Automation Trends in Finance
William Pollard once said “Learning and innovation go hand in hand. The arrogance of success is to think that what you did yesterday will be sufficient for tomorrow”.
According to several research, top-performing finance organizations reportedly spend 0.63% of the total organization revenue on finance while the bottom performers spend 2.05%. Finance functions are increasingly realizing the need to shift from transactional work to be able to add significant value to enterprises in the form of predictive insights, decision making, and better stakeholder engagement. This has been increasingly possible due to technology, coupled with their continuous investment in reskilling their people to work in the context of a high performing finance organization. What makes this investment worthwhile, is also accentuated by the constantly changing regulations for their respective industries, requiring error-free compliance and appropriate audit trails. The finance organization is now looking for ways, to make the enterprise risk-free as well as support business growth.
Transaction oriented activities that are highly labor-intensive, as well as low valued-added activities, are being automated. Traditionally, this is what typically constitutes a large part of the time and effort of finance teams. Finance functions of the future are moving towards leveraging technology to automate such labor-intensive tasks, thus allowing more time and effort to be focused on value-added activities such as closer collaboration with business, analysis, proactive decision making, risk assessment as well as management, financial reporting, tax, treasury, etc.
Here are some of the automation trends in finance:
Accelerate processes with RPA: Gartner predicts that over 73% of controllers will adopt RPA by 2020, up from 18% in 2018. Several processes in the Record to Report (R2R), Procure to Pay (P2P) and Order to Cash (O2C) processes could be automated with RPA. The good news is that RPA solutions are not investment heavy and can be accomplished in a very short period of time. However, for projects to be successful, the processes for automation should be very carefully chosen and importantly, optimized before automation. The virtual workforce that RPA solutions enable in a short timeframe, could support enterprise finance functions to quickly scale to be able to better support the business. Controlling functions can be well automated with bots to meet the enterprise mandates of financial integrity. RPA could also be useful for tax-related activities including calculation of book and tax differences and preparation of returns could be done by the bot. A lot of the routine activities during an audit can be done by the bot, thereby freeing up much time for more strategic and value-added activities.
Better collaboration with chatbots and portals: Finance functions need to deal with a lot of queries relating to payments both from internal and external stakeholders. Employees may have several queries relating to salaries, HR may need to collaborate for payroll-related processes and suppliers may have multiple queries right from onboarding to payments. With self-service portals and chatbots, finance functions of the future will provide superior experiences while freeing up their time from handling the routine queries and request for information. Chatbots are quite powerful to also fire widgets depending on the kind of request and based on the responses received, could then trigger additional processes via workflow and robotic solutions.
Advanced Analytics and data visualization: The business would like to various kinds of information such as performance, the profitability of its various products and divisions, risks to watch out for and proactive alerts based on certain thresholds. Enterprises have shifted their perspective from historical analysis to more forward-looking insights that can support them with decision making and execution prior to the occurrence of the event. Cognitive computing, natural language processing, and text analytics could automate unstructured content and processes. Advanced analytics in the procurement process includes spending analytics. Blending machine learning technologies, the data extracted from the ERP and various other applications could be classified and harmonized to categorize and classify spends which in turn could be used to identify patterns and determine cost optimization areas accurately. In the sales and marketing relating function that relates to F&A, this would include revenue forecast, customer credit risk assessment, predicting future demand for products, pricing and customer/product profitability analytics, sales effectiveness, revenue leakage, customer retention/ churn analytics and predictive pricing. With respect to the information on the supply chain, this could include ranking vendors for predictions of timely delivery and fraud detection and inventory optimization including service parts.
Procure to Pay Automation solutions: The P2P function is one of the most critical business processes for any enterprise. Spending is often fragmented in most enterprises across locations and business units, making it difficult to track the spends and manage the process. Leading enterprises have invested in technologies such as supplier portals, OCR and smart workflows, invoice automation solution and robotic process automation solutions to automate the process, providing early visibility to the F&A teams around liabilities, suspect duplicate invoices, productivity of the teams, potential leakages and such insights on areas of improvement. Supplier portals enable enterprises to collaborate better with their suppliers and provide a superior experience. Chatbots when integrated with supplier portals, enable seamless onboarding processes, handling of faqs and payment related queries. With RPA and workflow solutions, several tasks in this process such as reports/dashboards and workflows could be automated. Full-scale invoice automation solutions allow for automation of the process right from receipt of supplier invoice until posting and payment.
Order to Cash Automation solutions: Reducing cycle time to the process has a significant impact on the working capital by ensuring zero write-offs, superior customer experience, and better process agility. Solutions such as RPA enable automation of the purchase order to sales order process, ensuring zero error rates. RPA could also automate the dunning process, sending auto-reminders to customers and taking the necessary action in case of payment delays. Upon receiving payments, the solution could also automate the process of cash application, thereby ensuring accuracy and timeliness that in turn increases the efficacy of reporting and decisions thereon. When combined with blockchain, this could further accelerate the process, as the data accessed by the RPA is already verified and trusted, thereby eliminating the need for manual intervention in cases of discrepancies.
Automation solutions for Record to Report Process: The process of journal entry, reconciliation, management of tasks during the closing cycle as well as exception management could be fully automated with a set of ready to deploy, best-of-breed solutions, RPA, and blockchain. Also, processes like asset capitalization and posting of accruals could be fully automated. This way, the accounting process could be spread across the month thereby enabling a low-stress closing process. The entire reporting package could be automated with RPA that fetches information from internal and external applications, websites, etc. and puts together reports for management reviews.
CFO’s and their teams have exciting times ahead where there are immense opportunities to shape the future of their functions. As a quote goes “One can see an egg another sees an omelet, to envision the substance of things unseen is the inspiration for innovation”. The CFO organization of the future will remain at the forefront of business decisions by leveraging digital in innovative ways.