Entities operating within the finance and accounting sector have been some of the most fervent adopters of automation technologies. McKinsey's Global Survey found that making automation a strategic priority was conducive to success beyond the piloting stage.
Automation is trending within finance and accounting; however, there is still plenty of room to drive further operational efficiency despite all progress.
The Current State of Accounts Receivable and Finance
Most finance, accounts receivable and accounts payable departments have invested heavily in automation solutions to streamline operations. However, these entities continue to contend with several major efficiency hurdles.
Reports show that almost 50% of all accounting tasks can be done through today's technologies but is projected to go up to 90% within five years. As high as these values seem, only 1.4% of finance companies are fully automated, with only 22.4% primarily automated (>75% automated). This data reveals that far too many entities operating within accounting and finance are barely tapping into the true potential of automation technologies.
How to Facilitate Optimal Operational Efficiency
While many solutions can facilitate automation in finance, the most effective include a range of hyperautomation tools to automate everything that can be automated or made more efficient.
Hyperautomation — By automating everything that can be automated, hyperautomation is not a specific technology but a business methodology that leverages a multitude of technologies and solutions. It is centered around improving general operations from DevOps to Accounting to Marketing. When adopting a hyperautomation strategy, business leaders will systematically identify any and all viable use cases for automation technology across their entire organization. Standard hyperautomation tools include AI, machine learning, intelligent document processing (IDP), RPA, iPaaS, etc.
The basic premise behind hyperautomation is this: If automating one set of processes has an incremental impact on efficiency, then automating a multitude of functions will yield substantial operational improvements. This hyperautomation strategy is projected to be widespread in the finance sector.
Intelligent Document Processing — Intelligent document processing (IDP) is a technology that can use AI to capture, classify and extract data from various documents, such as invoices or other financial records or forms. Effectively, IDP builds the foundation for data collection. These technologies eliminate the need for time-consuming manual data entry practices and improve efficiency by reducing the frequency of input errors.
Automation in finance is virtually impossible without employing a proven IDP solution. This software can be deployed to streamline invoice processing, ensure compliance with regulatory requirements, extract consumer ID data, automate mailrooms and digitize analog records.
Robotic Process Automation — After post-processing, IDP's actionable data can then be fed to an RPA solution. RPA is a technology used to automate repetitive business processes using bots, digital workers or robots. This software can be programmed to perform a wide array of redundant tasks.
According to Gartner's research, human error in finance costs an average of $878,000 per year in avoidable rework. As it applies to automation in finance, RPA can be used to perform redundant tasks far more efficiently than humans. These robots also complete these tasks with near-flawless accuracy, significantly reducing accounting errors.
iPaaS — iPaaS acts as the connection between your organization's different technologies. Integration Platform as a Service or iPaaS is a group of cloud-based services designed to facilitate the integration of various workflows. iPaaS is used to connect multiple applications and processes across an organization.
iPaaS can pave the way for more efficient automation in finance by allowing separate applications to communicate with one another. For example, using an iPaaS solution is as simple as 1, 2, 3. It can:
- Connect your IDP solution with an iPaaS tool
- Automatically feed data into your RPA for invoice processing or other tasks
- Then, the RPA system can export the invoices into your ERP solution, where the data is stored and payment is made
This end-to-end automation enables companies to use best-of-breed technology without manually entering data multiple times into multiple systems.
5 Benefits of Deploying Automation Technology in Finance
According to Ardent Partners' Accounts Payable Metrics that Matter in 2022 report, the average processing time for an invoice is still 10 days. In addition, processing a single invoice costs businesses $9.25 on average. Although this figure has decreased by 15% since last year, deploying additional automation in finance is projected to drive costs even lower. Investing in automation solutions such as those previously outlined can also provide other benefits. These technologies will allow finance and accounting professionals to:
1. Spend Less Time on Manual Tasks
Manual data entry tasks are among the most tedious responsibilities that accounting and finance professionals will engage in. By adopting IDP solutions and automation software, finance organizations can significantly reduce the workload of their data entry personnel. This approach will give these professionals time to perform more value-centric tasks, such as interacting with clients.
2. Fuel Efficiency Across All Business Processes
When businesses deploy a single automation solution, they can increase the efficiency of a specific workflow or process. However, the Ardent Partners report explains that implementing multiple technologies in a short period will allow them to achieve an optimal return on investment on tasks such as:
- Invoice processing
- Electronic invoicing
- Supplier portal management
- Procure-to-pay solutions
- Contract/payment plan matching
- Automated routing and approval workflow
3. Improve Cash Flow Management
Decreasing invoice processing time and lowering the cost of obtaining payment by implementing automation technologies will create a stable cash flow. In addition, these tools will increase transparency by providing businesses with a means of digitizing and structuring their data. For example, Honda Logistics of North America reaped many rewards when they found that document automation turned their accounts payable processes into a profit center within their business.
Honda Logistics processes 135,000 invoices per year, which were all previously handled manually by a team of people, requiring lots of time and data entry into their JD Edwards system. However, with document automation, integrating all their internal systems was streamlined and offered tremendous efficiency.
Brad Gerritsen, their Accounts Payable Coordinator, was quoted saying: "The solution freed up our time by transforming data entry roles into more managerial roles. We can now quickly answer vendor questions, track invoices and monitor cash flow. We have visibility into all of our documents, so when auditors come, they have immediate access to all information."
4. Boost Job Satisfaction
In addition, automation technologies reduce the burden on personnel. Their adoption will lead to higher job satisfaction and better employee retention because employees no longer have to key in data themselves or conduct manual data entry. Without these cumbersome, repetitive tasks, they will have time to focus on higher-value activities that can bring more value to your business.
5. Make Data-Driven Decisions
Much of the conversation surrounding automation in finance is centered around how these technologies facilitate operational improvements and enhance efficiency. While these are certainly some of the most prominent benefits these solutions yield, automation technology also increases data accessibility and is the first step in any hyperautomation initiative. Businesses can more effectively use, measure and analyze their data, which they can then leverage to guide decision-making, gather business intelligence and provide a higher quality of service to their clients.
Where are your automation plans heading into next year?
Has finance and accounting come a long way in the race to adopt automation? Yes, but there is undoubtedly more work to be done. Early adopters will be well-positioned to succeed both in the short and long-term, whereas those that fail to evolve will lag behind. Will your organization make automation in finance a top priority this year?
Naren Goel is responsible for leading the global finance organization for Ephesoft. He is focused on driving the company’s next phase of growth including international expansion in a metrics-driven, structured and fiscally responsible manner as Ephesoft continues to lead worldwide adoption of supervised machine learning document capture and analytics.