How Your Business Can Benefit from FaaS or Finance as a Service

It’s not unusual during times of economic uncertainty for businesses to outsource noncore functions that don’t directly contribute to the bottom line. According to the U.S. Small Business Administration (SBA), the most commonly outsourced small business functions include marketing, information technology, human resources, research and development, and customer service.

You can add finance and accounting to this list. Four out of 10 small businesses outsource finance and accounting, which ranks ahead of payroll and customer service and trails only information technology. This includes businesses that utilize Finance as a Service (FaaS), an increasingly popular type of outsourcing that offers companies a comprehensive approach to managing their finance and accounting function.

A Cost-Effective Alternative

FaaS offers a modern alternative to building an in-house finance department by providing businesses with fully outsourced support for their financial back office. This includes bookkeeping, accounting, finance, tax, auditing, compliance management, reporting, FP&A and CFO advisory services. FaaS goes beyond traditional finance and accounting outsourcing by offering a holistic approach and comprehensive framework designed to support all aspects of financial operations. In doing so, FaaS helps ensure that financial operations are aligned and can scale to accommodate your business’ growth.

FaaS features advanced cloud-based platforms and a subscription-based pricing model in which your business only pays for the services needed. Using FaaS enables executives and staff to remain focused on core competencies and strategic initiatives that can drive the business forward, instead of spending time and resources on noncore activities that don’t add value. The benefits of FaaS may include:

1. On-demand financial expertise
With FaaS, your business has immediate access to high-level financial expertise that you might not be able to afford on staff.

2. Greater cost efficiency
FaaS eliminates the need to recruit, hire, and train in-house finance and accounting staff, including a high-priced controller or CFO. This can save 20-50% compared to the fully loaded costs associated with staffing an internal finance department.

3. Improved cash flow
Statistics reveal that more businesses fail due to poor cash flow than a lack of sales or profits. FaaS providers utilize cutting-edge financial technology, including bank treasury management tools, to shorten the cash flow cycle and improve business cash flow.

4. More scalability and flexibility
Since you only pay for the finance and accounting services you actually need, your business can easily scale up or down to rapidly respond to changing business conditions.

5. Better financial decision-making
Advanced reporting allows you to quickly assess and better understand financial metrics, which leads to faster and better financial decisions.

6. Access to detailed market data
FaaS providers can perform market and competitive analysis that uncovers new growth and profit opportunities, giving your business a leg up on the competition.

7. Stronger internal controls
Fraud and embezzlement are serious concerns for many businesses today. Using industry best practices such as segregation of duties, FaaS providers can implement strong internal controls that help stop fraud in its tracks.

8. Access to the latest financial software and systems
Advanced financial and accounting software can be expensive to purchase and maintain. FaaS providers utilize technology and tools capable of handling the most sophisticated financial and accounting needs, including interactive monthly financial statements and customized financial reports.

9. Improved compliance
Many southern California businesses are subject to strict compliance regulations. Access to real-time data and insights from a FaaS provider can help you remain in compliance with federal and state regulations that affect your industry.

What to Look for in a FaaS Provider

When choosing a Finance as a Service provider, look for one with practical experience in strategic financial management, preferably in your industry. Make sure your provider is leveraging the latest financial and accounting technology tools. And try to gauge whether the provider will be a good cultural fit since they will become a key member of your business team.

Set clear goals and expectations with your FaaS provider from the beginning in order to maximize the value of the relationship. This includes the scope of work, lines of authority, specific deliverables and reporting frequency. Clear communication is critical so schedule regular meetings (virtually or in person) between your executives and the FaaS provider to make sure everyone’s on the same page.

Concluding Thoughts

By aligning financial and accounting management with your business goals and objectives, Finance as a Service helps ensure that your company is well-positioned for long-term success. FaaS can save your company money while freeing up staff to focus on initiatives that drive business growth and profitability. Talk to your managers about whether adopting FaaS could make sense for your business.

Arthur F. Rothberg, Managing Director , CFO Edge, LLC