Chargeback & Finance Integration

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

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 company’s IT finance tooling

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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