Automation in Finance: Here’s What CFOs Need to Know

By Henri Taipale, Founder and CEO of Qvalia 

Financial transformations are a huge step for businesses, but how can you turn your ideas and goals into tangible action? Implementing financial automation is a strategy many fiscal departments attempt. If you want to do it right, it’s not too difficult as long as you have the right foundation.

Digital transformation has become a business buzzword in recent years. But how important is a digitization strategy anyway, and how can you perform it for your company without sacrificing efficiency and security?

Digital transformation in finance involves turning typical business operations like sales and paying expenses to online or digital forms. It’s easier than it sounds, and the resulting increased efficiency and accessibility make the process worth it for most organizations.

Still, it’s worth knowing how to approach digitization to minimize the impact on your IT or financial teams. Preparing well puts you at an advantage compared to most CFOs.

The Components of Finance Automation

A successful automation strategy requires the right building blocks. Always start your automation strategy with digitization, but ensure that financial teams still have control over transaction data throughout the process.

As a CFO, ask yourself the following questions:

• How do you generate financial data?
• How do you process transactions?
• Do your actions fall in line with the organization’s goals?

Remember, quality data gives you quality results. Likewise, you want your automation strategy to provide you with better efficiency and actionable insights. Implementing this type of system may even lead to the development of new business models, and is the starting point for a successful digital transformation.

• Step 1: Assess Your Company’s Automation Potential

Digitization technology enables companies to stay competitive in rapidly changing business environments. However, not all transformations work for all cases. Financial teams must understand the data they’re working with and how they plan to automate it.

CFOs already have comprehensive knowledge of transactional data. Thus, a digital transformation often begins with a CFO. The first step is to analyze the potential for automation:

1. What can you automate? What are your goals with this project? What percentage of your data is analog? Do you need to transform your manual account entries, your invoices, or anything else?
2. What type of invoices are you using? Converting paper or PDF invoices to a digital format reduces your risk and increases the visibility of essential data. A comprehensive automation system needs financial digitization.
3. How do you distribute sales invoices? What percentage of your orders are online, and which ones are done manually?

• Step 2: Improve Digital Inputs

You need contributions from multiple team members for a successful digital transformation. Plus, your suppliers need to be on board to support the changes. This latter part is where most of the risk is, as your business relationship with them might drop at any moment.

In response, you should incentivize suppliers to adopt e-invoices and join your digital transformation initiative. Take the time to:

1. Identify the formats of data you rely on.
2. Determine the most crucial information for your procurement and accounts payable processes.
3. Communicate with your suppliers and encourage them to adopt e-invoices.
4. Update software systems to contribute to your digitization.

• Step 3: The Right Approach to Financial Automation

Any automation effort requires high-quality data, and online invoices are the fastest method of getting it.

While AI and RPA technologies are useful for dealing with repetitive or structured jobs, you need another solution for the tasks involving deviation. Think about the specific areas you can improve in and determine how your data is being processed to find where automation shines the most.

1. Analyze how your company analyzes transactional data, including the entire process from input to output.
2. Chart your workflows. Use visuals to illustrate potential problems in optimization.
3. List all the software you use. Every system increases your chance of damaging your data, so think about what you can do to minimize cost and risk.
4. Determine the challenges. List all the organization bottlenecks, costs, and risks involved in your digitization journey.

• Step 4: Get in Touch With Suppliers

Finally, you need to clean up and organize your data. For instance, aim to optimize your supplier registry.

1. Inspect how you manage a supplier ledger. What roles, processes, software, and other touchpoints are involved?
2. Determine which suppliers are “active.” Establish empirical criteria for determining which of your suppliers are currently active with your company.
3. Use those criteria for updating the status of your suppliers. Perhaps a supplier might become inactive for some time. Keep your records up to date.
4. Assess financial risks regarding suppliers. Red flags include poor credit ratings, insolvency, ignored due dates, and inconsistent transactions.