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Financial process automation – A CFO’s guide

April 19, 2023


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CFO, also known as the Chief Financial Officer, wears many hats, from maintaining accounts and bookkeeping for the company to planning the following year’s budget. However, overseeing the day-to-day financial activities of the company leaves limited bandwidth when he would be spending more time analyzing how to make the company more profitable and competitive. . Insufficient accounting systems, mundane data entry tasks, and redundant workflows slow down processes, impact productivity, prevent the availability of real-time data, limit transparency, and hinder informed decision-making.

Therefore, financial process automation plays a pivotal role, automating and speeding up mundane tasks while freeing up CFO and other financial analysts to focus on strategizing and strengthening the organization’s financial stability.

What is financial process automation?

Today, the CFO’s function has evolved from being a mere finance and accounting owner to the partner of the CEO. He is expected to play a directional business role, but juggling multiple responsibilities has become a concerning challenge with the growing complexities in accounting and compliance concerns. Even though the CFO is expected to act as a catalyst for instilling a financial mindset throughout the organization, he is left only to handle the financial activities. Therefore, a change is needed, especially in how the finance department works, and technology has always been the most significant enabler.

Financial process automation comes to the rescue. It refers to the use of technology and digital solutions to automate the execution of financial processes and other related operations. It empowers human resources to dive deeper into the analytical part of their job rather than diverting their energy to conducting repetitive tasks like data entry or reconciliations. In addition, automation in financial operations ensures data transparency and guarantees data storage security in a centralized platform while maintaining compliance and governance expectations.

Finance automation – A brief history

Finance and accounting have come a long way from double-entry bookkeeping in papers to matching debit and credit totals on digital spreadsheets. However, human intervention remained the only thing constant for ensuring all figures were adequately entered and matched to reveal the company’s financial status.

#1. Manual data entry on papers

The whole process was extremely time and labor-intensive. Even though bookkeeping aimed to detect mistakes and fraud, the human error involved with manual data entry failed to reveal the accurate picture. And one tiny mistake could prove excruciatingly damaging for the organization. Adding to the list of problems was the number of hours spent manually calculating sums all day.

#2. Digital spreadsheets with embedded formulas

Digital spreadsheets were a robust innovation, enabling executives to efficiently manage data pools and quantify performance using formulas already embedded in the sheet. Unfortunately, spreadsheets also had their share of limitations, from being standalone documents giving rise to duplicate data to entering digits manually and messing up the entire sheet during a format change, and so on.

#3. Cloud spreadsheets for data storage

Contrarily, storing documents in the cloud was a quantum leap, allowing the safety of the data to be remotely stored in a single, organized place. Moreover, with the cloud data storage change came a wave of innovative tech-enabled solutions, making accounting an easy, less cumbersome task.

#4. Advanced tech-enabled solutions

Artificial Intelligence, Machine Learning, Automation, and others proved to be a breakthrough, improving every aspect of businesses’ operations, including maintaining their accounting books. Finance automation is more than just automating the whole accounting process. It is a one-stop solution providing access to reliable, error-free, accurate financial data and analytical support.

Why do we need financial process automation?

Financial data offers a holistic view of a company’s finances and enable owners to make accurate predictions about their future performances. These datasets provide insights into the company’s most profitable customers, identify and flag suspicious transactions, provide visibility into department-wise performances, track and manage expenses in real-time, help understand the organization’s cash flow situations, and forecast future costs. In addition, finance process automation can help speed up the entire workflow leading to such analysis, enabling businesses to stay responsive and ahead of time.

Today, innovative tools like Robotic Process Automation and Intelligent Document Processing are embraced by companies to streamline their operations and provide access to critical enterprise data. Financial data is the core element that can transform businesses with game-changing data-driven strategies. Hence, accessing them in real-time, especially during decision-making, is crucial. Therefore, financial process automation can quickly fill the data gap without delaying other workflows. That said, it’s essential to understand the exact benefits of automated solutions and how they help CFOs.

Financial process automation benefits for CFOs

Enhancing the team’s productivity

The accounting work involves collecting data from multiple sources and entering the same into the spreadsheet, which is time-intensive, costly, and prone to errors, impacting an employee’s alertness, productivity, and efficiency. Thus automated document processing financial services like XtractEdge can automate mundane tasks in minutes, freeing the employees to focus on higher-value tasks.

Removing data entry errors

As stated above, data entry and extraction in bulk is no child’s play. When performed manually, errors occur, delaying subsequent processes and impacting decision-making. Contrarily, financial process automation follows rule-based tasks, where the scope of error is eliminated , and data entry and extraction are much faster, ensuring data is available when needed.

Minimizing operational costs

The main benefit lies in reducing operational costs, from hiring extra staff for manual data entry to compensating for crucial data loss or misrepresentation resulting in wrongful transactional decisions. With more extensive improvements in compliance, data quality, and maximizing the productivity of resources, operational costs are greatly reduced by automated tools.

Eliminating operational risks

Corrupted spreadsheets resulting in data loss or the inability to update results can hinder operations. Excel sheets with complicated formulas and massive datasets can trouble executives in many ways. For example, they might become unresponsive or reflect duplicate inputs and slow adequate information retrieval. Without a proper backup, the chance of losing the entire dataset is always high. Such instances negatively impact other operations directly, depending on those insights. Financial process automation tools are ideal for mitigating sudden operational risks and preventing the loss or damage of crucial data.

Generating actionable insights

With minimal data entry and extraction errors, enterprises benefit from actionable, quality, and reliable information for their decision-making. Moreover, it saves time resolving minor errors or compensating for incorrect payments.

Improving transparency and accountability

Financial processes involve too many human hands before tasks are marked complete. But, executives and stakeholders need financial information to make decisions wisely. Unfortunately, the manual work extends the time for each accounting-related task completion, and decision-makers must wait indefinitely before getting access to insights. Furthermore, tracking errors in the process during manual execution is not possible, which reduces the accountability of defaulters. Transparency into the operations, data, and executions, as garnered by automated software systems, allows easy access to crucial data in real-time and increases the accountability of every staff involved with the process.

Challenges for CFOs in implementing financial process automation

The roadblocks to investing in a financial process automation can range from a biased mindset of staff to inadequate data supporting the investment choice. The following list comprises a handful of similar roadblocks:

How can CFOs implement financial process automation?

An automated software system for financial processes should run smoothly after the successful deployment. But unfortunately, many organizations reported digital transformation and automation failure  after the pilot phase. Experts have cited that the human tendency to resist change and their reluctance to adopt change are primary reasons for projects to fail. Well, not just human behavior, but a lack of adequate planning can also be a reason, especially when owners try to add a new solution to their technology stack without prior intimation. Therefore, for any form of transformation, be it automating financial processes or streamlining document workflows with software solutions, proper planning, and careful step-by-step implementation are needed. Simply put, financial process automation begins by following the given steps strategically:

Identifying financial processes for automation

As stated earlier, many financial processes could be easily automated. Hence, creating a visual roadmap of each process using Process Discovery and other solutions will quickly help identify suitable candidates for improvement. Without a proper roadmap, the chances of picking the wrong process for automation remain high. The visual roadmap further highlights the reasons and areas where inefficiencies or bottlenecks occur, which would assist owners in making informed choices, thereby laying the foundation for automation success.

Choosing the right FPA platform

The success of a pilot project depends mainly on the type of platform a company chooses for its transformation initiatives. The variety of features offered by the software solution matched against your company’s automation objectives matter in ensuring investment success.

Planning and preparing for implementation

The planning and preparation stage involves getting the resources on board with the automation program and assigning them specific tasks like developing the digital workflow and removing steps that don’t directly contribute to the intended outcome.

Monitoring software performance

Following the successful implementation, test out the processes within the automation scope. Monitor the software performance to identify new gaps and discrepancies and address them as and when they occur.

Evaluating the results

Continuous monitoring and evaluating software performance show how much the new solution succeeded in meeting your investment objectives. If all runs as planned, you can start deploying the solution across critical processes in the organization.

The key takeaway

Today, the world relies heavily on fast-paced movement and an influx of data. Data is needed to improve customer services, enable informed decision-making, and gain an edge over the market competition. Again, insights are equally important to power business growth through mergers, acquisitions, or new investments. Financial data plays a significant role here, but manual efforts cannot capture game-changing insights in real-time. And maintaining financial statements or generating reports also occupies many productive hours of employees without guaranteeing reliable, error-free outcomes. Enterprise financial operations are intricate and challenging, keeping CFOs and their executives on their toes. Given the current intricacies related to accounting and finance departments, financial process automation has become the need of the hour. Without automation support, enterprises will likely lose promising business opportunities.

Financial process automation software systems standardize operations, provide accessible and secured financial data storage, generate accurate reports, and share insights on time, supporting big business decisions. It is a surefire way to fully optimize enterprise data and resources to obtain an optimum value for the organization.

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