Is your finance team spending too much time on manual processes?
Could automation give you more time?
Ideally, as the CFO or financial manager, your finance team has a strategic role, supporting you, the CEO and the leadership teams to make critical business decisions that shape the future.
But what if you don’t have time to do that necessary work?
What if you’re spending 10 or more days on monthly financial closes, reviewing and reconciliating your records?
You might have monthly closes, quarterly closes, or annual audits to deal with.
Today for most businesses, there’s a lot of repetitive work involved to get through those cycles due to time-consuming manual processes.
In this article, we highlight how you and your finance team can say farewell to those manual processes courtesy of automation.
Here’s what we cover:
- Challenges of manual processes for finance teams
- How spreadsheets are slowing the financial close process
- Why automation can speed things up
- How to adopt automation for financial processes
- AI forecasting the future
Challenges of manual processes for finance teams
Managing processes can be time-consuming for finance teams, especially with issuing and processing invoices, keeping track of budgets, and creating financial reports.
As your business grows and processes and reporting become more complex, it’s common to waste incredible amounts of time with manual data entry, unruly spreadsheets and time-consuming workarounds.
No matter how skilled your finance department may be, any system that relies on manually inputting data from paper is slow and subject to human error.
Every time a piece of paper changes hands, you introduce an opportunity to misread, misplace or misunderstand something.
For a company that handles tens of thousands of invoices per month, even a tiny margin of error can result in huge losses.
Manual processing also leads to a lack of control and visibility, leaving you unable to make informed decisions to effectively lead your team, creating an environment vulnerable to fraud.
How spreadsheets are slowing the financial close process
Spreadsheets are cheap and flexible.
We all know how they work. And in lots of cases, they can be really useful.
However, a significant problem with spreadsheets is that you must enter calculations as formulas, so you need to learn the correct formula for each calculation you need.
And that can be a big problem when it comes to dealing with your financial close processes.
Training for this takes time, and some users still find them challenging.
If you enter a formula or data into a cell incorrectly, all calculations related to that cell will also be wrong.
Large spreadsheets can inevitably have some input or formula errors, which can be time-consuming to find and lead to severe consequences if uncorrected.
You can add spreadsheet on top of spreadsheet as you need them.
But as your business grows, your workbooks will become more complex, leading to more time wasted on maintenance.
The more complex spreadsheets are, the more of a problem it can be for anyone to change, modify and even destroy data.
If you lock them down, they lose the very flexibility that made you use them in the first place.
Why automation can speed things up
By incorporating automation into your financial processes, you can significantly reduce close days, increase agility, lower costs, improve productivity, reduce delays, minimise errors, and ultimately give your team more time to focus on strategy, business growth and success.
Automation can decrease the financial close to a more manageable three to five days and has the potential to get rid of the close entirely.
One day in the future, you might be able to automate all the processes within your finance team fully. Automation makes a future possible where real-time data removes the need for a close—as you’re always current.
Software as a Service (SaaS) businesses that might have only been able to forecast renewals quarterly can trend-spot in real time, flagging material changes.
Perhaps most importantly, automating routine tasks of assurance and accounting workflows frees up your finance team to focus on more strategic activities.
How to adopt automation for financial processes
If you’re looking at getting automation going, here are some steps you might want to take.
1. Understand what kind of automation you need
Every business is different, and it’s crucial to get the best value. It’s essential to understand what area of your finances could do most with automation.
You could focus on reconciliation, for example, a massive drain of resources for any finance office.
Reconciliation is a process where you must match the entry in the bank account with the relevant invoice in your system once you receive a payment.
Why not automate reconciliation?
With some types of financial management software, it’s possible to create rules where regular payments automatically get matched to their invoices.
Additionally, artificial intelligence (AI) means you can match up one-off or otherwise discrete payments.
Of course, someone from your team will still have to check the reconciliation.
Still, there’s a considerable time and labour difference between peering at two lists, matching things up, and simply checking that an existing reconciliation is correct.
Automation could allow you to import statements from your financial institutions and automatically reconcile them in minutes when managing your cash.
You’d be able to quickly spot exceptions, manage bank errors, monitor for fraud, and maintain accurate cash balances.
2. Develop a business case
When looking at automation within departments, you should question how economically viable opportunities are.
You should investigate what the return on investment would be.
Get relevant stakeholders in from the departments in question and try and create a business case.
3. Get management buy-in
You need to get information straight from stakeholders on what they understand when it comes to automation and how it would be able to benefit them.
You and other leadership team members should help the wider business understand what automation can do and how it could make their working lives easier, letting them focus on more critical, less repetitive tasks.
4. Support IT in setting up the systems
The IT team can provide technical expertise to ensure automation implementation runs smoothly and at the right speed.
The technical leadership needs to start small with automation, get the business used to the technology, and expand it when it gets used to the changes.
With the cloud, your finance team can become more agile and faster, gaining efficiencies through the time you save by removing time-intensive manual tasks.
To extract value from automation, it will be up to you to assess commercial models, look at the risks, recognise and account for value, and apply controls and governance.
5. Get results
Create a clear automation roadmap. You’ll have to work closely with your people, who will drive the use of new technology.
With the tech in place, you’ill need to work at measuring your progress and ask a few questions of your finance team:
- How are you using automation, and are you doing it right?
- How effective are your new processes?
- Are they leading to the productivity and efficiency improvements you expect?
- What outcomes do you see with the new technology?
- How can you get business metrics for your intended goals?
AI forecasting the future
Automation is a subcategory of AI that follows pre-programmed rules to run processes.
However, we’re bound to see more advanced forms of AI in the future as systems apply self-learning capability through machine learning.
The future will see forward-looking finance teams use data science and AI to look into the future, using real-time insights and AI-powered forecasting.
Today, AI can help support small businesses with cash flow forecasting, while, as we’ve said, larger medium-sized SaaS businesses in specific industries might use AI to forecast renewals.
Members of your finance teams can use AI to build patterns of understanding, identifying transactions flowing through the business that don’t match these patterns—in real time.
Your team will have confidence when reviewing hundreds of thousands of transactions a month. Humans cannot review all of that manually.
Aaron Harris, chief technology officer at Sage, says: “The real value in AI-powered forecasting isn’t that it’s more accurate than humans; the real power is that AI can do it continuously, and basically for free.”
Is cloud financial reporting a key component for you and your finance team?
Reporting is crucial in any finance department. And CFOs have always focused a lot of their attention on analysing these reports. This is a critical part of any modern business and an important measure to understand the business performance of a company.
Whether CFOs are compiling these reporting statements themselves or assigning others to create them, their role doesn’t stop with the handing over the numbers. CFOs are charged with producing reporting that is useful to leadership and key stakeholders.They will understand the performance metrics, indicators and targets that need to be hit for the organisation to move forward.
Traditionally, CFOs have been limited to looking backwards through a rear-view mirror. They would be reviewing financial reports and balance sheets that will create the state of the business at the end of a period.
The world has and is very much changing.
Financial reporting is still highly important. However, technology and the availability of data has made it possible for businesses to get real-time information about company performance – and even how the business can perform in the future.
What’s been the problem with financial reporting?
Financial reporting has always been challenging and time-consuming. End-to-end reporting means carrying out a number of complex tasks, which have to be done to supreme accuracy. Mistakes in the process could make the entire effort invalid.
Your business might be reliant on multiple spreadsheets for financial reporting. But there’s a good chance that errors could creep in, while hours of effort are likely to be spent on maintaining and keeping spreadsheet reports up to date.
However, it’s not just a spreadsheet issue, though.
With legacy IT on-premise infrastructure, the increasing complexity of the business can put pressure on systems. This can slow down processes and cause performance to suffer. The IT team might have to do a lot of firefighting, leaving a lengthy backlog.
Financial reporting is crucial to a business. It is needed for areas such as regulatory compliance and investor relations. As a result, there are pressures that CFOs and their departments could be feeling from the business when it comes to getting better control of financial data.
According to CFO 3.0: Digital transformation beyond financial management, a research report by Sage that looks at how CFOs can move from historians to visionaries within their companies, decision-makers are still spending as much time collecting and preparing data as they are analysing it, due to unwieldy legacy systems.
As a result, 70% of CFOs said administration has a significant impact on team productivity.
Why cloud computing can help
The benefits of financial cloud solutions are already well documented. Research and advisory firm Gartner describes the major benefits as:
- The ability to keep up to date with new releases
- More consumer-like features
- Improved analytics
- Improved agility through faster introduction of new functionality
- More emphasis on finance staff managing applications, with less reliance on technical staff
And with the cloud, you have the opportunity to make financial reporting a much more streamlined, accurate and less time-consuming process. It offers error-free reporting, a single version of the truth, and tools that don’t need constant watching and manual maintenance.
How working in the cloud can make finance teams more effective
The role of a CFO and the finance department has changed. Instead of simply being thought of as financial leader, the CFO now needs to actively drive business change through finance.
Thanks to cloud technologies, they have access to a variety of tools focused on predictive analytics and intelligence, with machine learning and artificial intelligence potentially changing the game even further.
Cloud technologies help to create a nimbler and more cost-effective finance function. It minimises the need for hardware and storage, providing more scalable and easily automated processes. You can enable a connected operating environment that provides greater automation and advances in real-time insights.
Automation is a reliable way to improve the quality of financial data and increase the productivity of financial/accounting staff.
Instead of being tied up in time-consuming transactional tasks and gathering data, automation offers an alternative.
Automation can allow businesses to:
- Minimise the manual intervention needed in financial and accounting-related tasks, such as ledger entries and reconciliations
- Reduce the potential for human error
- Improve the use of staff time through a reduction in manual processes
- Increase and expedite turn-around.
Through automation and the use of integrated business systems that serve as an auditable system of record, CFOs and their departments can make use of technical capabilities to make them more effective and useful for the business.
This includes automated financial reporting with narrative analysis. Financial data with context and a clear story can be very useful. In addition, you have access to:
Real-time updates to financial metrics
Real-time metrics improve the quality of related data and the efficiency of prepared reports. Having inputs uploaded in real time rather than batch processes reduces reporting turnaround time and helps to avoid financial data gaps.
This allows multiple codes to be used to generate models and charts from compounded sets of data. It allows data and analytics from various transactions to be aggregated.
Future-proofing the finance function means more automation. More than nine in 10 (94%) businesses agree that financial management technology will play a crucial role in tomorrow’s finance function.
Conclusion on using cloud financial reporting
According to the CFO 3.0 research, 55% of financial decision-makers are responsible for data privacy, digitisation and technology investment. It might be down to you to add value and shape the future strategy of your finance function.
You could well be central to making sure your business makes the significant investments it needs on tools and systems to expand your capabilities, which may need you to move to financial cloud management software.
Moving to cloud-based financial management software can help break down data silos and accelerate the way you do business.
The right technology platform can provide a consolidated view of your financial data from across the business. It can also provide the integrated business analytics functionality to deliver the data-driven insights that a new breed of CFO needs to drive broader business transformation beyond financial management.
By monitoring and understanding this data, you can make better decisions and uncover more opportunities in areas such as cost reductions, process waste removal, customer cross/up-selling, and the delivery of new products.
Not only can analytics find you ways to cut budgets in the right areas, it can help you find suitable ways to expand.
The role of the CFO has evolved. CFO 1.0 was a historian of past performance. CFO 2.0 was a real-time analyst. Our research reveals a radical new remit for finance decision makers as drivers of strategic change and visionaries of the future. This is CFO 3.0.
Technology may be the enabler driving this change, but the extent to which it transforms a business lies with those who are bold enough to take the lead.
It’s clear that the modern CFO will need to be versatile—marrying accounting, analytical, business and strategic-thinking skills into one package.
CFO 1.0: The historian
CFO 1.0 is a historian of past performance. A strong individual with high financial acumen, this role reflects the traditional view of the finance professional as a historian of company financial data and past performance.
While there is still a place for traditional skills, forward-thinking CFOs need to spot issues and make decisions in real-time and predict the future, aided by data and technology.
CFO 2.0: The real-time analyst
CFO 2.0 uses real-time data and dashboards to provide the support and analysis that helps a business improve operational and management performance. While CFO 1.0 can tell their colleagues what happened, CFO 2.0 can add the “why” and help the organisation use data to gain critical strategic insights.
And while CFO 2.0 can catch issues as they occur, they can’t accurately see where these issues are happening ahead of time.
CFO 3.0: The visionary
Our research reveals a radical new remit for finance decision-makers as drivers of strategic change and visionaries of the future.
We are in the age of CFO 3.0 – a new breed of trailblazing finance leaders who use data and emerging technology to create a vision for the future of the business and who are often in the driving seat of digital transformation. Instead of just using a rear-view mirror, data and predictive analytics allow them to look ahead and plot a new direction, making them one of the most valuable members of the C-suite.
The evolution of the CFO means many finance professionals now have an integral role in data governance, data flow and cybersecurity. This leads to more performance analysis and innovating the business model. This new remit will become key to unearthing new commercial opportunities.
Your journey to CFO 3.0
Whether you are already embracing emerging technology and driving digital transformation in your organisation, or you’re at the start of your journey to evolve from CFO 1.0, there are a couple of steps you can take.
Start by assessing your finance function and focus on dealing with risk management, getting up to speed with digital transformation and ensuring the team undergoes ongoing training. Then look at technology literacy skills – they are essential to the future of an effective finance department. It’s worth pointing out that, as our research demonstrates, more than two-thirds of CFOs still make decisions based on gut feel.
The changing dynamics of your job mean you need to keep learning to have the business, analytical and data skills you and your team require.
Leading a finance team to achieve its new function
As a finance leader looking to run your function effectively, you need to ensure your team is aware of its changing role. Crunching the numbers still has a place – and remember, automation can help with this – but so does the role of analysing and interpreting data to make key business decisions.
The finance team is there to evolve the business and it’s your role to look beyond the traditional boundaries of the function and make the sort of impact that drives the company forward.
By combining analytics, digitisation and the right blend of personal skills, you can make that a reality.
What are today’s CFO challenges? Well, the role of a CFO has changed for good. No longer simply thought of as some just in charge of the numbers, you now have the tools and technology to become a visionary, plotting the course for the future of your business.
Already an essential member of the C-suite, you as the CFO have strategic business decision making as a key responsibility.
Alongside that are numerous challenges that you have to face. Below, we go into more detail and offer advice to help you solve them.
1. Dealing with Brexit (and other global legislation)
According to a Sage research report, CFO 3.0: Digital transformation beyond financial management, where we took the views of 500 senior financial decision makers, 44% expected Brexit to increase regulatory burdens.
With the UK having already left the European Union (EU) and with discussions going on over a trade deal with it, you’ll already have assessed and prioritised the risks and potential opportunities that Brexit will bring in.
As well as currency fluctuations, you’ll also need to deal with what a proposed trade deal will look like, covering, for example, how your business raises finance in the future.
2. Tackling admin and productivity
The CFO 3.0 research says 70% of senior financial decision makers agree that admin hurts productivity. Your business will look at to find ways to fix this, and the answer is technology.
You should look at cloud-based financial management software, which can harness the power of automation for daily accounting tasks. In essence, 87% of financial decision makers are already comfortable with the use of automation for these tasks.
Essentially, future-proofing the financial industry is going to require technology innovations to provide even more automation.
Businesses understand the impact that financial management technology has in enhancing productivity. More than nine in 10 (94%) agree it will play a crucial role in tomorrow’s finance function.
Beyond the benefit for the finance department, it will also lay the foundation for better use of critical data and insights.
3. Coming up with new ways to help the business with financial matters
More of than half of financial decision makers (51%) say thinking of new ways to improve the business with financial issues is the most challenging aspect of their job.
Your role might be less about traditional accounting, with 94% of financial decision makers deciding their role has expanded over the past five years, and is no longer about fiscal responsibility.
They have better data tools at their disposal, such as real-time data, predictive analytics, immediate data access and a variety of information sources.
These tools provide you with new ways to quickly determine the immediate and mid-term commercial opportunities for the business, allowing you to adapt faster, take opportunities and effectively manage operations.
To achieve superior visibility of business performance, finance teams must have the tools and flexibility befitting the fast-paced, always-on era. Only then can they dovetail with all other facets of the business and collaborate as growth occurs.
Digitalisation provides advanced analytics to improve decision making, automation to improve processes, and metrics for improved real-time financial information.
Increased efficiency offers valuable insight into business operations to uncover growth opportunities.
4. Building a case to invest in financial management tech
The need for improved financial management tools is a catalyst for digitalisation. Indeed, more than two thirds (70%) of CFOs have full responsibility for digital transformation, a relatively new responsibility.
There are numerous pain points and an ever-expanding role in mastering – such as new data, technologies, and managing employee and stakeholder expectations. They are understandably concerned about how to bed down into their new function.
Also, 77% of financial decision makers will be unable to provide insights if they do not invest in financial management technology. And more than three quarters (78%) of finance leaders agree that if emerging technology is going to be transformational, they need the knowledge and resources for a successful deployment.
CFOs have become both the gatekeepers and king-makers to digitalisation. You must embrace your role as a leader of emerging technology, taking your place on the boardroom table.
You could witness a surge in progression that reverberates across the business. Don’t leave your business in the slow lane.
5. Tackling fraud and cybersecurity
The evolution of the CFO means you now have an integral role in data governance, data flow and cyber security, which means you’ll need to be active in performance analysis and innovating the business model.
This new remit will become key to unearthing cyber security and fraud. In the face of increasing cyber security attacks, it’s no surprise this is a priority.
Fraud, cyber misuse and data privacy protection now increasingly fall under your remit and the finance function.
What financial decision makers don’t always realise is that emerging technologies decrease the risk of data breaches.
Using the cloud creates enhanced levels of verification, securing data more comprehensively, as well as unearthing new commercial opportunities.
6. Lack of digital skills
As a finance leader, you should look to develop the skills that are essential to the future of your department and imperative to the changing industry. The task for the next generation of financial leaders is to manage a new landscape. You need the training and workforce to lead the charge within your organisation.
Delivering data-driven insights is another worry that keeps financial decision makers awake at night.
More than three quarters (78%) view technology literacy skills as essential to the future of their department, increasing to 86% in the financial sector.
More specifically, up to 31% are concerned about their lack of digital skills. The skills gap is felt keenly among finance professionals, especially with their enhanced responsibilities.
As such, two-thirds of CFOs (70%) still make decisions based on gut feel rather than data. Skills training is undoubtedly a factor for most CFOs, especially with the changing dynamics of the job.
You need a full complement of business, analytical, and data skills in your team. The need to harvest data rests on your team’s shoulders, so there’s an increasing requirement to upskill and use digital tools and cloud-based services.
Don’t estimate the change. But with the right systems and skills in place, finance teams will be able to operate more strategically to drive the business forward.
7. Dealing with concerns around automation
There is unease from financial decision makers who worry automation may replace their jobs (61%).
Finance maybe needs to rethink its traditional mindset. Rather than recruit finance professionals and try and upskill them with IT and data knowledge, they may need to look at non-traditional avenues.
It may be easier to hire data scientists and provide them with financial training. The skill-set should be closely aligned to allow a smooth transition and may also bring new blood and much-needed diversity into the profession.
Conclusion on CFO challenges
Emerging technologies, such as automation and artificial intelligence, are set to support the finance function throughout the digital transformation phase. This includes the creation of new jobs that will enhance the quality of working life.
Half of all respondents in the report (50%) agreed that emerging technologies would positively impact efficiency and accuracy. The most significant effects will be on data governance (48%), strategic and financial planning (48%) and efficiencies (47%).
Despite the challenges facing financial decision makers, the tools are emerging to help you tackle them.