Over the past couple of decades, technology has proved a major disruptor across multiple industry verticals, including those related to banking, finance and accounting. In each use case, innovative technology has brought about both tangible and non-tangible benefits to its users as well as customers of the industries where it gets used. In the field of finance and accounting, the outcomes have covered the entire spectrum that spans across the most magnificent to the most subtle. Collectively, these benefits have made the industry more efficient, more effective and very decisive.
Remember the early 1990s when we manually prepared our accounts – the ledgers, the trial balance, the balance sheets that included profit-and-loss statements? It used to take days and weeks of reconciling – a term used to checking for data errors and correcting them. A decade down the line, ERP solutions came calling and the finance department let out a collective sigh of relief as the amount of manual labour reduced dramatically. However, these teams continued to rely on spreadsheets to reconcile and finalize the accounts. The human error element wasn’t getting fixed.
Automation is at the core of these changes
Over the past three to five years, there has been a fresh round of disruption. We have technology helping us remove most of these manual processes that generate human error. Documents are scanned and accounted automatically, auto-suggestions are made for accrual entries and the balance sheets and profit & loss statements are available within 24 hours. The arrival of blockchain technology further revolutionized accounting. Digital ledgers offer accountants a secure, transparent and reliable way of keeping and updating records on a daily basis. It’s real-time accounting, if ever there was one. As for security, digital ledgers with blockchain technology makes it watertight as it restricts unauthorized interventions and alterations.
A major benefit from the above technology disruption came in the form of freeing up human effort and reorienting them towards a more strategic role of helping the business leaders take decisions based on data and analytics post the digital transformation of the finance department. Robotic process automation removed repetitive entries while the Bots did all the reconciliations. Moreover, the availability of real-time analytics meant that decision-making became completely data-driven. The arrival of multiple data modelling samples and sensitivity analyses made it possible to simulate several “what-if” scenarios to provide CXOs with more options while taking important decisions.
Data from automation and its impact on decisions
The process of quote-to-cash and procure-to-pay is another segment that technology streamlined. Now the whole process starting with a sales lead, moving to a formal proposal and its conversion into a deal followed by execution, invoicing and cash collection is now automated. Not only can the whole process be tracked now, it helps provide valuable data insights around lead times and sales probabilities. These data points can be extrapolated using data analytics to understand and improve success rates with an optimal sales team. Moreover, the automated invoicing and electronic dispatch and follow-ups resulted in tangible benefits in cashflow management and DSOs, as did RPA-based reconciliations that ensured faster dispute redressal. The blockchain-based customer fulfilment systems enabled transparency and accountability for the company and its customers.
The procure-to-pay automation has helped cost optimization through a data-driven understanding around pricing and payment trends. The process also enhanced efficiencies and transparency, while the blockchain-based vendor management process brought stakeholders on a common page around their invoice status, accounting and payment schedules. Also, the use of optical character recognition (OCR) meant that all manual records / documents got converted into digital data that hastened the pace of payment & accounting and made the entire audit and compliance bits error-free.
Making audit and compliance easier
In fact, in this entire story around technology disruption, the biggest beneficiary has been the financial audit business. Digital records helped auditors utilize technology to pinpoint probable irregularities through a scientific sample section process. Blockchain records simplified the procedure around audit trials and account analyses which meant that auditors no more needed to send large teams to their client enterprises to pour over records for weeks and months. Most of the work now happens at the click of a few buttons on an electronic keypad on software linked to the client accounting systems. So, all that an auditor does is seek out exposure areas and do a surgical deep dive!
Enhanced efficiency, improved cost effectiveness and timeliness of data could be the three areas where this technology transformation had the biggest impact. For example, today an employee can get reimbursements done with the click of a few buttons – submit the claims and bills, track their progress and receive an alert from the bank when money is deposited. This is made possible through processing systems that convert the bills digitally, make the relevant account notes before auto-routing it for approvals and audit. Errors get minimised in the process that uses RPAs to reduce manual interventions. Thereafter, blockchain creates full transparency and accountability, helping companies hasten their book closures.
There are challenges, but they’re surmountable
Of course, amidst all these development, there are a few challenges too. The biggest is the need for a change in mindset over technology itself. Awareness of the new systems and a constant desire to learn and upskill become critical for any successful adoption of technology and its implementation. This is where the education system plays a significant role of adding knowledge and skills on emerging technologies into the curriculum. Another challenge relates to data security as the threat of cybercrime is undulating. Companies need to make adequate investments to offset cyber threats and continuously upgrade them as well as the available skills in their respective IT departments.
These challenges can be overcome with a bit of planning and the right quantum of investments as the benefits of technology disruptions, both in terms of their costs and efficiencies, far outweighs the limitations that they carry along. Implementing Big Data, Cloud, RPAs, AI and ML are clearly going to be the norm going forward as the world seeks a more efficient finance and accounting ecosystem. The only question that we need to ponder over is: How fast can be gear up and how quickly can the solutions be implemented or used effectively?
By- Srinath Kamath, Industry Leader- Information Technology, Practus