We live in a time of acronyms. CRMs, ERPs, BI. It can be a bit much to keep up with them all. The latest that I've come across is FaaS (Finance as a Service). This is a bit of a crib of SaaS (Software as a Service) – although the same could be said of NaaS (Network as a Service), IaaS (Infrastructure as a Service), and PaaS (Platform as a Service)... I digress.
What is this new acronym, FaaS, all about? Is it something we should take seriously? Something to get in on?
What is FaaS?
SaaS is a software distribution model in which a cloud provider hosts applications and makes them available to end users over the web. In other words, it's a way in which applications are delivered over the internet as a service. FaaS combines elements of SaaS into its methodology of providing financial services, specifically proactive financial services.
Without SaaS, FaaS would not be possible.
According to GrowthLab, FaaS provides clients with "services across the accounting, controllership, planning, finance, and tax value streams under one roof" and what is unique to FaaS is the inclusion of planning and finance within the service offerings. As their president and founder, Steven Byler, says:
"I like to think of it this way: accounting is all about having good hindsight; planning is all about foresight. You can’t plan without solid accounting."
And FaaS is about combining foresight with solid accounting. FaaS is a future-focused accounting service model which blends finance management practices with advanced tech, such as AI and intelligent automation, to make finance more agile and proactive.
The benefits of FaaS
During the time of COVID-19, finance and accounting functions that were not yet fully centralized and still ran predominantly manual financial management processes struggled far more than finance and accounting functions that made use of standardized, digitalized systems. Many CFOs and finance and accounting teams struggled during the pandemic due to:
Limited access to real-time financial data;
Staff management challenges;
Bottlenecks from premises systems;
Operational inefficiencies; and
Cash constraints.
Meanwhile, those who adopted a FaaS model faired far better.
The FaaS approach helps CFOs in numerous ways by providing real-time financial data and insights from consolidated and connected data sources in reporting systems such as Syft. Other benefits include the following:
Easily accesible: by making use of cloud software, FaaS makes it easy to access the requisite data – even from remote locations.
Reduces fixed finance operating costs: with faster deployment and lower upfront and operating costs, companies have more cash in hand and can reach a higher return on investment from making a quicker transition to a FaaS model, irrespective of the cost of ERP licenses and the scale at which the business operates.
Improves financial visibility: by allowing companies to get financial reports in a unified and easy-to-read form that clearly presents the opportunities ahead as well as current challenges.
Reduces fraud and increases efficiency: brings integration in financial management systems which assists in reducing duplicate listings and repetitive tasks, empowering staff to handle higher transaction volumes.
So, what do you need to do to move to a FaaS model?
Employ a diverse team
To offer FaaS, you need to have a powerful team comprised of a variety of people with diverse skills. This means moving beyond recruiting solely accounting and tax experts and opening the doors to people who specialize in finance and analysis as well.
In any service-based business, hiring and retaining the right people is crucial to your success down the line. This is also one of the crucial areas in which many firms are currently struggling. To ensure that you both attract and retain valuable staff, you may need to think beyond the bare bones of the roles you offer and consider the ways in which offering employees these positions also means offering them a sense of purpose, the potential for future growth and up-skilling, a degree of flexibility, and a welcoming company culture.
After all, happy and fulfilled staff are far more likely to provide clients with a good service than unhappy, unfulfilled staff.
In addition, it's worth noting that when it comes to hiring new people, it's not just about their technical capabilities. You also need to focus on "softer" skills, such as communication skills, critical thinking, and the ability to adapt to change.
It's also helpful to recruit someone who takes ambiguity and uncertainty in their stride – which is actually more about attitude than aptitude.
Pro tip 💡: A dedicated FaaS team can afford to spend all their time on finance and planning services and clients, which may well be more effective than adding these services to a tax or accounting specialist's load.
Tax and accounting may still be vital services that you offer, so don't get rid of the employees who provide those skills. There's no point in throwing the baby out with the bath water. Just beware that your tax specialists may not necessarily be the same people who will join your FaaS team.
Productize your services
Turning your service into a product means simplifying the usual labor, time, processes, and human capital involved and turning them into one compact item. This also helps you find a niche into which these services fit which can give you a competitive advantage.
This will help you to explain exactly what it is that you are offering by defining what you offer in terms of:
The scope;
The cost; and
The package.
Packaging services helps you to standardize them so that you can make the most of your time and your team to complete the work.
When packaging your services, it's important that you standardize your planning and finance tech stack and your deliverables. Deliverables might include things such as:
Weekly financial health reports;
Monthly management reports and meetings;
An annual operating plan; and
A monthly meeting in which you review actuals compared to the budget.
You can also standardize your meetings by ensuring you have a set agenda each time and schedule follow-ups at the end of each meeting. And you can standardize your reports by building templates on Syft and setting up scheduled reports so you don't forget to send them out on time each month, quarter, year, or week.
Establishing a consistent schedule
Figuring out when and how often you deliver your services can help you to establish a schedule. Without this, you are left to wait on your clients to define a schedule for you, which is not ideal to say the least.
If your team creates the schedule and everyone knows what that schedule is, then you are all better prepared to deliver your services to clients in good time.
Should you consider a FaaS business model?
If you are moving more towards providing advisory services to your clients and are already making use of the latest tech, chances are, you're not far off from this model already.
For small businesses, employing external FaaS service companies can be helpful as they can provide business intelligence, elevated financial management, timely financials, and business strategy without getting caught up in the finer details and other tactical matters. It may also be far more affordable to employ an outsourced FaaS team than building out an optimized in-house finance and accounting function.
As we found in our series on the future of accounting, businesses are increasingly turning to accounting practices for reasons that go beyond compliance – to seek business and advisory services to help them better manage risks, keep pace with changing trends, and grow new streams of revenue.
Technological development has accelerated at such a rate that it's difficult to imagine a world without it. Finance as a Service is just another strand of this interconnected web.