Money holds significant power and greatly influences our decisions, especially those made by a company’s CFO. Accountants are responsible for decisions and control, financial planning, resource allocation, cash flow management, acquisitions, mergers, and capital budgeting.
At the end of each quarter, accountants and finance professionals work hard to ensure the timely and accurate closing of the books. Along the way, every accountant encounters some tedious manual tasks that, if automated, could speed up the process and make it more efficient.
Automating as many traditional finance functions as possible can and will give any institution a competitive advantage, and in this article, we will explain why.
What is Finance Automation?
When you hear the word “automation,” it will always be related to the word “technology.” Finance automation occurs when a software application streamlines your accounting processes and financial tasks that were done manually. These software solutions automate a wide range of activities within the financial function of an organization or institution, including but not limited to the following:
- Transaction processing: These software applications can handle routine financial transactions such as invoice processing, receipts, and payments.
- Financial reporting: Automation tools enable you to generate real-time financial reports.
- Tax compliance and reporting: Who wants to bear the burden of unintentional manual errors and, hence, non-compliance fines? These automated systems can manage tax calculations, filings, and compliance reporting.
What are the Benefits of Automating Your Finance Functions?
There are various software solutions out there that can automate your financial processes, but when looking for one, you need to keep in mind which processes this software will automate for your business and what effect it will have in the long run.
Automating traditional finance tasks can provide many benefits, and here are our top 10:
Risk Assessment
As the CFO of an organization, having access to accurate and real-time information empowers you with valuable financial insights about interest rates, inflation, or currency fluctuations. When this information is available to you, you can easily assess potential risks and identify potential opportunities for growth.
Global Expansion & Scalability
Think of one of the most obvious barriers to entering a new market: complying with legal regulations. Automating your finance functions will allow the organization to adhere to regulations across various jurisdictions and seamlessly and automatically manage accounts for local subsidiaries. Create
Increased Productivity
This is the most obvious benefit of automation in finance functions. You don’t want to miss on automating repetitive and time-consuming tasks, and you want your team to accelerate the completion of deliverables, freeing up some time for more value-added tasks.
Cost Management
This one is actually the most relatable one for the accountants on your team! If you were to choose to do the work yourself or have someone do it for you in less time and effort, but you would need to give this person some money, would you do that? What if this person will not only handle the manual work but will, in fact, result in significant reductions in operational costs and boost profitability? Would you hire that person?
Automation saves not only time but also resources; the software takes over repetitive tasks and enables savings by processing a higher volume of records quickly and inexpensively.
Enhanced Accuracy
If you could think of the most common error your team makes, what would it be? According to Bloomberg’s BNA study, 27% of accounting mistakes are made because of incorrect data entry.
Automated systems minimize these common human errors, such as calculation mistakes, typos, and oversights. When your company’s processes are automated, they become standardized and consistent. If there are any anomalies, automated systems can quickly detect discrepancies, and notifications can be set up to flag potential errors or inconsistencies. Therefore, your finance team can investigate and rectify issues promptly before they escalate.
Automated Compliance Checks
According to the U.S. Securities and Exchange Commission, “Bank of America agreed to pay a $7.65 million penalty to settle the charges stemming from regulatory capital overstatements that it made due to its internal accounting control deficiencies and books and records failures.”
Artificial intelligence and machine learning automated systems are programmed to comply with relevant financial regulations and legal standards. These include internal policies, industry-specific regulations, tax laws, and accounting standards, among others.
Your CEO will appreciate avoiding fines that may arise from manual oversight or misinterpretation of policy details. Automation enforces these policies consistently, increases productivity, and reduces the risk of non-compliance.
Real-time Data & Reporting
Many of the company’s decisions are made based on financial data, so if you can have immediate access to real-time data and generate financial reports instantly, that would positively impact how financial information is accessed, analyzed, and utilized for decision-making and reporting.
Let’s take cash flow management as an example. Real-time tracking of cash inflows and outflows enables better liquidity management and overall financial planning for the company.
Efficient Audit Trails
Finance function automation significantly enhances the efficiency of audit trails. The system provides comprehensive and accurate records of all your company’s financial transactions. It documents each transaction and hence you will have a detailed and reliable audit trial.
This level of detail is crucial for both internal and external audits. Also, the real-time nature of automated systems ensures that audit trials are always updated without any need for manual tracking and data compilation. This, therefore, has a direct positive impact on facilitating compliance with regulatory requirements by providing clear and transparent documentation, thus reducing the risk of compliance penalties and improving overall accountability within the organization.
Easy Integration with Other Systems
One of the significant benefits of finance function automation is the ease with which these systems integrate with other business applications, such as Enterprise Resource Planning (ERP), Customer Relationship Management (CRM), Human Resource Management (HRM) systems, and Compliance Management Software.
This seamless integration ensures that financial data flows effortlessly across different departments. Synchronized operations result in a unified and holistic view of the organization’s financial health, which can, in turn, inform strategic business decisions.
Employee Satisfaction
When you automatically remove the burden of manual and boring routine processes such as data entry and invoicing from your employees’ shoulders, you enable them to focus on more strategic and engaging activities. This shift in the department’s processes not only enhances productivity but also job satisfaction, as employees can dedicate their time to tasks that require critical thinking and creativity.
Also, automation reduces the likelihood of human errors, which in turn decreases the stress and frustration associated with correcting mistakes. The efficiency gained through automation also means fewer instances of overtime work, which promotes a better work-life balance.
In a survey, 80% of employees highlighted that automation has allowed them to invest more time in tackling challenging new projects, developing their skills, and building relationships with customers and stakeholders. They also said that the introduction of automation tools has notably enhanced their job satisfaction, with nearly 9 out of 10 employees reporting increased satisfaction since integrating these technologies, and 84% expressed higher overall satisfaction with their employer.
In most cases, nearly everything in this world has pros and cons. Implementing automation tools is no exception; it can be challenging at first if the software does not have a user-friendly interface. This can be because it might need IT implementation, but automation is one of the instances where the positives significantly outweigh the negatives or where the cons are minimal and manageable in comparison. If the software solution is chosen wisely and carefully, you will maximize the benefits while minimizing the drawbacks.
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