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.
A tagging and account strategy is vital as ways to identify costs. By either assigning a tag to a resource, or by designating a cost center that pays for resources in a certain account, practitioners can identify who is accountable for the expense incurred.
It is important for a centralized FinOps team to align with their finance partners to make sure that the decisions made in this capability (chargeback vs showback, tagging and accounting strategies, how to handle shared costs) can integrate with the companies IT policies and systems. The goal is to make it easy for users to be accountable for their expenses. The best way to do this is by integrating with the company’s finance tools and processes.
WHERE ARE ORGANIZATIONS IN TERMS OF MATURITY
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.
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.
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
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
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
Tagging and Account strategy are important for cost allocation.
Company accounting policy
Company cost center/department hierarchy
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