What is Finance-as-a-Service?

Written by Amanda Bower    |    Published: January 19, 2023

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You’ve probably heard the term “software as a service,” but what about “finance-as-a-service” or FaaS? Finance-as-a-service is rising in popularity because it solves a critical issue that many startups and new businesses face: they require robust and technically advanced accounting services. Still, they might be unable to build their own comprehensive accounting and financial department.

Finance-as-a-service offers a “one-size-fits-all” approach to outsourced business accounting and financial services. This is because FaaS services are modular and subscription-based and can be used on-demand by startups and small businesses. Finance-as-a-service is also an entirely digital form of outsourced accounting, providing services online using digital tools and next-generation tech stacks.

Finance-as-a-service can be a great system for putting a business’ accounting, bookkeeping, planning, monthly financial reporting, strategizing, and taxes under one roof. Here’s everything you need to know about finance as a service.

How Does FaaS Differ From Traditional Accounting?

Finance-as-a-service is vastly different from traditional business accounting models but can have powerful benefits for startups and other new businesses. Let’s get real: the traditional corporate accounting model is outdated, bloated, and no longer meets the needs of the SMB market. 

That’s because small- and medium-sized businesses rarely need multi-tiered accounting departments, which are extremely costly and require lots of resources and infrastructure. While these accounting models might still be suitable for large and global companies, they’re simply wasteful for today’s SMBs.

Instead, finance-as-a-service offers a bespoke, affordable, and more useful accounting model for the SMB market that arms businesses with critical accounting services and standardized best-practice business processes. Firstly, FaaS breaks down financial services into modular and customizable components. 

Businesses can select which specific services they need, add these to their stack at will, and are not obligated to incorporate services that they don’t need or are irrelevant. Finance-as-a-service also offers services on a subscription basis that recur month after month, ensuring continued financial success for the startup.

Second, finance-as-a-service is built for a digital world. These services are provided entirely over the Cloud and use web-based platforms and systems. 

This reduces the need for in-person meetings, software updates, or localized computer programs that can quickly become outdated. More importantly, the Cloud-based nature of FaaS enables companies to choose from globally-competitive accounting companies because the location of accounting providers no longer limits them.

Lastly, FaaS is typically more suitable for the financial models of today’s fast-growing startups and new businesses. While these businesses can hit quick growth spurts, a fully-fledged accounting apartment can be wildly out of budget for a new business today. Instead of founders and leaders trying to tackle accounting on their own in the interim, FaaS offers an affordable accounting option, which can provide businesses with comprehensive accounting services for a fraction of the cost of traditional options, with the ability to scale as needed.

Why Do Startups Like FaaS?

In general, outsourced accounting is on the rise, with research telling us that accounting is the most common process that small businesses outsource. And while many businesses can utilize finance-as-a-service, there are many reasons startups are drawn to this accounting model.

Firstly, finance-as-a-service allows startups to access services that historically they could have only accessed with a costly in-house accounting department. That’s because finance-as-a-service tools don’t just include accounting and taxes but can also include regular bookkeeping, payroll, critical planning, and strategizing services. 

For startups, these services are absolutely vital, especially when we consider that the top reasons startups fail today is because they run out of cash or fail to raise new capital. Professional accounting insights can help prevent potentially catastrophic missteps. 

Startups also choose FaaS because of its financial accessibility. For new businesses, a fully-fledged in-house accounting department is cost prohibitive, as are key financial executives who could take charge of a business’ accounting needs (such as a Chief Financial Officer). Finance-as-a-service allows startups to hire the financial experts they desperately need at a fraction of the cost of the traditional in-house accounting department. 

Next, startups also prefer the remote and virtual nature of the finance-as-a-service model. Virtual and hybrid teams are the new norm for startups, and according to one survey, 70% of startups are at least offering remote work as an option to employees. With this in mind, the virtual nature of finance-as-a-service fits nicely with the current needs and work trends of startups. 

Lastly, startups prefer the subscription-based nature of finance-as-a-service because it’s modular and specific. This means that businesses can choose the specific financial services they need, and they’re not obligated to pay for services that aren’t suitable. This also means they can choose when to engage in specific services when needed and will be supplied regularly. 

How Does Outsourced Accounting Tie into FaaS?

Finance-as-a-service goes hand-in-hand with outsourced accounting because it is a form of it. In general, outsourced accounting is when a business uses an outside financial organization for its accounting services instead of an in-house accounting department. 

Outsourced accounting services today are typically virtual and remote, and these services are provided by specific businesses specializing in financing. However, these services differ from other outsourced virtual accounting solutions because of their modular and Cloud-based nature.

What Are Some Signs Your Team Could Benefit From FaaS?

Leading a startup or new business means navigating challenging yet critical financial aspects. Here are some signs that your team could benefit from finance-as-a-service solutions.

There’s No Financial Team in Place

Because of the sky-high costs of in-house accounting services, many startups try to tackle key financial and accounting tasks on their own (especially in the beginning stages) without the help of financial experts. While this might seem manageable in the earliest days, leaders and founders quickly realize that even “easy” tasks like payroll and bookkeeping can become monstrous at scale. If your business doesn’t yet have financial experts guiding your decisions or helping with processes, FaaS can be the perfect solution.

You’re Growing Fast

Fast growth is a startup founder’s dream, but it can mean that financial support is suddenly vital. But just because a startup is experiencing growth doesn’t mean leaders want (or need) to build out an entire accounting department just yet. Startups that are quickly growing can find the financial support they need in the form of finance-as-a-service. 

You Want to Ease Workloads 

Tasks like payroll, bookkeeping, financial reports, and account management take valuable time and immense resources. This can be an incredibly taxing assignment if whoever handles these tasks isn’t a financial expert. On the other hand, when financial experts handle these tasks through finance-as-a-service, you free up your people to focus on what they’re best at. 

You Want to Make the Best Financial Decisions 

Financial decisions can be make-or-break for startups because funds are limited, and every dollar matters. When making financial decisions, they should be educated and guided, using the best financial information available to your organization. Finance-as-a-service provides founders with crucial economic data they need to make the best financial decisions possible. Leaders can even turn to FaaS to execute well-informed financial planning and strategizing. 

What Are the Major Benefits of FaaS?

Finance-as-a-service offers tons of benefits to startups and other fast-growing businesses. Here are the major benefits of FaaS.

Custom Services

Finance-as-a-service is customizable to meet the needs of a startup or new business. This means if there’s something a business doesn’t need, it doesn’t need to pay for that level of service and can select a more appropriate product, with the ability to scale up when needed. 

Budget-Friendly Financial Solution 

FaaS is far more budget-friendly than traditional in-house accounting departments, which can break the bank for new startups. Instead, FaaS offers subscription-based accounting services designed for the budget of a fast-growing startup.

Global Financial Experts 

Because finance-as-a-service is 100% virtual, startups are not limited by geography and have access to the world’s best accounting providers. 

Constantly Updated Tools and Programs 

Finance-as-a-service is Cloud-based, meaning that the tools, programs, and processes are constantly being upgraded and optimized. This is opposed to bulky localized accounting software that lives on a hard drive. With Cloud-based accounting, startups have access to the latest business accounting developments and highly advanced digital tools. 

Finance-as-a-Service Offers Organizations the Chance to Dive Deeper into Their Finances Than Before

Finance-as-a-service is revolutionizing the way that startups and new businesses handle their finances. This next-generation accounting methodology gives startups access to the precise services and tools they need when they need them while saving them money along the way. These financial services help startups get a hold of their finances today and allow them to make the best financial decisions possible for their future.

We’ve got you covered if you’re looking to use finance-as-a-service to level up your business’ finances. We’re hiline, and we offer a wide array of finance-as-a-service accounting services to meet your needs. That includes accounting, taxes, bookkeeping, payroll, planning, and strategizing. 

Interested in learning how we can help you with your finance-as-a-service accounting and financial needs? You can read our FAQs for tech startups and learn when to invest in account services.

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