer experience, learn continuously, etc. If they try to deal with finance tasks at the same time, it will eat up much of their time they could have spent on core issues that affect the long-term success of the company. The FaaS model helps reduce distractions like these, allowing them to focus on identifying opportunities and stay alert for any red flags.
9. Executing with confidence
Without solid financial management guidance, business owners can neither monitor nor guide their company’s strategic directions. To execute with confidence, you need accurate financial visualizations and models, including:
- Tracking budgets and forecasts to keep the organization on course
- Identify simple mistakes by employees or vendors missing deadlines
- Provide visibility into cash flows
- Recognize early-stage strategic mistakes
With proper financial reporting, you will be able to execute with confidence.
Is Finance as a Service Right for Your Company?
The companies that can benefit from the FaaS model the most include:
- Startups, small, and medium-sized businesses: This model is perfect for companies with straightforward accounting needs and lower transaction volumes but want the ability to easily scale as their business develops. FaaS providers offer support in performing daily bookkeeping functions and provide expert assistance to address a business’ daily needs.
- Scaled and emerging growth companies. Next, the FaaS model suits organizations with complex accounting needs and higher transaction volumes, which requires a deeper level of financial expertise. Finance as a Service providers offer a wide range of controller-level and transaction processing services. All that is done in close coordination with the company’s tax advisor and CPA to ensure proper tax planning and compliance are in order. It comes as an excellent alternative to staffing an in-house finance and accounting team that’s turnkey for your fractional or in-house CFO.
- Scaled, emerging growth, and startups (PE or VC-sponsored). FaaS providers also offer executive-level access and CFO services for the most comprehensive financial management partnership to your company. For example, Consero offers a virtual CFO that will work closely with your board, investors, and leadership team to provide meaningful financial advisory and reporting for corporate and capital transactions.
Revolutionize Your Corporate Finance Function with Consero
Outdated systems, inefficient processes, and wrong people obstruct progress for most startups and SMBs. Consero’s Finance as a Service will enable you to strategically outsource your financial and accounting departments but still maintain a core finance team supported by experienced financial experts.
Our services can help you bridge the gap between your company’s financial numbers and goals (a problem which is often the cause of business failures). With improved financial visibility, you can monitor performance and measure progress accurately and assess risk in all potential scenarios.
Finance as a Service also removes the hassle of technology research and hiring people. Consero is already equipped with a proven technology stack and has a team of financial experts that have successfully implemented software and surgically mapped processes hundreds of times.
Since we provide the staff and technology that work to provide accurate information and easy-to-read reporting, companies don’t have to design their finance and accounting processes from the ground up. The system is already in place, and our clients only need to plug into it after a 1-2 month implementation, leaving CEOs and CFOs more time to focus on more important business areas.
While our platform collects huge amounts of data, our AI-powered technology will make sure that all of it is up-to-date, accurate, and produced in an automated and efficient way. The reports delivered are created in a way that every non-financial and general business person can read and make sense of it.
In addition to all this, our clients will get access to SIMPL – our aggregation platform that combines transaction details, support documents, real-time information, and financial dashboards in one place.
If you’re ready to gain control over your finance function function, get in touch with us to learn more.
