Robotic process automation (RPA), AI, and other allied technologies are changing our understanding of automation.
It’s not only about eliminating the need for manual processing but also about generating “intelligent” outputs. The same kind is now being adopted for financial systems.
Financial process automation is a great driving force for workflow optimization and business growth. Besides improving departmental productivity, it also:
- saves costs,
- reduces discrepancies in financial processes,
- boosts employee satisfaction, and
- brings transparency in the processes.
This post will walk you through a step-by-step process to automate your financial processes.
But first, let’s get the basics right.
Which finance processes can be automated?
Any rule-based, repetitive financial process where accuracy and timeliness are pivotal can be the best use case for financial process automation.
Here are some of the processes that fulfil the criteria.
Process #1: Accounts payable
Automating the accounts payable process ensures the whole payment workflow is resilient and free of errors. Here’s how.
Before you can process any invoice, you must cross-check its details. But performing this task manually increases the chances of errors while unnecessarily slowing down the process. Also, not to miss, the processing cost per invoice is $15 to $40 on average, contributing to a significant financial burden.
When combined with the cost of rectifying processing errors, the cost goes well above $50.
Accounts payable automation software like SoftCo automatically detects missing elements and anomalies in invoices. It’s an essential measure in fraud detection.
Moreover, it also establishes a smooth workflow where tasks like capturing invoice data, uploading it to the ERP, and processing final payments are done automatically.
Process #2: Payroll
Employee payment processing is one of the most extensive accounting responsibilities that a business has to fulfill. Many aspects of salary processing, such as duty hours, the number of employees, monthly deductions, added benefits, promotions, etc., need to be considered before the final payments can be generated.
As per IRS, one-third of employers are penalized for making payroll mistakes in any given year. In fact, 2021 accounted for nearly $7 billion as penalties. This can also become a big issue that can hamper the employer-employee relationship.
With automation software, your business can streamline the analysis of all these aspects, so the final salary is always maintained accurately.
Process #3: Accounts receivable
The automation of the accounts payables and receivables goes hand-in-hand.
Automating the old manual receivables process helps your business establish a better credit management system and maintain proper cash flow. The latter does not let your business requirements take a hit whenever there is a discrepancy in payment settlements.
Since 93% of businesses face late payment settlements from customers, managing cash usage wisely is essential.
Process #4: Reconciliation
Account reconciliation is called to match internal and external documents to ensure there are no discrepancies in financial data.
Businesses that deal with tons of invoices daily find it very difficult to reconcile documents manually. In such cases, machine learning embedded software solutions come in handy to automate the process.
The machine learning model quickly identifies discrepancies and flags them immediately for the managers to take appropriate action.
How do you automate your financial processes?
Here’s a 4-step process you can follow.
Step #1: Create a blueprint
We have already discussed the financial processes that have a scope for automation. First, however, you will have to identify the areas of inefficiencies with such processes that exist in your particular organization. The best accounting books suggest that you conduct a ‘walkthrough’ of a single transaction to document each step of your accounting processes to identify the relevant ‘What Could Go Wrongs’ and the controls your organisation has put in place to address them.
Then, create a plan or a blueprint, keeping these shortcomings in mind so you work towards creating an automated workflow where these challenges can be eradicated.
Step #2: Work on a digital workflow
When you’re clear about the processes you need to automate and the inefficiencies to address, you can utilize software to create a customized automation workflow.
The reason behind creating a customized workflow is—it gives you the space to remove any steps that do not contribute enough to the final outcome. This way, you reduce the completion time, and automation improves accuracy.
Step #3: Test the software rigorously
Earlier, software solutions for accounting automation were heavily code-dependent.
So, creating customized workflows was a daunting task, and testing was way too expensive as one would need to hire IT experts for the project.
But, with the advent of no-code automation solutions, it has become possible to test custom workflows rigorously.
Step #4: Deploy the software
During the deployment phase, things you should check for include:
- the occurrence of downtimes,
- integrations, and
- the time taken to complete the task.
The bottom line
Investing human resources in completing repetitive financial tasks is a big reason why many companies have not scaled as much as they should have in the last few years.
But automating financial processes and leveraging technologies like RPA and AI add value to the finance workflows. So finance automation should be a high-priority deployment for modern businesses.