How to Use Robotic Process Automation in Finance and Accounting
How to Use Robotic Process Automation in Finance and Accounting
February 22, 2020
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Reporting With RPA – A Perfect Blend

Reporting With RPA – A Perfect Blend

Intelligent Bots

With the evolvement of technology, robotic process automation (RPA) solutions are being used and deployed with the machine learning (ML) approaches. RPA systems are truly intelligent as they can make accurate decisions in complex situations.

Robots, not to be misinterpreted as typical robots, are software that mimics humans in various organizational and operational tasks without getting tired of any situation or work. In the finance and accounting industry too, robo -accountants are extremely helpful in automating almost all tasks for which humans can easily rely on machines. Therefore, human accountants and the workforce can do other significant and prioritized tasks that can add more value to the business. Bots, being intelligent digital accountants, can learn from human accountants with much more efficiency and can decide easily from the fed knowledge which variables to focus on.

Applications Of RPA In Different  Departments

Deloitte’s 2017 RPA survey states that  “Business trends are indicating near-universal adoption of RPA in the next 5 years. Average spending among companies surveyed was $1.5 million for RPA pilots and upwards of $3 million for full-scale programs”.

Robotic automation is being used in various departments of the accounting and finance industry in varying percentages. Let’s have a look:-

Departments RPA usage
Accounting and finance 54%
Operational 25%
Human resources 8%
Informational technology 6%
Tax 5%
Internal audit 2%

The value of RPA

RPA improves the correctness of processing transactions, accountability, and productivity. It is widely being used in the accounting and finance departments for a variety of reasons, such as:

Reason #1: The accounting and finance sectors need a higher degree of accuracy and consistency in the workflow across the organization that is quite difficult to obtain from the manual operations. Bots, being a smart workforce, can accomplish these goals with almost nil problems. Outputs produced with automated accounting software are not only accurate and reliable but also quick and time-saving. According to Gartner research, clerical errors within the finance function produces 25,000 hours of avoidable rework, on average, at an annual cost of $878,000. That’s a big amount!  

Reason #2: Transaction processing is the life of accounting. Every transaction step is required to be recorded in the books. Just one miss and balance sheet is tilted. The smallest business venture today holds around 100 plus clients and the larger firms have an even wider client base. Transaction processing is a repetitive task that is highly time-consuming. If operated manually, it leaves accountants or accounting departments with little or no time to handle thousands of consumers’ queries accurately and precisely.

Automation is like rain on a deserted land in this case. Robotic accountants can seamlessly record, analyze, interpret, and update ample transactions of a plethora of consumers. RPA never complains about the repetitive nature of any process. Neither does it give up on getting overloaded with work. Bots increase productivity as compared to the full-time workforce and can run 24 hours a day, allowing organizations to take away the mundane and tedious work from employees and refocus their capabilities to more analytical, higher-value activities.

Reason #3: RPA understands the need to move to a comprehensive system. Making automated tasks process faster is the core requirement of any business system. It also provides a more comprehensive picture of the financial health of the organization and helps businesses make informed decisions.

Reason #4: The traditional system of bookkeeping does not keep up with the requirements of speed and scalability that the finance team needs. Although the disparate methods could render the data needed for reporting, the man-hours still can be utilized for more important works within the organization. RPA helps at a great level in this.

Reason #5: Robots improves the quality of governance by tracking the action of each bot, every access, and every output generated. It then stores those data points on a centralized database. This audit trail procedure enables organizations and auditors to hold concerning parties answerable for the RPA’s actions by analyzing transactions for accuracy or malicious and unauthorized access.

There is a long list of such reasons that favor deploying RPA in the accounting and finance industry. All these characteristics can help in automating the significant number of tasks in back-office accounting and finance functions namely accounts payable, accounts receivable, financial closing and reporting, and so on…

With this information, let’s move on to the next topic!

RPA: A Perfect Match With Financial Reporting

‘Reporting ‘ is generally seen as a difficult chore by the finance teams because of its complex requirements. Most finance teams grit their teeth and shrug when it is the time for financial reporting, considering it as a tedious but necessary process. From a business perspective, reporting tasks like compliance and audit consume plenty of time and resources. Moreover, they include high risks in the case of failure or errors.

However, modern innovations and digital technologies like RPA can automate the process of reporting from start to finish while maintaining transparency and avoiding the risk of manual errors.

Robotic process automation can take over a maximum of the processes. Your finance team determines the parameters – nation, organization, legal entity, period – and the bots take the information there. It captures the information without human intrusion, processes the results, conveys the reports and accumulates the data in the records management system flawlessly, all in a fraction of time. However, companies can include a hand-operated validation action between report generation and the sending process, if they want to.

 Although only 29% of corporate controllers are using it for financial reporting processes, Gartner predicts that by 2020, 88% will use RPA.

“Most controllership processes have clear steps and defined rules,” says John Van Decker, VP Analyst, Gartner. “These manual and repetitive tasks are a perfect opportunity to leverage RPA.”

Reporting- ‘ugh’ Factor For CFOs

Reporting is always a chore for finance teams and CFOs as it takes a mind-numbing amount of focus and massive effort of copying and pasting digits into the relevant columns and rows. It gets on the nerves of CFOs. Here are 5 reasons why reporting seems a burden to the executives:-

Reason #1: Huge Pressure

The amount of pressure for making financial reports more efficient and transparent is the primary reason why it is a burden for CFOs. Since every business or organization wants a better access and transparent insights to reach the right decisions and to evaluate the team’s performance, CFOs are expected to be a strategic advisor to other executives of the C-suite and also improve the insights and flow of information for internal and external users (such as audit committees, supervisory boards, and investors).

One more pressure on CFOs is to generate good ROI for the investments they made in deploying any new technology or resources for the teams. This pressure forces them to make financial reports just to show the metric instead of finding solutions for profit increments within their data. Although accurate financial reports and analysis can uncover opportunities for sales, pricing, and margin improvement, CFOs still face issues. The finance experts end up spending much of their time explaining reports rather than sharing and demonstrating what their findings mean and how the company can benefit from them in the future.

Reason #2: Regulatory Requirements And Deadlines

According to Deloitte’s CFO Signals™ survey, the possibility of new and burdensome regulations is a top concern among financial leaders. It always seems like as soon as the finance team adjusts to new laws, another regulation comes along knocking things off-kilter again. CFOs are being held responsible for external auditor-relationship management. They have to build a strong relationship and communication with them.

CFOs with public companies have to answer to shareholders’ regulations. Private companies have to answer banks and other sources of financial support. In short, they have a lot to manage and it’s easy to mess up.

Reason #3: High-Cost Investment On Technologies

ERP systems are costly and get outdated within a few years. Moreover, they usually never provide required reporting solutions. Since many organizations are still using local ERP and reporting technologies, CFOs constantly struggle with outdated systems and technology for preparing financial reports.

Moving your ERP to the cloud can be the best solution for the organization. Cloud accounting software provides you the most updated and most intuitive version of the software. It allows you to access data, analytics, and findings in one place. Reporting is also made transparent by using cloud-based software.

Reason #4: Excessive Technology

CFOs usually operate various technological solutions to check data and organize their findings. A report from Ernst and Young states that almost 32% of organizations work with at least 16 varied reporting systems. Hence, financial reporting through multiple systems is like a zig-zag path that leads them to make mistakes along the way.

Reason #5: Bad Data

Good data is the fuel that propels the push organizations towards success whereas, bad data can kill finance processes and put all your hard work in vain. It directly influences the organization’s financial reports.

Refraining RPA From Financial Reporting

According to Gartner’s research, finance departments miss the opportunities for efficiencies if they are unwilling to remove humans from financial reporting. Fewer than one-third of finance departments that have deployed RPA  have utilized the technology in conjunction with financial reporting.

Gartner surveyed the use of Robotic Process Automation in finance departments through symposia with more than 150 chief accounting officers (CAOs), corporate controllers, and other accounting leaders to discover the main advantages of implementing RPA within the financial reporting function.

“While 88% of corporate controllers expect to implement RPA by next year, we routinely encounter hesitancies when it comes to applying RPA to financial reporting processes,” said Dennis Gannon, research vice president in Gartner’s finance practice.

“When viewed from a narrow ROI perspective, financial reporting appears to be a low priority compared with other business initiatives,” Gannon said. “The departments that have experimented with RPA in their reporting processes, however, report a series of additional benefits, from less staff time fixing mistakes to more time allocated to higher-value work. The result is typically higher employee engagement and less turnover.”

This detailed analysis by Gartner disclosed three challenges that finance experts encountered when deciding to implement RPA. These are:

  • The reluctance to remove human involvement from the process

RPA, as you already know, is best applied to physical, redundant activities that a human accomplishes with a computer. RPA’s advantages don’t make an impact when it comes to human decision-making abilities that software cannot do.  

“CAOs and controllers we’ve seen overcome this roadblock have created tandem systems set for a limited time,” said Gannon. “This allows accounting leaders to test the performance of a fully automated process against the traditional manual approach and provides proof of the efficiency and accuracy of RPA.”

  • An intuition of low ROI

Most CAOs are forced to prioritize bots-driven activities based on insufficient resources and their role in governing a cost center, where they are always asked to do more with less, to produce a good return on investments. Using a conventional cost-centric ROI process pointed on the full-time workforce’s time-savings tends to deprioritize bots within financial reporting for other business opportunities.

Accounting leaders who fully embrace RPA go beyond simplistic metrics and view the technology as a boost to their employee value proposition,” said Gannon. “Most employees will welcome the opportunity to avoid tedious rework in favor of the more strategic activities that only a human can do.”

Gartner research has found that the average amount of avoidable rework in accounting departments can take up to 30% of a full-time employee’s overall time. This equates to a savings of 25,000 hours per year or $878,000 for an organization with 40 full-time accounting staff.

  • Delay in process standardization before implementation.

The third issue in full-scale RPA implementation for financial reporting is that the accounting experts believe that the process must be standardized before it is implemented. Discussions with CAOs and controllers revealed that failure rate due to exceptions is likely to be high if processes are not standardized before the RPA implementation. Such unrealized failures were regarded as unpredictable and riskier as compared to other automation opportunities due to the risk of missed reporting deadlines or financial misstatements. However, bots can be installed to manage separate steps within a process; the whole process does not require to be standardized for deriving benefit from bots.

“By implementing RPA on the processes that can be automated from day one, accounting teams can immediately free up capacity with a minimum of disruption that typically occurs when new process standards are introduced,” said Gannon.

Conclusion

RPA is the right choice if understood properly. To leverage the robotic process automation for financial reporting that may increase productivity, create efficiencies, and free up resources, organizations must ensure that it’s being used intelligently. Considering RPA risks and controls before its implementation, you can be sure that process automation with bots will certainly make a business grow—instead of putting it at risk. Since this latest technological innovation deployment is fast, accurate, and economical, organizations are swiftly digitizing elements of their business through robotic process automation that is a plus point for CFOs and finance leaders to manage financial reporting chores seamlessly and timely.

 

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