What is Financial Automation?
Finances and how they are administered are essential to a company's growth and development in every industry, every business, and every organization (even Ripper casino bonus codes). The role of automation in the future of finance is critical to your function, growth, and evolution as a business owner, CFO, or member of the finance department.
Financial automation entails more than just automating payroll, while that is helpful. Risk assessment, audit, and compliance are just a few of the features that come with automating financial procedures.
Various theories have been proposed in regards to finance automation replacing finance professionals. However, over time, it has become evident that, rather than replacing finance personnel, automation in finance empowers people to reach their full potential.
Since the emergence of computing technology, financial management has progressed quickly. As technology advanced, financial experts and professionals realized that process standardization and centralization were critical to increasing modern firms' efficiency and performance. Financial Automation became the next obvious step for firms and organizations as efficiency became a core pillar of management procedures.
According to some research, 60 % of all vocations have 30 % or more capabilities that can be automated using existing technologies. Furthermore, due to the unprecedented impact of the COVID-19 epidemic on work, there has been a substantial shift in understanding of what can be automated and what should be automated.
Instead of hiring and outsourcing financial activities, firms and professionals who want to simplify and streamline internal processes may consider automating them.
What is Financial Automation?
Financial Automation is the use of technology to automate important financial tasks such as bookkeeping, spending management, and bank reconciliation with minimal human participation.
Automation in the finance business, like automation in any other industry, enables for faster and more precise completion of tasks.
For firms and corporations, the premise is similar, but on a much larger scale and with a lot more moving components.
In other words, the process of using technology to execute activities with minimum human participation is known as financial automation. Employees would ordinarily complete these activities, which would free up time for them to work on more difficult jobs.
Financial Automation is a reality because to technologies such as Artificial Intelligence (AI), Blockchain, Optical Character Recognition (OCR), and Robotic Process Automation (RPA), among others.
Why Financial Automation is Important?
Accounting and finance departments are the most common divisions in finance departments. Both of these groups are responsible for different things.
Historically, accounting was done by hand, with staff accountants maintaining general ledgers and physically entering journal entries. As staff changed or accounting policies changed, the process became time-consuming and error-prone.
As a result, accounting departments frequently devote a significant amount of effort to examining journal entries, managing payables and receivables, maintaining supplementary accrual and depreciation schedules, and preparing financial statements.
Financial reporting involves significant time demands in specific circumstances where unique accounting principles apply.
The load of data input can be shifted from humans to robots, which has the advantage of being static and constant across all entries.
This enables accountants to do substantially more in-depth evaluations of the accounting environment by allowing humans to examine and assess entries much more effectively. This also leads to a more stable and effective control environment. Similarly, financial automation has almost eliminated supplementary accrual/depreciation schedules and has aided tax planning significantly. Automation has had a huge impact on the way data requests are handled for finance professionals.
Finance Departments have traditionally been the dumping ground for numerous data requests, requiring a significant amount of time to receive and prepare ad-hoc reports that took raw data and made it palatable for those who requested it.
Automation Software has enabled the construction of dynamic dashboards for pertinent data that can be used by each department, offering real-time information and relieving financial experts of the effort of responding to these requests. As a result of effective automation, finance departments have experienced a move from data management to data analytics.
Financial Automation has resulted in lower costs and faster execution of financial activities such as collections and month-end closing cycles for many firms.
Manual inputs have resulted in fewer errors, and operations have become significantly more visible as a result of automation. In most circumstances, automation allows employees to focus on higher-value-added jobs, resulting in increased employee engagement and satisfaction.
Technologies used in Financial Automation
Although the majority of these technologies rely on machine learning, it does present a list of technical techniques in financial automation:
Documents Automation
Electronic document generation and processing are made possible by document automation. Document generation systems are logic-based systems that construct a new document from pre-existing text and/or data segments. Financial automation technology includes things like creating uniform invoices and financial statements.
Robotic Process Automation (RPA)
RPA is a popular method for creating customized agents that can automate secretarial chores using screen scraping and other technologies. RPA bots may conduct repetitive, rule-based monotone operations and connect various systems in finance processes, allowing firms to spare humans from low-skill manual chores and focus on higher-value-added activities.
Process Mining
Companies can use process mining to examine their processes and discover their strengths and shortcomings, allowing them to take action to improve them. Finance teams can use process mining tools to determine whether their invoicing processes are taking too long or costing too much, as well as which elements in their source-to-pay processes can be automated.
Conversational Agents & Chatbots
A chatbot is a computer program that allows humans to communicate with machines via text and speech. Conversational agents can be employed as virtual assistants for finance teams or to automate communication between finance teams and suppliers or consumers in the financial sector.
Artificial Intelligence (AI)
Businesses can use rule-based automation to create and execute requirements for various processes in accordance with the rules. On the other hand, machine learning algorithms learn from previous transactions and customer decisions, recognize decision-making patterns, and use these patterns to make future judgments. Finance departments, for example, can use this technology to run precise simulations and prepare for possible catastrophic events.
Benefits of Financial Automation for Businesses?
Here are some of the key reasons why industry leaders are investing in financial automation and why leading firms are implementing it in their day-to-day operations. You should do the same if you want to take your company to the next level without having to worry about your cash.
1. Have access to more in-depth Financial Analysis at your fingertips
A finance automation tool provides a complete picture of a company's whole financial environment. It automatically generates strong business reports, such as P&L statements, cash flow statements, income statements, payment performance reports, and so on, that contain key business data. Businesses can use these reports to analyze their present profitability index, break-even point of sale, earnings per share (EPS), and interest expense, and make appropriate changes to improve their financial condition.
Finance Automation solutions allow them to monitor critical business growth factors and take appropriate action. Businesses can gather financial ratios such as current ratios, interest-coverage ratios, asset turnover ratios, gross profit ratios, and so on without having to employ many calculations on a spreadsheet.
2. Manual Errors must be eliminated
Basic human errors cannot be avoided, no matter how experienced an accountant is. While human faults are forgiven, accounting blunders can have major consequences. Even a single extra zero or a typo can cost a company a lot of money.
This danger is eliminated through Financial Automation. Finance workers can stop manually entering data and balancing accounts since automation software automates everything from invoice scanning to reconciliation.
3. Time is Money
An accountant's normal day entails a lot of manual data input, as well as processing invoices, reimbursements, reconciling accounts payable and receivables, and making compliance payments. Automating such time-consuming procedures saves time and improves team productivity.
Accounting automation speeds up financial operations, allowing all stakeholders to focus on more important tasks.
4. Reduce the Possibility of Fraud
Any data breach or fraud involving financial data can be fatal for a company. The usual method of storing data in spreadsheets is insecure since anyone may access it. Let's face it, breaking into a spreadsheet doesn't need rocket science.
An approval workflow is included with most financial automation software, allowing you to regulate who has access to your company's financial data. An accounting automation software's cutting-edge technology aids in the detection and prevention of fraud.
Workplace Structure could be Affected by Financial Process Automation
What happens to the workers and jobs previously linked with those finance objectives is one of the most significant concerns involved with studying financial automation and, as a result, deploying financial automation software.
There's little doubt that implementing financial automation will alter many employees' jobs, as well as how they are trained and move toward their career goals. Automation will, however, replace low-value, easy, and time-consuming duties, allowing employees to broaden their roles and spend more time on value-adding activities that will assist a company's competitive advantage.
Managers must be willing to re-engineer processes and redeploy resources to maximize efficiency and production in order to realize the full potential of financial automation.
Assurance and verification are another factor to consider for anyone intending to implement automation and AI technology. This verification activity guarantees that the technology in place is performing at the level required to meet compliance and quality assurance standards.
Challenges of Financial Automation
Despite the obvious benefits of automating financial procedures, organizations might nevertheless confront unique problems. They should first comprehend the underlying problems before taking steps to address them.
1. Large Modifications to Key Procedures are resisted by Businesses
Finance operations is the backbone of a firm, and it is a low-cost item for most businesses, thus risky modifications to finance processes are avoided.
2. Automation might have a Low Return on Investment
Some automation solutions need businesses to invest hundreds of thousands of dollars in order to make the move. Automation initiatives would have a lower return on investment if such an upfront investment was made. There are, however, vendors who provide more flexible payment schedules. One strategy is to price things according to the benefits they provide.
Clients are charged per document processed by some document automation companies, such as those in invoice automation. This allows businesses to evaluate the benefits of automation without taking a significant financial risk.
Furthermore, when it comes to quantifying the benefits of automation, organizations prefer to focus solely on labour savings. In addition to the traditional quantitative cost measures, a holistic approach that includes more qualitative measures (such as decreasing employee turnover, shifting talent to higher-value opportunities, and minimizing potential rework) will provide a more accurate assessment of the benefits of automation.
3. Automation that is based on process standardization may take longer to complete
Automation solutions are easier to implement in standardized processes. Any huge corporation, on the other hand, has highly tailored processes. To enable a quick roll-out of the solution, vendors must be able to configure their solutions in accordance with the company's particular processes. Alternatively, they may need to wait for enterprises to standardize their processes before using the new solution.
Financial Automation in the Future
Even if IA and machine-learning algorithms are still in their infancy, finance leaders should not wait for them to fully mature. Many automation platforms and suppliers, according to McKinsey, that failed to survive IT security evaluations a decade ago are now well established, with the infrastructure, security, and governance to support business programs.
"Where earlier a manager had to wait for an overworked IT team to install a bot, today a finance person can often be trained to develop most of the RPA workflow," says the author. Every day, new opportunities emerge as a result of the exponential expansion of structured data fuelled by enterprise resource planning (ERP) systems and the lowering cost of computer power.
Businesses may risk-rate 100 percent of transactions in the general ledger and sub-ledgers using AI-enabled risk discovery, resulting in an aggregated risk profile of the data that makes up the financial statements, allowing for laser-like concentration on the areas that matter.
Financial automation has a bright future ahead of it, and it is already reshaping the way financial services are delivered in both large and small businesses. Incorporating AI, RPA, and other forms of automation can appear intimidating at first, as there are numerous activities and organizational adjustments that must be made in order to incorporate new technologies and procedures.
By arming your financial team with AI coworkers, you can cut down on time spent on routine activities, allowing your team's human talent to shine.
Conclusion
If you're a business owner or a financial professional trying to increase the productivity of your finance department, you should invest in finance automation right now. Finance teams in the future will not be confined to simple accounting activities, but will play a vital role in determining the end-to-end operations of a company's growth.
Every finance department understands the difficulty of financial planning and analysis. Big data is required for accuracy, timely execution, and, of course, monitoring, regardless of the tasks you are conducting.
You may operate in Excel with the support of a far more complex data management system by substituting spreadsheets with real-time data and merging fragmented workbooks and data sources into one centralized area.