Finance as a Service (FaaS): Top Tools for Modern Finance Teams
The finance team’s role today is evolving and becoming increasingly vital to their company’s success.
Leaders often need to be key consultants in a multitude of areas of the business. Their span of influence may often extend beyond pure accounting and FP&A -- they dabble in corporate strategy, data & analytics, pricing, and human resources to help companies produce predictable revenue while managing margins and spend.
Though CFOs have taken on more responsibility in organizations, their tools often remain the same. As evidenced by a recent survey, 88% of CFOs still relied on traditional spreadsheets for budgeting and forecasting. Excel is still the go-to for everything-- and while there’s no denying the value of the tool, modern software solutions are revolutionizing everything from spend management to HR.
In the tech world, product and software development teams no doubt work exclusively in software applications to be more productive (AWS, Figma). Sales and marketing teams have seen a surge of tools that improve their workflows through automation, analytics, and prediction (Outreach, Autopilot, Gong, Drift, Clearbit).
But when it comes to finance, SaaS adoption is only just starting. The finance and accounting tools that financial professionals use have largely been unchanged in the last 20 years. That is — until the recent explosion of FinTech brought about a proliferation of FaaS tools (Finance As A Service).
Outsourcing some of the most tedious aspects of finance and accounting with FaaS tools not only offers sizable cost savings, but also reduces the workload of the finance team and accounting department. Everything from financial reporting to invoice processing can be done with modern FaaS tools.
Here’s a basic rundown of the different sectors of finance, trends in the space and most innovative solutions for growing companies.
- Accounting & Reporting: maintain visibility into accurate financials.
- Financial Planning & Analysis: plan for the future to make decisions.
- Payments: send and receive money — the life and blood of any business.
- Spend Management: manage spending across employees and vendors.
- Payroll & Benefits: give your employees the financial capital to succeed.
- Equity & Financing: keep the company afloat with optimized capital.
Accounting & Reporting — maintain visibility into accurate financials
Accounting — automate month-end close
SMB Winner: Xero
Mid-market - Enterprise Winner: Netsuite
Like any solution — the best accounting software for your business highly depends on your business. Most commonly, companies start on Quickbooks, but Xero is definitely making waves in the accounting community with their better UX, exhaustive integrations, and fast development cycles.
Accounting complexity often naturally increases as the business grows. Many large SMBs to mid-market companies eventually graduate to the expensive and powerful NetSuite to tackle more complex accounting needs like multi-entity support and custom reporting requirements.
Still, although most accounting platforms help teams store transactions and generate financial reports, much of the preparatory work that goes into closing the books each month require manual reconciliation of various CSV files and journal entries. New tools are popping up that integrate directly with the top accounting platforms to simplify this (e.g. Ramp, Stripe, Shopify).
Startups like Pilot are increasingly focused in automating or abstracting away the accounting function completely.
SMB Winner: Redash
Mid-market - Enterprise Winner: Looker
In today’s environment, financial professionals need access to real-time financial data across the organization. Many still pull reports from their accounting systems which are 20 days stale on average. Leaders leverage a strong data warehouse and BI tool to be able to pull data and slice as needed. This enables a much more granular and up-to-date view of financials to make faster more informed decisions.
An increasing number of companies today even have Business Intelligence or Data Analytics functions dotted line report to the CFO, or even have dedicated data analysts sit within the finance function. It is crucial for finance teams to have access to clean, accurate data to tackle questions around revenue recognition, dig into key analyses like CAC, and drive accurate forecasting.
Redash is a quick and easy pick for startups looking for a simple reporting solution, but as companies scale, their more complex financial reporting requirements and graphical preferences are better served by Looker. Both, of course, require clean underlying data to begin with.
Financial Planning & Analysis — plan for the future to make decisions.
Planning — FP&A as a service
Modern financial leaders have shifted away from manual Excel analysis of month-end, quarter-end, and annual budget vs. actuals analysis to Zero-Based Budgeting (ZBB) which leans into Agile financial planning — allocating money more fluidly based on the strategy and needs of the business instead of trying to predict the future. Anaplan has traditionally been the software tool for both finance and sales team planning, but Planful is specifically modernizing these key analyses for finance, with productized cash flow forecasting and what-if scenario analysis. Expect many of the analysis companies entering this space to increase their value add for strategic finance.
Analysis — smarter spreadsheets
The reality is that analysts love spreadsheets — they aren’t going away anytime soon (until AI takes over). But at the very least, use smarter spreadsheets. This includes cloud collaboration, version and access controls, and integrations with your data warehouse to automatically update the analysis. Even Google Sheets has released a number of integrations that allow for direct data syncs from other sources (e.g. Salesforce).
Payments — send and receive money
Payments is a broad term and complex space. For our purposes, let’s boil down to two things: making payments and receiving payments.
Making payments — the rise of virtual cards
Winner: Ramp (credit card)
Businesses need a way to make payments easily for goods and services (e.g. marketing, SaaS, T&E, etc.). The use of virtual cards for B2B payments is on the rise — which makes sense given their benefit: cashback for the business, traceable payments, easy reconciliation and fast settlements for cash flow. Previously, it was common for a finance department to put everything in invoices they managed manually, uploaded to their accounting software and manually paid through their bank. With virtual credit card solutions like Ramp, finance teams can issue virtual cards with 1 click and pay vendors on the fly.
Receiving payments — a simple plugin to accept all payments
Accepting payments is now easier than ever. Stripe has built a payment processing empire with an API that can be integrated with any application in minutes and accepts a multitude of alternative payment methods across 30+ countries. Stripe is also expanding to other tangential areas as well including financing (Stripe Capital) and card issuing (Stripe Issuing).
AP/AR — automated workflows for complex operations
For any payments that are on specific terms or require invoices, an AP/AR solution is a must. These systems handle invoices, approval workflows, payments (ACH, Wire, Check) and reconciliation with accounting systems. While Bill.com has been the de facto solution, many startups are competing to eat their lunch and offering more automation to save teams time (e.g. OCR for data entry, automated approval, better integrations, etc.).
Spend Management — manage spending across employees and vendors
Procurement — smart platforms that negotiate for you
In early stages, companies don’t have a centralized procurement function. Spending happens amorphously, optimizing for growth and sacrificing chaos. Once you hit a certain scale, a centralizing procurement process is put into place to regulate what employees purchase. Procurify is an industry-standard, but a few exciting startups are arising here focused on SaaS management — including Vendr (professional procurement) and Intello/Blissfully (SaaS for… SaaS). For larger enterprise companies, Coupa is considered the heavier weight choice with supplier and contact management modules as well.
Expenses — real-time expense management
Expense reimbursements are painful, inaccurate, late, and expensive.
Finance teams are progressively moving away from forcing employees to front money and get reimbursed via solutions like Expensify. Today, finance leaders issue corporate cards (physical + virtual) via advanced spend management platforms like Ramp. These corporate cards have embedded controls on what you can spend on, transactions on these cards are automatically visible and reconciled, and anything outside of the expense policy is flagged. The result: hours saved chasing receipts and expense reports, real-time visibility, more control and faster reconciliation.
Payroll & Benefits — give your employees the financial capital to succeed.
One of the largest operational costs companies incur is payroll. Leading solutions offer not just payroll processing, but a suite of other benefits that employees need to thrive, including retirement, insurance, onboarding, time tracking etc. This space (ERP, HRIS, HRMS) is competitive and fragmented — with ADP/Trinet dominating upmarket and Gusto/Zenefits/Justworks/Rippling fighting for SMEs. Pick a solution that can scale since it’s highly sticky.
Equity & Financing — keep the company afloat with optimized capital.
Equity — liquidity to private markets
If you thought understanding your stock options was hard — try administering them! Ensuring that a company is not just well-capitalized but well-structured is important to acquire talent and investors to grow its valuation. Cap table software like Carta helps make it easy to structure and issue stocks. Startups are increasingly entering this space to try and create liquidity in the private equity space (e.g. vested which allows employees to sell their stocks) or help consumers become investors (e.g. Angelist Access Fund).
Credit — cheap loans fast
With interest rates lower than ever, it’s important to think about whether to fund a business using debt or equity. FinTech has focused on making small business lending easier than ever and cheaper by leveraging alternate data sources (e.g. cash flow via bank transactions through Plaid, accounting information from Quickbooks, payment data from Stripe, sales data from Shopify, etc.). These data owners are also trying to get into the lending business — Amazon, Intuit, Stripe, Shopify, and Square all have a small business lending arm leveraging proprietary data to underwrite.
How to navigate
If your company has a finance need, chances are there is a FaaS company in the market with a seamless solution. Outsourcing finance and accounting tasks to these finance software tools is a great way to reduce the workload of your finance department while also claiming potentially large cost savings.
But the finance tech stack is complex. There is no one size fits all. When choosing solutions across the sectors, finance leaders and need to keep the following considerations in mind:
- Ease of integration: Does the solution fit neatly within your existing tools? Does it replace a tool you are currently using? → go for solutions with direct integrations with your critical systems.
- UX: Do you users enjoy using the solution? Is it intuitive or does it need a user manual? → go for solutions that make your employees happy.
- Speed of development: Is the company still investing in the product? Is it responsive to feedback? → go for innovative solutions over comprehensiveness.
- Flexible pricing terms: Does the company offer low-cost trials to test out the product? Are you forced into expensive multi-year contracts? → go for transparent and low-cost solutions.
- Scalability: Will the solution scale with your organization as you grow? If it doesn’t, will it be painful to switch? → go for solutions that scale especially if they are hard to replace.
A revolution is coming — one where innovative solutions will redefine not only the way finance teams will manage company financials, but their very roles within the organization. Strap in! The world is about to get even messier.
Learn more about how you can strenghten your finances.