Automation Is Transforming Finance Operations

Automation Is Transforming Finance Operations

Finance teams across industries have seen a significant change with the advent of multiple payment options and automation. First, the size, complexity, and importance of data is growing at a breakneck pace because ever increasing numbers of transactions are moving to digital mode. As a result, the manual approach of managing finance operations using spreadsheets is proving insufficient for finance teams. Second, finance teams are in need for solutions and consequently are utilising automation software products. The technology around automation products is rapidly revolutionising finance processes by providing faster, cheaper, more accurate options. Automation software products utilise a combination of rules engine, machine learning algorithms, and artificial intelligence to automate business operations. This can include data processing, multi-party reconciliation, reporting, monitoring, auditing, and even compliance.

While finance teams are embracing automation, prioritising the right items to automate first is a key to success. Studies cutting across multiple industries can provide a checklist on priorities:

  1. Automate transactional and routine activities such as general accounting operations, cash disbursement, revenue management, finance controllership, etc.
  2. Boost finance’s role in managing data; including, consolidating, simplifying, and controlling data across the organization.
  3. Strengthen decision-making through adoption of data-visualization, advanced-analytics, and debiasing techniques.
  4. Support subject matter experts in strategic functions like tax planning, treasury, capital structures, risk management, external relations and business development.
  5. Equip staff in critical roles with the necessary level of experience, leadership mind-sets, and authority to influence the business.

A thoughtful execution will lead to several benefits with the most prominent ones as the following:

1. Cost Reduction

Multiple studies have highlighted that finance teams spend up to 70% of their time in mundane, repetitive tasks such as data gathering, cleaning, and formatting. These tasks can and are automated by software products. It helps companies in freeing up man-hours and reducing cost.

Thus, one of the primary advantages of automation products is their ability to reduce cost. As highlighted above, these products can automate not only mundane and repetitive tasks but even complex tasks as well. According to a BCG report, automation products can optimise finance operations while reducing costs by up to 75%.

This article, Ways to Jump-Start Improvement in Your Accounting and Finance Team, pairs really well with an automation strategy by highlighting improvement ideas that don’t rely on automation.

2. Efficiency Gains

Automation products can exponentially reduce the time taken to accomplish complex tasks especially involving large amounts of data. For instance, they have proven to reduce cycle times from weeks to a day or even seconds. These products can integrate with the existing information technology infrastructure of a company. They can automatically gather data from sources like payment gateways, order management systems (OMSs), enterprise resource planning systems (ERPs), bank statements, etc. The automation products can seamlessly manage and analyse the data almost instantaneously.

Once these products are deployed appropriately, they can be left to complete the task without any further intervention or assistance. With more usage, the automation products tend to improve in quality and accuracy by covering corner cases.

Innovation is a key to creating value in finance. Coupling process improvements with automation can be a catalyst for step function improvements in your accounting and finance operations. Learn more here, Innovate: How to Speed Up Your Financial Processes.

3. Workforce Enablement

Automation Is Transforming Finance Operations

A report by Bain & Co. highlights that automation products not only enhance the quality of results but also prepare a reliable and efficient workforce. The team gets equipped with better tools to carry out even the most challenging tasks. This whole process boosts the efficiency of the workforce while improving employee retention and creating better outcomes.

When automation products are operated under the training and supervision of the user, the user gains complete control over the process. This user driven approach ensures the desired results are obtained. This creates time for users to perform more scenario-based analyses.

With all the tools our staffs are required to utilize and ‘own’ today the importance of performance feedback and development plans are growing in importance. To help manage career growth and expectations read this article on the latest in mentoring and growth for your team, Individual Development Planning: From One-on-One to a Team Sport

Case Study

A fintech marketplace was using multiple payment getaways to facilitate transactions. The amounts from transactions were settled in several accounts with different banks. A team of finance operation specialists were reconciling the data from payment gateways and bank statements with the data from the internal order management system. This team of specialists was spending roughly 75% of their time on routine items like fetching, cleaning, and formatting the data before it could reconcile even a single transaction. And still the cycle time was 2-3 weeks. Clearly, it was not a scalable approach. The company implemented a software suite that is automatically fetching, cleaning and formatting as well as reconciling data from all multiple sources. The product has also automated reporting and workflows. Eventually, the product is tracking discrepancies like non-payments and under-payments on the accounts receivable side and overpayments and double payments on the accounts payable side.

Using the automation software product, the reconciliation was happening real-time, thus reducing the cycle time by 99% while reducing the cost by 80%. The company is primed to manage a much larger scale of millions of transactions without ever increasing the team size. The company is able to reduce discrepancies by catching them in the real time.

Caveat: Automation Products are Complementary Tools

The automation products undoubtedly offer several benefits, but some may wonder whether they will take over the common workforce. The answer, however, is quite evident - a skilled workforce will always be needed. Automation products can and should be used to augment finance teams in becoming swift and efficient. These products should be seen as a way to lessen the burden of the working personnel, freeing up their time to decision-making and sorting choices. A certain psychological perspective can only be identified by humans

Conclusion

In conclusion, automation products are transforming finance operations by providing faster, cheaper, and more efficient processes. They reduce the need for extensive paperwork, increase both efficiency and productivity, and boost employee confidence. Automation should be used as a tool to make working in finance easier and more effective, with humans playing a critical role in the decision-making process.

Here is a related article on automation you will enjoy, Automate—and Watch Finance Grow More Agile

References:

https://www.mckinsey.com/capabilities/operations/our-insights/finance-2030-four-imperatives-for-the-next-decade

https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/bots-algorithms-and-the-future-of-the-finance-function

https://www.bcg.com/publications/2019/simpler-faster-efficient-operations-financial-services

https://www.bcg.com/publications/2021/becoming-digital-finance-function-benefits-challenges

https://www.bain.com/contentassets/9cd677fc720d4e28b2ea4a6076190afa/bain_brief_rethinking_how_finance_uses_digital_tools.pdf


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