Plugging the finance automation gap

By Shak Akhtar, SVP Finance Automation and Customer Experience Officer

The automation of finance processes isn’t new. But there is a huge difference between the perception of how much of the work involved in managing and executing these processes has actually been automated today and the reality. Despite the widespread adoption of ERP systems that were supposed to take away this burden, 4 in 5 finance processes are not automated. One has to question, why is that?

While an ERP system and other technical tools appear to promise finance automation across core areas such as record-to-report and accounts receivable and payable, there remain significant gaps across these complex finance processes. Those gaps mean work still needs to be done manually outside of those ERP systems, and additional tools or extensive ERP customisation are required.

Most companies use a significant number of tools for finance automation but the applications are limited to specific processes or tasks. The scope of these tools is overlapping but there are still significant gaps, and ongoing maintenance and operations are expensive and complex too.

The result is a compromise – either by accepting a lower level of finance process automation and having to fill the gaps with manual work, or by incurring extra IT effort and cost in custom development and additional tools to try and fill the gaps. What is missing from both of these approaches to really plug this gap, however, is a comprehensive automation platform across all finance processes and tasks.

Three causes of automation gap

1. An ERP alone can’t handle all finance processes

ERP systems, such as Oracle and SAP, are the engines of the business and underpin finance processes. But it’s a long-held misconception that going through the pain and cost of implementing an ERP system across a business will solve all financial efficiency and automation problems. The reality is that there are parts it cannot reach.

For their many powerful capabilities, ERP systems are designed to support rather than eliminate manual tasks. In fact, even the most optimally configured ERPs create manual effort rather than eliminate it. For example, there are very few functions that automatically create and post journals within the general ledger. Similarly, very few ERPs have effective automated cash allocation functions in accounts receivable and there are limited automated reconciliation functions for intercompany and balance sheet.

2. The inherent complexity of finance processes

Most finance processes require people to perform many activities in and around their ERP. There can be multiple sources of data required that sit outside of the ERP. And this data is often not in the correct or consumable format. This requires heavy usage of spreadsheets in the extraction, transformation and consumption of the data within a finance process. Rules required to process the data are also not governed by the ERP, which means how the process is executed can vary dramatically from one company within the group organisation to the next.

And yet the actual components required to perform these and other activities are very similar. Looking at the various finance processes from a technology perspective, what is really needed is a uniform solution that allows the finance function to configure its business processes in the way they need to be performed – without having to acquire a mixed bag of point solutions that adds to an organisation’s technical debt, cost and complexity

3. RPA and other add-on tools have failed to plug the gap

Common tactical approaches to tackling the inflexibility of ERP functionality include point solution tools or ERP customisation. However, this legacy thinking simply creates additional cost and complexity. The cost of ownership, resilience and support challenges are why most CIOs don’t advocate bespoke changes to their ERPs these days.

Instead, most organisations turn to additional best-of-breed point solutions or robotic process automation (RPA) tools to try and plug the automation gap in their finance processes. This has spawned a huge market in add-on solutions developed by third parties to extend ERP functionality and automate specific functions, such as balance sheet reconciliation, cash allocation and journal uploads.

The perception is that these add-ons will pay for themselves through productivity gains and are simple to deploy. The sales patter will assure that deploying the add-on will require little more than minimal reliance on an organisation’s already stretched IT department.

The reality, however, is that these add-ons provide a plaster at best. The cost of deployment and ongoing operational costs of add-ons is often underestimated, rarely factoring in costs associated with change management, testing, training and ongoing support. There are other issues to consider too. Some add-ons require data to be duplicated from the ERP, creating additional manual effort, particularly relating to data synchronisation and yet more reconciliations.

Restore control to the finance function

The finance industry is ripe for change. 2021 will be the year that every company — not just the 15% of firms that were already digitally savvy — doubles down on technology-fuelled experiences, operations, products, and ecosystems.

By seeking opportunities to transform the finance function using robust finance automation solutions and other enablers, businesses will ensure they are plugging the gap to build resilience and preparing for tomorrow.