Definition
Chargeback and Finance Integration is about pushing spend accountability to the edges of the organization that are responsible for creating the expense.
Once chargeback has been implemented and visibility given to teams, mature FinOps practitioners then integrate that data programmatically into their relevant internal reporting systems and financial management tools.
Chargeback is the focus in this capability, but Showback is a foundational part of any FinOps practice. The difference is that Chargeback sends expenses to a product or department P&L and Showback shows the charges by product or department but keeps the expenses in a centralized budget. Neither way should be considered more mature than the other, as which method used is entirely dependent on organizational accounting policy and preference.
Maturity Assessment
WHERE ARE ORGANIZATIONS IN TERMS OF MATURITY
Crawl
42.1%Walk
33.8%Run
24.1%FinOps practitioners using some form of automation to integrate with their Finance team to facilitate chargeback reporting for cloud costs were part of cohorts operating at a FinOps Run maturity.
Crawl
- Cloud spend is allocated to teams based on estimated usage of resources.
- Shared costs and discounts are held centrally due to lack of strategy on how to provide visibility and/or allocation.
Walk
- Tagging strategy and/or Account strategy is in place to provide visibility into how expense is allocated
- Strategy implemented on how to show and allocate shared costs/discounts
Run
- Teams understand their direct and allocated shared cost portion of cloud spend based on their actual consumption.
- Chargeback/Showback reporting is integrated automatically into the companies IT finance tooling
Functional Activity
As someone in a Business/Product role, I will…
- Review the costs I am accountable for each month
- Understand how these costs impact my budget
- Have an understanding of organizational policy regarding chargeback/showback and allocation of shared costs/discounts
As someone in a Finance/FinOps role, I will…
- Understand how cloud expense is generated
- Ensure there is appropriate documentation on chargeback/showback policy and that operations are auditable according to company policies
- Help teams reconcile their portion of expense that is allocated to them each month
- Help teach teams the tagging and account policies and the importance of expense accountability
As someone in an Engineering/Operations role, I will…
- Understand how cloud expense is generated for each service used
- Comply with company tagging and account policies
- Review costs incurred each month
As someone in an Executive role, I will…
- Understand how cloud expense is generated
- Review cloud expense for portions they are accountable for
- Leverage this information for real time decision making
Measure(s) of Success & KPI
Measures of success are represented in the context of cloud costs and may include one or more key performance indicators ( KPI ), describe objectives with key results ( OKR ), and declare thresholds defining outliers or acceptable variance from forecasted trends.
at least one measure of success; should be described in a context of cost; this could be an efficiency KPI or an agreed upon threshold or target.
for example:
- idle resource costs will not exceed 3% of total monthly cloud spend
- anomaly costs will not exceed $150/month
Inputs
- Tagging and Account strategy are important for cost allocation.
- Company accounting policy
- Company cost center/department hierarchy
Get Involved
Get involved and contribute to the community by sharing your real world experiences related to this Capability in the form of a story or providing a playbook for how you have implemented best practices in your organization. Your real world experiences can be provided in the context of:
- one or more cloud providers
- the types of cloud services used (compute, storage, database, etc…)
- describe a combination of tooling, platform or vendor, and processes including KPIs
- the industry the organization belongs to
- the complexity of the organization (global enterprise, start-up, etc…)
- the [FinOps personas](https://www.finops.org/framework/personas/) involved / organizational roles
Join the conversation about this Capability in Slack . You can submit stories, how-tos and suggest improvements using one of the options for contributing here.
