One of the major changes in global finance function at the moment is digitization. Ledgers and even spreadsheets are on their way out in favor of new methods of data entry, data storage and most importantly, data reporting.
Within digitization, one of the most important trends for CFOs to consider is automation technology. That is the use of machines to improve and replace the more mundane aspects of human work. Unlike Artificial Intelligence, which is the use of machines to replicate human behaviors such as decision-making with no human input and the scope for machine learning, automation is the adoption of pre-set rules to run certain finance processes. Also called Robotic Process Automation or RPA, this software is useful for handling high-volume repetitive tasks with accuracy and speed.
According to WorkMarket’s 2020 In(Sight) Report, 56 percent of business leaders are planning to introduce workforce automation technology in the next 3-5 years. As the CFO, with responsibility for the majority of the data and the biggest share of data entry tasks in the business, automation is a transformation that you should lead. Within the Chartered Institute of Management Accountants, 83 percent support the automation of the finance department.
The benefits of automation within finance include improved efficiency, productivity, and better quality data. Finance processes will be streamlined and therefore more cost-effective. Thanks to your new digital workforce, your human staff will have more time to dedicate to strategy and innovation. With better data and more staff to analyze it, decision-making will improve within the finance function and beyond. This will result in more profit opportunities.
In these turbulent times, businesses are vulnerable to volatile share and commodity prices and currencies. Not to mention constant geopolitical uncertainty. Automation is key to maintaining a competitive advantage in such an environment. Freed from the manual processes machines can take care of, financial officers have more time to spend on analysis and reporting. That means more reports that are more accurate produced more often. The real-time strategic insights and agility this will afford your business will ensure you maintain a competitive edge.
As CFO, it is no longer enough to deliver budgetary control, finance leaders must now show strategic input. Automating data entry and reporting processes is a way to deliver this essential business component and come in under budget.
How automation can benefit you
The first step is to understand, as CFO, your processes and where there might be room for improvement.
Finance departments are known for being the home of many repetitive and tedious tasks. Those that are the most time-consuming are the ones to target first. AP processing, bank reconciliation, inventory management, and placing orders, payroll, invoices, tax, accounting, and reporting are opportunities to free up your teams to complete more high-level tasks.
As CFO, you can take those robotic, repetitive jobs away from the humans. In doing so, allowing them the bandwidth to do more human work with that big data.
The good thing about digital transformation towards automation is that there is a quick payback time. Once automated, your teams, your reports, and your decision-making will see rapid improvement.
The many benefits you will begin to reap include:
Amongst, finance leaders, 52 percent cited improving efficiency as an important business goal. With old systems, manual data entry and multiple spreadsheets mean that businesses can take up to 20 days to complete financial close. Automation allowed Amazon to shorten their financial close delivery from five days to one.
Even day to day, streamlining repetitive and time-consuming tasks earns employees many hours each in free time. In WorkMarket’s 2020 In(Sight) Report, 53 percent of employees reported that they saved two hours of work a day as a result of automation. They said they can save up to 2 work hours a day through automation. Meanwhile, 78 percent of business leaders suggested that automation opened up three working hours a day.
According to an Oxford Economics study entitled “How Finance Leadership Pays Off”, 73 percent of the CFOs surveyed said that automation had improved their department’s efficiency.
Not only will the finance function become more efficient, but it will also be more accurate. By eliminating so many people working across so many spreadsheets, and without the pressure to rush financial close, errors in data entry will be all but eliminated. Plus any existing errors will be flagged by the system.
Data will be more accountable without a mess of emails and spreadsheets. With everything held in the cloud, the audit trail will be clean, visible and transparent.
Finally, the system will remain up to date at every minute of the day. For global teams working in different time zones, the fact that the system is working even whilst finance staff are sleeping means total accuracy at any hour.
Productivity and Agility
The knock-on effect of accurate and instantly accessible data is that reports can be delivered and analyzed as and when needed with minimal disruption. A significant improvement on old-style quarterly reports that saw teams working all hours to deliver data which was all but out of date by the time anyone analyzed it.
With timely, accurate reporting, quick and competitive decisions can be made based on accurate data. The agility this affords the business will be increasingly necessary in these times of economic uncertainty. Furthermore, decisions will be more united across different silos of the business. Everyone has access to the same data, updated in real-time for all users.
Innovation and fresh thinking
With data entry taken care of, staff have space for advanced analytics, innovation, and fresh thinking. Indeed, 73 percent of CFOs believe that improved efficiency gives their executives more bandwidth for value-added tasks.
The profit opportunities from automation are three-fold.
Firstly, machines are less expensive than human capital. As staff spends less time on data management, the business saves money on labor costs. Research from Gartner stacked this up as a saving of 30 percent of a full-time employee’s overall time. This works up to 25,000 hours per year, and a saving of $878,000 across an organization employing 40 full-time accounting staff.
Secondly, with the extra time available to them, staff spend time on more ‘valuable’ tasks. These jobs not only command a higher salary but are worth more to the business. Contributing to analysis and strategy makes the finance workforce more valuable to the organization.
Finally, the higher levels of data visibility and reporting mean that you have the opportunity to review spending across the business. You may identify new areas in which savings may be possible.
If cost-saving or profit promotion is within your business’s KPIs, automation is a quick and clear route by which to achieve them.
Employee engagement improves when the department is spending less time on mundane and repetitive tasks. Staff find their days filled with challenging and satisfying strategy tasks and enjoy their work more.
Dennis Gannon, research vice president in Gartner’s finance practice notes that “Departments that have experimented with RPA in their reporting processes… report a series of additional benefits…(including) higher employee engagement and less turnover.”
Again, this stands to reduce department running costs. Engaged employees are more productive and the outlay on hiring new staff is reduced.
A centralized cloud system for reporting means that sensitive information isn’t passed around a lengthy workflow any longer. Central storage and updating mean that you control who has access and who has the authority to make changes. This will not only improve security but also improve data accuracy.
Software companies who specialize in cloud technology have the highest levels of data security. According to research by Gartner, in 2020, cloud infrastructure will suffer 60 percent fewer security incidents than traditional data centers.
Automation can improve the finance department’s outward-facing service within the business. With automated query responses, response times to the rest of the business and the external supply chain are faster and take up less employee time.
How to make automation a success:
Given the myriad benefits, it’s within every CFO’s best interests to make automation a success. These are our tips for ensuring automation delivers for you and your team.
Analyze the business
Take the time to review your department and the business as a whole. Where can automation optimize your workflows? How many tasks or activities can you automate and to what degree?
Understand the different types of automation on offer. Do you want to automate daily, manual, repetitive tasks with RPA or involve machine learning to do more complex tasks with the help of humans?
Work out what your ROI ought to be. Find out how much you are paying your workforce to complete a given task to make a business case for automation. In the early stages, it can be helpful to run tandem systems for a limited period to allow automation to prove its value, efficiency, and accuracy. The evidence will allow you to make a business case and give the digital transformation support and strength across the business.
Start small, start now
Dennis Gannon notes that “While 88% of corporate controllers expect to implement RPA by next year, we routinely encounter hesitancies when it comes to applying RPA to financial reporting processes.”
Overcome hesitancy by starting now with small, quick wins. Solve obvious solutions first and look at breaking up larger ones once you have successes under your belt. Good candidates for small automation wins are found in back-office, for example, cash flow or accounts payable automation.
These early successes will encourage other departments and promote a culture shift. Remember that you can automate individual steps in a process, to begin with, extending the process when the time is right. You will still notice benefits straight away.
Speaking of a cultural shift, as CFO you must lead your team in a successful automation transformation. One of the biggest obstacles may be people and cultures inherent to the business.
Establish from the beginning that automation does not pose a threat to jobs. In a survey of CFOs, only 4 percent said that automation was costing finance professionals their jobs in their organization. In fact, quite the opposite is true. With more time to add more value, finance officers find their worth and value growing. They require more skills as they do less data entry and more data analysis and only become more useful and more employable.
Automation can even lead to a growth in the finance department headcount. Department bottom line improves and entry into new technological realms such as machine learning and AI occurs, so new positions open up.
Keep teams on side by remaining transparent and involving them in every stage, from deciding areas to be automated to completing the switch from the legacy system. They will need your encouragement and support as they upskill to recognize where automation can help them and even learn to design it themselves.
In this way, new tasks replace the old ones, automation becomes company culture. An openness to new technologies and agility in the face of change only stands employees and their teams and managers in good stead as the future looks increasingly digital.
Automation can be difficult to scale and can lose momentum. Be sure that your automation project is sustainable by choosing your initial projects with care and by training staff on time.
To maintain your trajectory, appoint support and monitoring staff and be aware that improvement will be necessary. It’s not enough to just set and forget automated processes. Consider what your regular data handling needs are and work them into your strategy from the offset.
To learn more about the benefits of automation for Global Payroll, including resource time savings, access to consolidated reporting for real-time analysis and agile decision making in the face of global change. Contact us today.