International Data Corporation (IDC) – the premier global market intelligence firm, predicts that between 2018 and 2021, companies worldwide will have collectively spent nearly $6trn on digital transformation initiatives. And, according to Krishnan Ramanujam, president of business and technology services for Tata Consultancy Services (TCS), a global IT services, consulting, and business solutions organisation: “CFOs, along with their counterparts in strategy and technology, can play a major role in determining which models may be economically viable for their firms, now and in the future.”
CFOs will have numerous sizable internal funding requests fall on their desks and they can’t be blamed for playing the devil’s advocate since they argue to help determine the validity of any digital transformation project. But their primary role as a digital CFO will be transforming their own department.
Automation led finance function
According to Accenture’s Finance 2020 report, automation will eliminate up to 40 percent of the transactional accounting work the finance department does today. Terry Walby, founder of Thoughtonomy, a software company with multi-award winning automation technology platform, reiterates the CFOs critical approach: “As the project sponsor, the CFO needs to be comfortable building a business case, willing to take input from other departments and to spend the time to fully understand processes at a granular level.
A study undertaken by Compleat – How tech is changing the role of finance, found that 51 percent of workers within UK businesses have rushed to implement new financial technology in the past couple of years, citing the UK Government’s Making Tax Digital (MTD) initiative as a key driver.
Researchers at Gartner conducted interviews with 150+ corporate controllers, chief accounting officers, and chief accounting leaders to study about the benefits automation could pose for businesses. One of the highlights from the study was that the average amount of avoidable rework in accounting departments can take up to 30 percent of a full-time employee’s time. If fully implemented, automation can save upward of 25,000 hours per year and close to £675,000.
According to The dawn of a new partnership: A robotics-led finance function by EY, automating manual processes with little subjective judgment – like data input and output, reconciliation, data quality management, reporting, and dashboard and business rules can reduce man-hours between 20 percent-80 percent.
The use of automation in finance can drive efficiencies by reducing human error. It helps in freeing up the finance team to refocus on more strategic work. By using automation, the finance function can accurately forecast, which means that the business can make more real-time decisions as opposed to just playing catch-up. The CFO can start to get more predictions from the accounting department and that can result in better business outcomes.
Back in 2018, Spanish football club RCD Espanyol automated its financial processes and according to their finance director Joan Fitó: “The finance team has become infinitely more flexible since making use of the automation features, with productivity going up by more than 20 percent, reporting time reduced by 50 percent and errors reduced by over 25 percent. The team can instead focus on using Club information, analysing it in real-time to become more strategic in its effort to become a globally-recognised name in the world of football.”
Tim Leger, SVP – business process automation and transformation at Sutherland Global Services said in an article on Financial Director: “The future of digital finance is intelligent automation and RPA is yesterday’s news. As organisations have embraced robotic process automation (RPA), it has become a single, commodity tool in the larger automation toolbox – no longer at the centre of transformation and synonymous with process automation.”
The real cost of automation
It is difficult to associate a cost in terms of price for finance function automation. It depends on the kind of project, the scale of it, size of the company and several other factors. Understanding and explaining the actual costs associated with deploying finance automation are tough since they are quite different from an industrial robot.
According to a blog on DocuPhase, business automation tools can start at £23 a month for 0-10 employees, and rise from there. Typically, automation in the finance function starts from accounting tasks. This article in Accountancy Age gives a good idea of the pricing of the best online accounting software in the UK. Business analysis tools, such as ActiveOps, StereoLOGIC or Celonis compare the short-term costs of using automation over the next two to five years versus a finance software tool.
However, the real cost of automation in the finance function is beyond the project implementation cost and the price of the software or the technology. Here are considerations that CFOs must make while deciding on implementing automation projects.
Make or buy analysis
As in accounting terms, make or buy analysis needs to be conducted to check the feasibility of both – making an automation software in-housing or buying/getting it developed from external providers. The analysis will help in highlighting the costs and benefits associated with either of the decision.
Architecture, hardware, IT infrastructure
The success of the automation initiative depends on its integration with existing business applications and hardware.
Keeping business continuity in mind, the implementation of the automation project needs to consider the current and the proposed architecture, hardware and IT infrastructure on priority. Over dependencies on the current set up can create an outage that can have a significant business impact post-implementation.
While it’s easy to get caught up focusing on the commercial rationale, the success of the automation project depends on the willingness and participation of the staff involved not just in its implementation, but also in using it.
Another outcome of automation, which might be a potential notional cost – at least for the CFOs, is the perceived threat of machine taking over humans. CFOs, as leaders of the finance function, need to keep viable streams ready to deploy the members of the team whose tasks have been cut short. Automation will inevitably lead to changes in organisational structures and redefined roles, if not layoffs. Amazon recently said it would spend close to £540m ($700m) to retrain 100,000 employees to perform new jobs made possible by AI and robots.
CFOs could come up with plans like financial planning and analysis personnel getting deployed to support the business closely than before and tax specialists refocusing to maximize after-tax income for the business.
Monitoring and support
Automated processes require oversight to make sure they are operating properly. Hence monitoring is necessary to make sure that the process is being operated and yielding results as per its objectives. Automation software is like middleware in the sense that someone needs to support and maintain the programs on an ongoing basis.
The cost of upgrading the automation software must be considered – specifically, for regression testing and possibly re-implementing required to take advantage of new features or changes in features.
Automation, once up and running can appear magical. But, just like the magic shows seen on stage, there’s more to it than what meets the eye. Automation software are typically rule-based systems that need creating rules, basically “if statements”, that are fed and followed.
It is vital to accept that automation can’t handle irregular or highly complex processes, make decisions, fix broken processes, self-correct, and thus can’t replace the human team. When businesses attribute the abilities of automation to magic, the spell can soon break down.
Andrew Spanyi, the author of four books on process management, says: “RPA does not redesign anything. It doesn’t ask whether we need to do this activity at all. It operates at the task level and not the end-to-end process level.”
Securing CFO’s position in the board
The adoption of emerging technologies like automation in the finance function during the next decade is going to change the role of the CFO. As per Accenture’s estimates based on insights from market analysis, cross-functional integrated teams will deliver 80 percent of traditional finance services.
As a business case to CFOs, automation contributes to both, the top as well the bottom line by not only replacing time-intensive, low-value and backward-looking accounting tasks but also enabling finance teams to spend more of their time on high-value, forward-looking business building and in-turn making them company’s most important competitive advantages.
By saying yes to automation, CFOs can position the finance function as a strategic partner and in turn secure their own positions on the board and get closer to the CEO. But they deserve to be provided with a strong business case.