Source: ThirdWay

Technology advances can help to simplify, accelerate, and automate processes in finance. In traditional systems that support finance operations, such as traditional on-prem ERPs, financial procedures were slow and error prone due to manual work. But thanks to the rise of machine learning and deep learning, automation rates can be significantly increased in finance operations.

These advances help companies increase their operating performance while reducing costs since it allows them to focus on higher value-added tasks. Based on interviews with companies that rolled out leading edge finance automation solutions, businesses can save ~70% of finance operations costs, have faster turnaround times, fewer errors and less human intervention.

What is finance automation?

Finance automation is using the latest tech advances to automate finance operations. Here is a more formal definition by Gartner:

Finance automation technology integrates machine learning and artificial intelligence for use in areas such as financial analysis, payroll administration, invoice automation, collections action, and preparing financial statements. The use of such automated software reduces the need for human intervention in these activities.

Which technologies are used for finance automation?

This is not a MECE list as most of these technologies also rely on machine learning but it provides a list of the technology approaches in finance automation:

Document Automation

Document automation enables the generation and processing of electronic documents.

Document generations systems involve logic-based systems that use pre-existing text and/or data segments to compile a new document. Generating standardized invoices or financial statements are some examples of this technology under finance automation.

More interestingly, companies use technologies like machine learning and optical character recognition (OCR) to auto-extract validate and enrich documents. This enables processing of most documents (e.g. invoices) in a completely automated way.

You can read our in-depth guide to learn more about document automation.

Robotic Process Automation (RPA)

RPA is a popular tool that uses screen-scraping and other technologies to create specialized agents that can automate secretarial tasks. In finance processes, RPA bots can run repetitive, rule-based monotone tasks and link disparate systems so that businesses can free humans from low-skill manual tasks and help them to focus on higher value-added activities. You can read more about RPA from our in-depth guide.

Process Mining

Process mining allows companies to analyze their processes and identify the strengths/weaknesses of them to take action for improvement. With process mining tools, finance teams can discover whether their invoicing processes take too long or what steps they can automate in their source-to-pay processes. To learn more, you can read our process mining guide. 

Chatbots & Conversational Agents

A chatbot is a computer program that allows people to get information from machines using text and voice. In finance, conversational agents can be used as virtual assistants for finance teams or they can help automate communication between finance teams and suppliers or customers. Feel free to read our in-depth guide to learn more about chatbots.

Machine Learning

Rule-based automation helps businesses to define and execute requirements for different operations in compliance with the rules. Machine learning algorithms, on the other hand, learn from past transactions and customer decisions, perceive decision-making patterns and use these patterns to make future choices. As an example, finance teams can benefit from this technology to run accurate simulations and take precautions for possible adverse scenarios.

Which finance processes to automate?

Source-to-Pay (S2P)

Source-to-pay (S2P) is the process of selecting a supplier for completing all their payments. It is also called purchase-to-pay or procure-to-pay (P2P).

Since S2P processes include collecting invoice and payment data from multiple systems such as supplier emails, ERP, CRM, banks, retailers, and since not all of these systems have simple integration methods, they usually require some sort of manual labor. RPA bots may fill the integration void.

On the other hand, businesses can identify manual steps to automate and discover bottlenecks in these processes by using process mining tools. Celonis claims that they can increase automation by 35% and decrease rework time by 52% with its process mining tool.

Sub steps of S2P also have significant potential for automation:

Accounts Payable

Accounts payable (AP) processes include collecting, processing, and paying invoices from suppliers who have provided products or services to the client. In accounting, these transactions are written into accounts payable on the account before payment is made.

Before automation, finance teams used to go through invoices manually, and try to understand data, forward them to related systems to complete their records. They rarely spotted the anomalies in the invoice and contact the suppliers to solve the issues.

Now, invoice automation allows finance teams to concentrate on higher value-added activities. Invoice automation allows completely automated processing of most of a companies invoices. This was in the past true for invoices received through Electronic Data Interchanges (EDI). Automation was also high for invoices with purchase order numbers (PO) since purchase order included all the necessary details about the invoice. Therefore getting the purchase order was enough to process the invoice.

However, a significant share of invoices are submitted as images without purchase orders. Modern accounts payable automations rely on deep learning to automate them. Now businesses can extract relevant invoice details via invoice capture, validate them, identify duplicates and create relevant accounting entries automatically.

You can learn more from our in-depth guides on

Financial Planning and Analysis

Financial planning includes the unexciting task of the preparation and compilation of financial statements by a variety of departments in the Financial Planning and Analysis (FP&A) framework, which can be at least partially automated. The RPA tasks can include:

  • generating standardized financial reports
  • consolidating and validating budget and forecasts inputs
  • data collection and cleaning for analysis

Account Reconciliation

Account reconciliation is another low-skill task for finance teams. However, any mistakes might cause significant disruption to businesses. With RPA tools, companies can:

  • log in automatically and extract relevant information from ERP systems
  • cross-check balances from the bank statement to general ledgers
  • prepare reconciliation statements on a standardized format

Order to Cash (O2C)

Order to cash is the whole process from receiving orders from customers to delivering products and services and receiving payments.

Accounts Receivable

Accounts receivable is the amount of money owed to a company for goods or services delivered or used but not yet accounted for by customers. It is part of order-to-cash process. The hardest to automate part of the process relies on getting data from order forms submitted as images by businesses. This part of the process can be automated using deep learning. Feel free to read our detailed guide on order to cash automation.

In addition, RPA bots can provide automated monitoring of receivables, send automatic notifications to customers for long outstanding balances, and calculate the provision for doubtful debts.

Payroll Administration

Payroll administration can be defined as any of the activities required to arrange the compensation of employees for hours worked. These can include the control of overall hours served by staff, the rate of pay, and the allocation of compensation to staff.

According to McKinsey, the following tasks can be automated under payroll administration:

  • Flagging time-sheet errors and omissions
  • Auditing reported hours against schedule
  • Calculating deductions
  • Harmonizing data across multiple time-keeping systems

What are the main benefits?

The benefits of finance automation include:

  • Reduced costs: According to EY, finance automation can cut data entry costs by up to 70%.
  • Faster processes: Businesses can handle more tasks with automation in the same amount of time. Ardent Partners reports that AP automation can reduce the cycle time to 4 days, while the manual process takes 17 days for most companies. In case of accounts payable, this helps companies get discounts by making early payments.
  • Reduced manual errors
  • Improved visibility thanks to audit trail of automated operations
  • Employee satisfaction: Automation enables employees to focus on higher value-added tasks

What are the main challenges for finance automation?

Although the advantages of automating finance processes are numerous, businesses can still face particular challenges. They should first understand the root issues and then act to solve these challenges.

Businesses are hesitant to make big changes to their core processes

Since finance operations is the backbone of a business and is a small cost item for most businesses, businesses don’t want to make risky changes to finance processes. Vendors such as Hypatos, focus on providing automation modules without changing their clients processes and workflows. This approach enables companies to increase their level of automation without taking the significant risk of removing currently working systems.

Automation can result in low ROI

Some automation solutions require companies to invest hundreds of thousands to switch their systems. Such upfront investment would reduce ROI of automation initiatives. However, there are also vendors that offer more flexible payment schedules. One approach is to price products based on the benefits it generates. For example, some document automation vendors such as those in invoice automation, charge clients per document processed. This enables companies to test automation benefits without taking on significant financial risk.

In addition, companies tend to be focused only on labor savings while quantifying benefits of automation. Looking from a holistic perspective that includes more qualitative measures (like decreasing employee turnover, shifting talent to higher-value opportunities, minimizing potential rework) in addition to the typical quantitative cost measures will provide a more accurate assessment of the benefits of automation.

Automation that relies on process standardization can be delayed

It is easier to roll-out automation solutions in standardized processes. However, any large company has highly customized processes. Vendors need to be able to configure their solutions in line with the customized processes of the company to ensure a fast roll-out of the solution. Or they need to wait for companies to first standardize their processes while they roll-out the new solution.

If you have questions about how to automate finance processes of your business, don’t hesitate to contact us:

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