FinOps best practices for businesses to scale up their financial process

Ever since cloud computing and cloud-based applications came into existence, FinOps has become an intriguing buzzword.


As there is a constant increase in the availability of cloud-based applications, it is common for a business to get overwhelmed and invest in everything.


This is where FinOps best practices come to the rescue to let you reap maximum benefits and agility through cloud processes by spending reasonably.


FinOps management denotes the combined management of cloud software costs of a company.


Finance and business operations should always go hand in hand to bring forth maximum revenue. FinOps cloud management is indispensable for that.

Why are FinOps teams important for small businesses?

Around the inception of any company, they have less work to do and use manual processes for the most part.


As they grow, works start to mount and they realize, they are surrounded by spreadsheets and files.


This is when you start looking for cloud-based automation solutions that simplify the job.


It can equally be a trap for your finance team if they start spending more than they intend to because cloud financial management doesn’t exist in your organization at this point.


As much as you need efficiency and agility in business, you also need to choose an economic and cost-effective path to achieve that. 


FinOps management can establish cloud cost management best practices that bring control and governance in managing business finances.



Here are the core principles and values that businesses should follow for better FinOps management.


Finance and technical teams should work together. The message can get lost if an outsider discusses their goals and requirements. When both these teams collaborate, they can discuss the need for innovation and budgets and where improvement is needed.



Decision-making decentralization. Decisions about cloud resource availability and costs should be taken unitedly. Everyone in the team should take responsibility and ownership for their cloud usage and start considering budget availability as a measuring factor too. 



More importance is given to the value that the cloud brings to the business. Taking practical decisions giving into consideration the performance, speed, cost, and agility of the cloud system.



Forming a centralized team that drives and controls FinOps management. This team should single-handedly handle cloud resource utilization, discount negotiations, and deciding the quantities, plans, customizations, and volumes of cloud applications. 



Keeping FinOps cloud reports and data transparent to everyone. This visibility on cloud utilization and spending will help anyone involved understand if the cloud resources are provisioned to the required level.




Not fearing the variable pricing model of cloud resources and using that as an advantage to weigh and choose the most profitable option. Using price as a factor to compare different services and what they offer to choose the most cost-effective products.

3 FinOps phases that you should know

There are three stages through which FinOps is practically implemented in any organization.


The lifecycle of FinOps management can be explained in three stages.

Inform

This stage is the starting point when you get a revelation about increasing and unmanageable cloud costs and try to find a fix.


You try to get a basic idea of the current IT costs and spending and inform everyone. The major goals you discuss in this phase are.


Visibility


Cloud activities and respective costs from different teams must be made visible and have to be documented to demonstrate spending along with reasons. 


Budgeting


Both the finance team and the technical team should sit together to set budgets for cloud resources analyzing the requirements of each team. This budget shouldn’t be higher than the estimated ROI.


Forecasting


Setting the budget and gauging the ROI walk hand in hand. You have to forecast the cloud costs and track them frequently. Also, the goals and KPIs that you want to achieve through the cloud and the expected returns for every involved team are estimated here. 


Allocating


Now, based on forecasting, budgets should be allocated for cloud resources. The best FinOps management allocates precise budgets that support business goals and help innovation thrive in the workplace.  


Benchmarking


Later, you compare different peers based on the scores given to each cloud provider and select the best that offers excellent performance and value for the money offered.

Optimize

Cloud financial management has been initiated already and FinOps best practices are drawn. It’s time to rightsize the funding and resources.


Here is where you need to exhibit real-time decision-making skills and carefully evaluate your FinOps and business operations.


Look for places where the cloud system is over-used or under-used. If there are any services that you pay for and don’t use fully, it’s time to cut them down or optimize them.


Slice down the extra layer for the best cloud financial management and utilization. Down the line, formulate a strategy for the FinOps management, which is to predict, plan, and purchase.


This way, before even making an investment, the team can work on the prices and purchase what they precisely need.

Operate

Operate is the third stage but certainly not the last stage, as the process can go on in cycles indefinitely.


This stage is for monitoring the achievement of goals and KPIs you have set earlier. It involves doing the needful to bring improvements in innovation and efficiency. 


The team members should create a communication channel to discuss the progress and further action steps to be taken.


The team of people who work collectively and collaboratively here is known as the cloud cost team of excellence (CCOE). Every step of this team should be aimed at continual development in finance automation.

What are roles and responsibilities of the FinOps team?

The CCOE team has a huge responsibility mounted on their shoulders, that is to look after the FinOps cloud management and derive cloud cost management best practices.


From the IT technicians to the finance or purchasing heads, here is what they are responsible for.

1. Managing expenses

As a rule, it is the top management or the chief of finance who is responsible for budgets and managing business finances.


If it’s a small business, the CEO or CTO will be the person who approves such expenses. It can be a headache for them to entirely govern cloud financial management.


But with the help of the FinOps team formed, where each picks up their own responsibility to keep the cloud costs upfront and under control, it becomes manageable.


From cloud vendor negotiations to expense management, FinOps management hands over this role to the CCOE team.

2. Efficient accounting process

As companies slowly incline towards forming virtual teams, they are in a position to do traditional jobs in a modern and efficient way.


One example of this is accounting and end-of-month and year-end closing.


Though this pain is only felt by the accounting team, with FinOps best practices, a company can help them by creating an organized accounting system

 

FinOps management team can create space for seamless accounting control and management tool that makes EOM and year-end closing effortless in both office and remote setup.


By establishing a FinOps cloud team, a company can easily tackle these difficulties.

3. Reporting and forecasting

Cloud financial management will increase the visibility and transparency of business expenses and you can pinpoint where exactly your money went.


As you have access to more important data, you can make faster and better financial decisions.


You can also predict and forecast expenses and risks thus making more informed decisions. This trait is crucial for your business growth as you scale and grow further.

4. Choosing the right integration partner

Cloud applications have the ability to connect with their counterparts and other relevant applications to merge data or connect one process to another automatically.


But not all can do this seamlessly and not all can match the applications you are already using.


FinOps management can pick the right integration partner that will connect all applications in one line and improve efficiency at the lowest cost possible.


Integration is necessary for futuristic workplaces as they nullify manually done tasks and amplify the speed at which the job gets done.

5. Expense reporting automation

Manual expense management leads to a lot of waste and turns an accounting team into a sweatshop.


They have tasks other than churning receipts and paying bills, and they have an indirect role in managing business finances.


By establishing accounting and finance automation, you reduce internal waste and bring transparency to expense reporting.


With that, you can foster understanding relationships between employees, managers, finance, and the HR team.

6. Optimizing the cost

As your organization grows, the need for cloud systems also increases for smooth finance and business operations.


It can be hard to decide which expense to prioritize if FinOps management is not in place.


The FinOps team can optimize and standardize the cloud costs and get the best value for the price invested through their thorough competitive analysis and effective tracking.


It indeed takes a village to design FinOps best practices that suit your business and bring everyone together in line to keep up the constructed FinOps culture.

Choose the best financial tech stack and tools

By leveraging advanced tools, technologies, and financial tech stack, your finance and accounting team can work together better and set up a systemized money management system.


A financial tech stack is when you have a suite or array of applications that work together and gives you access to managing business finances in one place.


Here is what your financial tech stack should have for smooth finance and business operations.


With the right financial tools, you can reduce time and effort, optimize costs, and build an efficient team even if you work remotely.

Accounts payable and receivable management

The accounting team takes care of payables and receivables.


They use a variety of accounting and ERP software to pay the bills, receive payments, and manage their records.


Having an automated system will be more effective as the number of bills and payments go up if your company expands.


It should have a bill pay system that automatically pays your bills on time, schedules payments ahead of time, and has single or multi-level approval workflows.


Suggested read - Simplify AP and AR management with automation

Automated accounting software

Cloud financial management system will also let you store your accounting records and transfer them into other ERPs seamlessly.


Accounting and finance automation software is the need of the hour for growing enterprises as they have multiple outgoing payment systems and approaches.


It saves time for accountants and creates a single outgoing payment model that does everything from picking invoices to getting approvals to sending out payments.

Payroll management software

Your payroll system is what pays your employees their monthly wages and extras and makes employee income tax deposits.


Payroll is also a significant part of your company expenses.


If your financial stack has payroll, you don’t need an additional system to handle this task.


Finance automation systems these days carry payroll management as an add-on and let you process paychecks accurately without having to outsource.

Expense management software

Tracking all expenses in one place is not possible in traditional payment systems as you pay different stakeholders through different payment methods.


One has to meticulously spend their time creating spreadsheets summarizing all expenses for the organization’s finance team to go over.


Expense management and tracking system will not cost you that. With one click, you can view all major and minor expenses of your organization and thereby see if you are overspending.

Use corporate cards

Who said only big organizations and enterprises can use and distribute corporate cards to their employees?


Modern financial systems and card distribution platforms make it possible for any organization to have corporate cards in both physical and digital formats.


Your employees can use these cards for out-of-pocket expenses and create a fair and well-functioning expense reporting system.


You can use them to make online purchases, subscriptions, and other online payments that require card details.


They are safe and secure in that one card can be easily cut out of the system and the rest can function independently.

6 FinOps best practices

Cloud applications seem like the best and most efficient way for companies to work remotely with minimal IT infrastructure.


On the flip side, finance teams report overspending and higher cloud costs that break the budgets and impact finance and business operations.


What they can do instead is craft and follow their own set of cloud cost management best practices.

1. Treat cloud cost data as a first-class metric

Once you decide to go with FinOps cloud management, there are tons of metrics that the FinOps team will go after.


Some of them are speed, latency, maintenance and downtimes, availability or uptime, security metrics, networking, and cost metrics.


If you are really conscious of costs, you should treat cloud cost data as a first-class metric and give more importance to it than others.

 

Some data that gets collected under cloud cost metrics are cost per feature, cost per customer, cost per deployment, and cost per team.


While evaluating these terms, your team can actually see if the product offers the best value to your team and is profitable or not.

2. Have your cloud KPI metrics early stage

Before you decide to implement a cloud system, spend time creating a set of KPI metrics that will help you measure the performance and success of the application.


Having an early start can help to establish realistic and readable metrics that can later be refined as you scale or are in need of additional support or tools.

3. Better cost management approach

Cloud costs are generally complicated to understand. But if you don’t get to the bottom of it, you will be wasting your money on applications that are poorly utilized.


The FinOps team should spend time understanding which teams utilize what cloud resources. 


Right size the current cloud resources and cut down the unused and unnecessary ones to create a model where you pay only for what you use.

4. Plan your strategy according to your business needs

Companies often don’t measure their requirements beforehand and choose the ideal instance thinking it would fit their company size.


But, going for an oversized instance will come along with a heavy bill as well. Plan your cloud optimization and utilization strategy according to your business needs. 

 

If you look closely, you might not even need a cloud cost optimization strategy right now.


It’s okay to start your cost optimization and FinOps best practices implementation in later stages if its importance is not felt at the moment.

5. Optimize cloud costs

Your goal shouldn’t be just saving costs as much as possible. It should be about making the most of what you invest and reaping maximum benefits.


Cloud financial management is not only about choosing the lowest-priced solution. Find a cloud provider who renders just the needed solutions or packages at a fair pricing model.


It’s the onus of the FinOps team to go on an extended trial period before jumping in to upgrade the product or get discounts through different ways (referral schemes, coupons, forming a partnership, etc).


In some cases, the reverse of the above plan works too that is upgrading as soon as possible to get the ultimate benefits in a short period or save money.

 

The team can also recommend jumping to a different product if they provide better deals or services.

6. Make sure your teams can access the data anytime and anywhere

Visibility and transparency in cloud costs are mandatory to understand how activities impact the company’s budget and expenditure.


If you want to implement FinOps best practices across your organization, make sure that the FinOps cloud data is accessible to anyone at any time.

 

This available data should be in a language that is comprehensible and understandable to the intended audience.


Different teams have different goals when it comes to cloud optimization. Their goals, functions, and objectives differ.


For example, the finance team cares only about cost metrics whereas the product team cares about scalability, and the engineering team is concerned with product architecture and how much it costs to put that in place.


Any questions they have with the cloud product and how their requirements affect pricing should be addressed and made available to everyone.

 

If you have already done that, it’s time to establish a common channel for communication to address open questions.

 

Many companies struggle with making the cloud costs visible as they are mostly untagged and uncategorized.


If that’s something you are concerned about, it’s time to bring in another cloud system to organize your company’s spending, especially cloud spending.

Benefits of FinOps

1. Great transparency

From stakeholders to involved teams, everyone gets to see how much the company is spending on cloud services and technologies and what is the utilization rate and ROI.


Without FinOps management, it can be chaotic to let everyone know the cloud cost data and other metrics.


As only the finance and accounting team has access to the billing console and cloud cost data, the involved teams have no idea about the reserved instances, cloud utilization, and how much the company incurs because of this spending.


The costs of shared services that are utilized by everyone should also be made known to everyone and cloud cost management best practices have space for it.

2. No more leakage in spending

Spending on waste and unused resources is a big drawback in managing business finances and cloud funds.


Unless informed and educated about cloud optimization strategies and FinOps management, teams will be careless in cloud usage.


Teams like engineering or testing might keep the tools running 24/7 even if it’s not necessary.


And this contributes to the additional bill amount that the company should pay.


You can close all these sources that leak your money and streamline your cloud spending in a way that doesn’t exceed the budget forecast.

3. Improve team collaboration

FinOps management opens doors for an open, collaborative, and inclusive environment where people from different professional backgrounds and teams work on shared goals.


Whether or not related to finance and business operations, every team that uses cloud assets gets to have their say and learn from each other about their part in FinOps best practices execution.

 

Innovation and technological costs are interrelated. You cannot achieve innovation without spending a few bucks.


But when teams collaborate, each involved person gets a chance to do their part in optimizing the costs without compromising on product utilization and allocation.

4. Better decision making

FinOps management helps the company make better and well-informed decisions at the right time.


The total cost spent on a product is itself not an appropriate way to calculate its performance.


Cloud financial management shows alternative ways and more accurate cost-related KPIs (like cost per user, cost per deployment) to estimate the business value of the product.


You do not just get a detailed insight about how the cloud resource is working internally but also see by yourself if the product is needed or not.


So every decision that the management makes about the FinOps cloud management will be based on real values and scenarios.

How can Volopay help businesses with corporate cards?

Cloud technologies are irresistible in the business world for the smooth management of finance and business operations.


However, if you are not careful from the start and don’t employ cloud cost management best practices, it can become unmanageable as multiple teams start consuming different advanced tools and applications.


FinOps management is the discipline that can regulate and keep the cost in control while allowing your teams to leverage innovation to the maximum.


If finance automation is one of your goals to achieve, get Volopay expense management system for your organization.


This cloud-based tool can expedite your accounts payable’s tasks and make accounting simple, transparent, and quick.


Cloud-based applications mostly work on subscription-based models that require you to make auto-payments every month.


You can rely on Volopay’s credit cards to automatically pay the subscription payments on time and monitor their costs from a centralized system.


And guess what you can generate cards in unlimited numbers. So, there isn’t any limitation even if you handle numerous applications at the same time.


Combine your FinOps best practices with finance automation with the help of Volopay and simplify managing business finances and cloud expenses.

Managing business finances is easy now with Volopay