Finance departments have changed a lot in recent years. This is only going to accelerate and become more impactful. Businesses are turning to automation in finance departments not only to save time and money but to improve accuracy and get better results. In this blog post, we will explore how automation can create value for your business.
Automation in Finance: Overview
Automation in finance is the wave of the future and businesses need to adapt or risk losing out on key opportunities that automation can provide. Further companies that don’t move forward will be at a competitive disadvantage. Automation dramatically reduces time on repetitive tasks, and given the nature of a finance department, there are many processes and workflows that are prime candidates to automate. This will accelerate processing speed for transactions, better aggregate data, and more seamlessly enhance financial reporting. An example of a workflow commonly automated is accounts payable whereby a bill can be received, processed, approved, and paid within minutes (although remittance of payment may be delayed based on a predetermined schedule). Especially for small and medium-sized businesses, creates massive time savings and reduces administrative costs for paying bills, allowing the business to re-deploy team members’ time to higher-value activities.
Automation dramatically reduces errors as well. When a task needs to be done the same way every time automation will make sure there are no mistakes. Automation not only eliminates errors at the outset of a process workflow such as data entry, it also limits human intervention throughout the workflow to mitigate risks of error throughout the entire process. Reducing processes performed by humans; the administrative burden is more limited for monitoring and review to ensure accuracy. More time is saved at manager levels for review, again allowing you to re-deploy higher-level resources. This moves up the chain because each layer within the department can free up time for the layer above. With less time spent on processing transactions, energy is reallocated to focus more on analysis, forecasting, and decision support for strategic issues. For example, instead of time spent processing and reviewing transactions, the finance team shifts its efforts to things like scenario modeling the viability of a new project or enhancing the budgeting process. Now the finance department can better support informed decision-making for the executive team.
In addition to time savings, you can ensure that your transactions are processed based on your designed workflows and approval structure every time. There are no workarounds in the internal control structure unless it is built into the system intentionally. This offers not only control in how you design and implement the system but also comfort in knowing the internal controls are being consistently followed. Automation even for basic workflows creates value for businesses in a variety of ways, so whether you are a small or medium-sized business there is no reason not to get started exploring today how to optimize your business.
But once you’ve decided to move forward and have buy-in from the executive team, what’s next? While your business can automate processes piecemeal one thing at a time, you’ll likely be automating many processes over time so it would be prudent to have a long-term framework of how to implement multiple softwares that are easily integrated. One way to do so is to perform a strategic finance process assessment either internally or hire a qualified consultant. The purpose of which is to develop an overall plan for the finance department to prioritize the highest value add areas to automate.
A proper strategic finance process assessment will include:
- Walkthrough of all your major finance policies and procedures
- Review the design and implementation of internal controls and systems
- An overall assessment of the finance team
The strategic finance process assessment will provide a gap analysis indicating the current state of the finance department, the desired future state, and the steps to bridge the gap. Bridging the gap usually means an investment in either talent or software to automate processes. When automating, and a needs analysis should be performed to determine the specific criteria the right software should meet. Although you can look at specific workflows, ideally the best approach is to consider the entire technology stack to make sure all your systems will be integrated effectively and function in harmony. Next perform a search for technology partners (or combination of partners when looking at the full tech stack) to assess the solution(s) that best fit and complete a selection process. Although the implementation does require a significant effort and technical expertise, your technology partner(s) have dedicated implementation teams to work with you through the process.
Let’s look at a real-world example with a technology solution that a large percentage of businesses have either completed or are in the process of implementing; accounts payable automation. A previous client identified the accounts payable transaction cycle as one that had a number of inefficiencies and was a quick win to adopt a technology solution. The initial state was: invoices were mailed by vendors to a wide variety of managers throughout the organization and then forwarded to the finance department often just before they were due. Processes for things like approvals were not consistent. Finally, because the process was haphazard to some degree, it was impossible to account for all the outstanding invoices at any given time. Overall there were too many inefficiencies, late payments, excessive administrative energy, and struggles providing management accurate data.
We assisted them in 1) the review of their needs, search for solutions, and procurement process then 2) facilitated the contract negotiations 3) served as the client-advisor during the implementation process. While every implementation has unexpected headaches, we were there to troubleshoot the issues as they came up. At the conclusion of the work, the client had a consistent and efficient process which saved so much administrative time they were able to reduce the efforts of a full-time staff accountant to limited part-time efforts and reallocate the remaining time to more productive value-added duties. Better yet, because there was more accurate reporting and better visibility for the executive team.
In conclusion, automation is a win-win for both the finance team and the business overall. Automation creates more time for all multiple levels within your department to focus on higher-value projects which translate to better business results. It will drive down the cost of doing business by lower processing and monitoring costs, enhancing reporting, providing better data, and adding visibility to your operations. Overall because your energy is better utilized, it improves your ability to make effective business decisions.
