Finance teams today spend countless hours on repetitive, manual tasks ranging from invoice processing and data entry to report generation and reconciliations. A survey by McKinsey found that finance employees spend 25-50% of their time on processing transactions and managing data. Not only is this highly inefficient, but it prevents finance professionals from providing more strategic decision support to drive business performance.
The good news is that finance automation technology has now matured to the point where a majority of finance processes can be automated, freeing up staff for value-added analysis while reducing costs and errors. Leading enterprises are already achieving tremendous productivity gains through finance automation initiatives. Let‘s explore what finance automation means, what processes are ripe for automation, key enabling technologies, implementation best practices, and how finance teams of the future could be transformed.
What Does Finance Automation Really Mean?
Finance automation refers to the use of technology solutions to completely or partially remove manual, repetitive tasks from finance processes. This improves efficiency, speed, data quality, and compliance while enabling finance talent to focus on high-value responsibilities. Intelligent automation combines robotic process automation (RPA), artificial intelligence (AI), machine learning (ML), and related innovations to replicate or augment human activities.
According to a study by Ernst & Young, finance teams currently spend up to 70% of their time on routine activities versus advising the business. Finance automation can help radically shift this mix.
The global market for finance automation software is forecasted to grow at a CAGR of 12.5% to reach $7.3 billion by 2027, indicating this is becoming a strategic priority for CFOs. Leading drivers of this explosive growth include:
- Pressure to reduce finance costs and headcount
- Need to improve reporting speed and data insights
- War for top finance talent – automation improves retention
6 Finance Processes Ripe for Automation
Many finance processes involve repetitive steps that are ideal automation candidates. Here are 6 areas offering the most potential for efficiency gains:
Order to Cash
The order to cash (O2C) cycle includes customer onboarding, order management, invoicing, payment collection, credit control, and cash application. Tedious manual activities like payment matching and reconciliation can be automated using AI-powered software. For example, HighRadius leverages ML to automatically classify customer communications and predict payment outcomes.
Payroll remains stubbornly manual in many organizations. Employees waste significant time reviewing timesheets, calculating wages and taxes, distributing payments, and maintaining compliance. Automating payroll with tools like Workday eliminates these pain points while enabling real-time insights into labor costs.
Procure to Pay
Procure to pay (P2P) entails procuring goods/services, approving purchases, processing invoices, authorizing payments, and managing suppliers. Using OCR and AI, leading P2P platforms can extract key data from invoices and execute approvals, freeing up staff for value-added supplier management.
Financial Planning & Analysis
FP&A functions like budgeting, forecasting, and reporting involve collating data from multiple sources, running what-if analyses, and creating boardroom presentations – all very labor intensive. Solutions like Host Analytics automate data collection, reporting, and more – enabling analysts to focus on actionable insights.
Reconciling account balances is a tedious and error-prone manual process. Automating reconciliations between bank statements, sub-ledgers, AR/AP, and G/L enables 100% accuracy and near real-time closure. BlackLine is a leader in balance sheet automation.
The financial close remains predominantly manual at most organizations. Finance teams race to consolidate financial data, book accruals, perform intercompany eliminations, and validate results. Automating key steps accelerates closes from days to hours, reduces bottlenecks, and improves visibility.
4 Finance Processes and Typical Sub-Processes to Automate
|Process||Typical Sub-Processes to Automate|
|Order to Cash||Credit checks, payment prediction, cash application, collections|
|Procure to Pay||Invoice processing, GL coding, PO matching, approvals|
|FP&A||Data collection, reporting, budgeting, forecasting|
|Account Reconciliation||Extract account data, match transactions, highlight exceptions|
Technologies Powering Finance Automation
Finance leaders today have a potent mix of cutting-edge technologies to automate their processes and augment staff skills:
Robotic Process Automation (RPA)
RPA tools use software bots to automate repetitive, rules-based tasks across multiple applications just like humans, but significantly faster and with no errors. Bots can copy-paste, move files, extract and input data, trigger responses, and complete calculations around the clock without breaks. Leading RPA platforms include UiPath, Automation Anywhere, Blue Prism, and Microsoft Power Automate.
Artificial Intelligence (AI) and Machine Learning (ML)
AI solutions can automate more complex processes by learning from historical examples and large datasets to mimic human-like decision making. For instance, ML algorithms are able to forecast cash flows, predict future revenues, and optimize budgets based on billions of data points. AI empowers natural language interactions via chatbots and interprets unstructured content like emails and invoices.
Optical Character Recognition (OCR)
OCR software uses computer vision to instantly read text and numerical data from scanned documents and images. This eliminates slow and inaccurate manual data entry for key documents like invoices, statements, purchase orders, and tax forms.
Process mining gives complete visibility into end-to-end processes by analyzing digital activity logs. Finance leaders can identify bottlenecks and inefficiencies in processes like O2C and P2P to determine the best opportunities for automation or process re-engineering.
|Automation Technology||Key Capabilities|
|RPA||Handling repetitive rules-based tasks|
|AI/ML||Learning from data, decision automation|
|OCR||Reading text and data from documents|
|Process Mining||Discovering process improvement opportunities|
The Many Benefits of Finance Automation
Adopting finance automation delivers impressive benefits across hard costs, speed, quality, experience, and more:
- Cost reduction – Automating manual work significantly lowers finance operating costs. AP automation can reduce invoice processing costs by 40-90%.2
- Higher productivity – Technology handles more volume with less human effort. AP automation can improve productivity by over 80%.3
- Speed improvements – Automated processes like cash posting or intercompany settlements can be 10x faster.
- Error reduction – Bots perform processes perfectly every time, eliminating costly human mistakes.
- Real-time visibility – Automation and AI provide self-service insights into P&L, cash flow etc.
- Better customer/supplier experiences – Bots resolve routine inquiries instantly, while staff handle complex issues.
- Improved compliance – Automated controls and audit trails reduce compliance gaps.
- Scalability – Finance teams can scale to support rapid business growth without proportionally increasing headcount.
- Strategic focus – With grunt work automated, finance staff spend more time on high-value analysis to guide leadership decisions.
Overcoming Finance Automation Challenges
While the benefits are compelling, finance executives need to be aware of these common automation challenges:
Entrenched processes – There is often resistance to changing longtime finance processes and habits. Leadership must clearly communicate the burning platform for transformation.
Concerns about ROI – Automation requires upfront software/services investment. The ROI case needs to consider both hard savings and productivity gains across finance.
Process standardization – Before automating, processes must be standardized as much as possible across business units and regions. This may require eliminating customizations.
Complex environments – Large enterprises often have a tangled map of legacy finance systems and data flows. Rationalizing these via ERP consolidation or automation tools is key.
Talent barriers – Some finance staff will perceive automation as threatening their jobs. Proactive change management and training is critical to driving user adoption.
Selecting tools – With many point solutions and vendors, it‘s challenging to select the right automation tools for each process. Focus on user-friendly tools with proven ROI.
10 Tips for Successfully Implementing Finance Automation
Follow these best practices when rolling out finance automation initiatives:
1. Get executive sponsorship – Gain C-level buy-in to set the strategic vision and secure budget/resources.
2. Take a phased approach – Start with 1-2 pilot processes to demonstrate value before scaling across finance functions.
3. Standardize first, then automate – Assess and improve processes to remove constraints before applying technology.
4. Involve users early – Get input from finance teams who know pain points and requirements. This drives user adoption later.
5. Select tools purposefully – Look for tools purpose-built for each finance process vs. generalized platforms. Favor ease of use and rapid ROI.
6. Measure rigorously – Quantify improvements across cost, speed, efficiency, data quality, customer satisfaction etc.
7. Celebrate successes – Publicize automation wins and results to generate further enthusiasm and appetite.
8. Invest in change management – Train staff on working alongside automation, emphasizing new career opportunities it creates.
9. Maintain close governance – Monitor automation operations closely. Establish protocols for handling exceptions.
10. Take the long view – Start small, learn and improve. But maintain the end goal of automating as much of finance as possible.
Imagine Finance Teams Running Like Digital Workforces
The future vision for finance should be functions operating like efficient, automated digital workforces augmented by human capabilities where necessary. Important manual tasks are eliminated, while staff focus on high-value roles:
- Providing actionable, real-time insights to guide business strategy
- Forecasting future scenarios and adapting plans accordingly
- Developing analytical models to optimize decisions
- Directly advising senior leadership and the board
- Monitoring automated finance processes and handling exceptions
- Identifying new opportunities to drive performance
- Overseeing and continuously improving automation tools
- Focusing on complex transactions and issues to resolve
The rewards of finance automation are clear and substantial. With deliberate change management and methodology, finance leaders can transform their functions to be far more strategic, while running like a finely tuned digital workforce. The time for finance automation is now!