FINANCE AS A SERVICE

Finance as a Service – FaaS

During the first C19 lockdown I was on a call with Mike Webster, CEO arvoia.  I took the call in the garden, summer was on the way and while the world was caught up in terrible uncertainty, nature knew what it was doing.  The growth was evident everywhere and I enjoyed basking in the pungent smells and sounds.  We were just catching up, sharing our perspectives.  I took some time to explain my new business model and true to form, Mike suggested it sounded like it could be called Finance as a Service (FaaS).  As usual he is at home with big concepts.

When I got a chance I Googled FaaS but nothing obvious came up.  After some digging I managed to find a few boutique finance houses in the USA that described themselves as working in the area of FaaS.  It also turned up in a few other contexts around Fintech and in the corporate world.

More recently Deloitte (USA/Global) in their document predicting trends in the Finance industry in 2025 – ‘Crunch time V Finance 2025’ Outlines the following:

“Automation provides a new lever for managing costs, one that gives finance organizations the opportunity to re-evaluate how they’re organized, where work gets done, and what kinds of processes no longer require human intervention. Finance-as-a-service will gain traction beyond mid-market companies.”

But what is FaaS – what do they mean?  To understand this we need to look at Software as a Service (SaaS) and understand what it is. 

SaaS

SaaS is a business model where customers pay monthly to use software hosted on a remote computer.  This model was perfected by Salesforce who in 1999 were the first company to launch as a dedicated SaaS business.  They were hugely successful at it and many other businesses followed suit.  Today the global market for SaaS is worth US$157 Billion. (www.Statista.com).

Together with IaaS and PaaS; Infrastructure and Platform as a Service they form the main categories of cloud computing. Many other types of ‘as a service’ have developed in recent years; including Managed software, Desktop, Database, Security, Everything as a Service.

“ *aaS is an acronym for as a service (e.g., X as a service), and refers to something being presented to a customer, either internal or external, as a service, always in the context of cloud computing. As a Service, or XaaS (Anything as a Service) offerings provide endpoints for customers/consumers to interface with which are usually API driven, but can commonly be controlled via a web console in a user’s web browser.”  (Wikipedia).

The Salesforce website describes the following as benefits of SaaS:

  1. Low setup and infrastructure costs
  2. Accessible from anywhere
  3. Rapid implementation
  4. Scalability
  5. Industry-leading service level agreements
  6. Automatic, frequent updates
  7. Timely improvements
  8. Security at the highest level.

These are the type of qualities we would need to see in FaaS if it is an accurate definition for what is going on.  From my research there is some confusion with Fin Tech so it is worth understanding what it is.

Fin Tech

Fin Tech or fintech is used to describe technology and innovation that aims to compete “with traditional financial methods in the delivery of financial services” (Wikipedia).  It is an emerging industry that uses technology to improve activities in finance.  The use of smartphones for mobile bankinginvestingborrowing services, and cryptocurrency are examples of these technologies.

fintechireland.com has a wonderful map that charts the number of fintech on the island of Ireland.  They are grouped into Credit / lending, Platforms, Funds & trading, Crypto & Blockchain, FinOps, InsurTech, Accounting, Payments, RegTech, Saving / Investing, Big Data / Analytics & Others. The total comes to approx. 230 entities. It’s a fast moving space in Ireland alone. Some of these entities are SaaS models but because they address financial services they are also grouped as fintech.  I have seen some writers (Anna Khan CRV Insights) describe these SaaS models as FaaS but I think that is inaccurate.  Finance as a Service in the context of fintech generally is too broad a definition, it is hard to see what it could mean.

Chris Principe, Contributer at Financialit.net has made a bold attempt to claim FaaS for Fintech with the following:

“As the banks cling on to their past, many new propositions are hitting the market mostly led by the Non-Financials. The Peer to Peer (P2P) platforms like Funding Circle, Faircent, Orchard and Assetz Capital are fast becoming the choice for some corporations. I would put forth that FaaS can be the identifier for Finance as a Service, which covers this group of e-platforms”. 

These fintech come under the banner of Credit / Lending.  They are deploying technology to get finance into the market but they are hardly subscription models and while they may maintain information on the Cloud (all banks do now) they are not really Cloud based. They are using technology to compete with traditional financial methods in the delivery of financial services – fintech.

Corporate Transformation Consultants

There is further confusion, as I have found a number of Transformational Consultants describing the need to move culturally from ‘Finance as a Function’ to ‘Finance as a Service’ internally. 

These transformational consultants are picking up on the trend that you suspect I am getting to but are only seeing it as an internal re-focusing of the culture.  Their use of FaaS as an internal destination for change is missing the point, as to have the feel of a ‘as a Service’ offering there needs to be a subscription model and the service needs to be hosted on the cloud.

However, while FaaS being used to describe an internal culture transformation is unhelpful, it is recognising the burden that finance teams face with having to deliver the day to day activity which usually has them swamped as opposed to ‘SERVICING’ the needs of the other internal business units. 

This simplification wont hold water for adept CFO’s or CEO’s who understand that they are challenged with delivering the day to day but are struggling with the resource allocation.  Typically too many valuable employees are doing too much low value transaction work as opposed to higher value decision support.  This effects all businesses from the Start-up with no finance team to a large Corporate.

FaaS as I see it is an opportunity to deal with this fundamental resource allocation challenge.  Before I get further into that it is worth defining outsourcing so we don’t confuse it with FaaS.

Outsourcing / Offshoring

Outsourcing has been around for a long time and many Accountancy Firms provide outsourced services for payroll, payables, receivables etc.  In this situation a task(s) is identified and the outsourcing firm provides the person(s) to complete the task.  Offshoring is a version of this where the business or accounting firm employs their own staff in another country to do the required tasks.

FaaS could be used to describe this activity but why invent a new term for the same thing unless the nature of it has changed?  What is the nature of the evolution into FaaS that could be different to Outsourcing?  This comes down to the fundamental trap that we all fall into when there is ‘work’ to be done.  When we Outsource we look at the transaction detail, the number of items a month or the number of people to process etc.  However, what we really need is a focus on the outcome required and allow the provider work out how best to do that.  The outsourced assignment is tightly scoped and the provider does not become part of the team.  Could we imagine a relationship with a third party that is focused on delivering outcomes and businesses rely on that partner to implement the best operating procedures and host it on the best available cloud solutions.  Now this could be something different, something deserving of the description FaaS.

Challenges facing businesses

Before we look at what Finance as a Service might look like, it’s worth considering what the are challenges facing businesses; CEO’s, COO’s and CFO’s What could be solved with a change in how  we approach finance in the business?

First and foremost, a typical company is swamped by core day to day activities which are stopping them looking at projects to improve the business and enable further growth. They don’t have time to think about internal innovations. An early stage growth business without an accounts team uses founders or other key team members to complete low value transactional work, just getting it done to a minimum standard.  Larger companies and corporates typically under resource the finance function as business grows and the finance team spends their time focused on maintaining the nominal ledger, completing reconciliations and producing reports as opposed to focusing on the strategic use of capital, investment allocation, profitability metrics and supporting the other business units in an organisation.

Secondly, in the last ten years since the advent of the smart phone all of us have become so accustomed to being able to access whatever data we require instantly.  E.g. I can open my Garmin App on my phone and it will tell me where I ran, when, with who, what the weather was like and linking it to my health apps, I can view my weight from our Withings wifi scales, log my own blood pressure with my Nokia monitor and compare my sleep data.  The application can chart all this data in real time and generate any report I desire.

In our businesses, generally speaking, the systems are much clunkier and getting access to the best information requires knowledge of multiple applications and may require spreadsheets to pull the data together and possibly the internal IT or accounts team to do it, each time. Accounts data is rarely live and again multiple processes are required to extract monthly reports.  In-house finance has not being keeping up with the experience we are having in our personal lives. 

How can this change without a fundamental shift in how we view the finance function of a business.  From a finance perspective we need to split the needs on the business into two:

  • The need to process information, to maintain proper records, produce live reports and remain compliant.
  • The need to support decision making in the business, generate key operating information, consider funding strategies, working capital management, investment plans.

The Founders, Executive and CFO if there is one need to focus on 2 above and find a solution to get 1 delivered without distracting them.  FaaS is a potential solution.

“FaaS can take care of the day to day activities so the business can focus on the Rocks to fuel further growth. Where growth is the name of the game you don’t want to be there tempering expectations or not grabbing market.” Workday

What is FaaS in more detail

If we go back to the Salesforce Website Benefits we can see that a SaaS type service, in the finance space, would need to include the following, coupled with a subscription service and being hosted on the cloud:

  1. Low setup and infrastructure costs
  2. Accessible from anywhere
  3. Rapid implementation
  4. Scalability
  5. Industry-leading service level agreements
  6. Automatic, frequent updates
  7. Timely improvements
  8. Security at the highest level.

At Numeric we provide a remote team, we can commence our service on demand, increase it or decrease it as needed, we use automated contract software and there are no set up costs or infrastructure costs required. 

We use a subscription model and all the software we deploy is cloud based.  The software includes automatic and frequent updates, timely improvements and security is at the highest level. 

We take over the finance function for a business and we deliver timely, accurate and relevant information every month.

I have referenced some other providers of this type of service at the end of the Blog and you can see that they are all similar.

This type of service is Finance as a Service and you are going to see much more of it in the years to come.

Deloitte + Workday

Workday is a Cloud Finance, HR and Planning platform; Enterprise software targeted at the Corporate Market.  Deloitte have entered a partnership with Workday and they are focused on delivering FaaS to Corporates.  They are looking to work with CFO’s to restructure their teams away from transactional work onto decision support. 

When I entered the market I imagined that FaaS could be deployed in larger corporates in-time but I didn’t expect it to be happening now.  In fact, many Workday customers have grown their finance departments with this type of model in mind. 

If you want to know more about this space got to Jillian Ogawa’s Workday Podcast: How Finance-as-a-Service Helps CFOs Accelerate Transformation of the Finance Function.  Does the on-demand model work for the finance function? Matt Schwenderman, principal global Workday finance lead at Deloitte, and Scott Van Valkenburgh, global alliances and channels lead at Genpact, share how Finance-as-a-Service helps CFOs accelerate digital finance transformation

In this podcast they discuss the likelihood that the Technology Sector will be the early adopters of FaaS.  This confirms our approach at Numeric where we have focused on the Technology Sector. 

Europe & UK

Before you think that the finance industry is uniting behind the FaaS opportunity and embracing it, I’m sorry to say – not yet.  To add further confusion when we search FaaS in the UK & Europe we find that EY and Grant Thornton have claimed the acronym for their own Financial Accounting and Advisory Services which have nothing to do with FaaS as described by Deloitte.

GT say “The Financial Accounting and Advisory Services (FAAS) team at Grant Thornton is a multi-disciplinary team that designs and implements creative solutions to address these complexities.”  – Now you Know!

EY’s FAAS teams support you in determining, monitoring and disclosing financial and nonfinancial insights for your stakeholders.   FAAS addresses the CFO’s agenda and provides CFOs, controllers, treasurers and audit committees with insight and services to support compliance with evolving financial requirements and help provide transparency and trust in reporting to support better decision-making.

IBM UK have a ‘Function as a Service’ – I lost the will to look into it.  More marketing speak I guess.

So that’s it

Finance as a Service is a remote team, that can commence their service on demand, increase it or decrease it as needed, they use automated contract software and there are no set up costs or infrastructure costs required. 

FaaS uses a subscription model and all the software deployed is cloud based.  The software includes automatic and frequent updates, timely improvements and security is at the highest level. 

Mike Webster was right after all – Thanks Mike!

 

 

 

 

Reference sites – USA

Thankfully, as I mentioned there are a number of firms in the USA describing themselves as providing FaaS.  They have taken the time to work out what they do and acknowledge it as a generic service which is helpful.  The benefits they describe include the following:

  • Real-time financial data and insights
  • Cloud-based ERP and digital technologies
  • Minimal cash outlay
  • Rapidly scalable operating model
  • Ready for the rebound

(Genpact)

  • Access financial information in near real-time, anytime, anywhere
  • Calculate, monitor, measure and compare key performance indicators (KPIs) against your goals
  • View monthly financial packages and historical transactions
  • Approve bills, payroll and billing
  • Authorize and issue payments and more

(Rose Financial)

 

We will manage your accounting and finance operations using industry-leading cloud-based software solutions. TruSpan provides a full end-to-end accounting and finance process for your company. We can support your back-office for a fraction of the cost of hiring full time resources and can allow your over-tasked team to focus on projects that create value for the business.

                                                                                      (Truspan Financial)

Finance-as-a-Service companies offer fully integrated accounting, financial, and business strategy streams. The benefits are:

  • Value streams which are consolidated under one roof;
  • It’s like having multiple yet cohesive internal teams at a fraction of the price
  • Focus that is placed on execution and business continuity

A FaaS company looks very different than your typical accounting or advisory firm. This is due to the fact that they leverage technology, scalable systems, and standard operating procedures. With this being said, they are agile to meet the needs of business, while providing customized reporting and dashboards.

(Growthlab)

At Consero, we combine traditional CFO, controller and bookkeeping services with proven processes and integrated software to give executives a dashboard view of company performance, plus the ability to invoice customers and pay bills all in one place.

Delivering far more value than outsourced accounting, which often just provides glorified bookkeeping with compliance based reporting, Finance as a Service gives clients—like your organization—enterprise-level financial visibility and control at a fraction of the cost and time required to setup and manage an internal finance team and infrastructure. You also get management reporting that tells you how your business is actually performing financially. We can have you up and running in 30 days with minimal impact to your company, delivering real value including:

  • Connected Data: 
  • Process and Controls: 
  • Right People: 
  • Saving Time: 
  • Financial Visibility: 
  • Poised for Growth: 

(Consero)

(Photo Sabbir Rahaman)

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>