By Carlos Quintana
The race to automation is already here and you better start running if you want to be prepared for the future. Are you wondering how to embrace automation and why you should do it?
If you are, you need to do three things. First, you need to understand the nature of the ongoing technological revolution. Second, you need to know where the world of finance is heading. And, third, you need to take some specific steps that will help you to start running this race and invest in the right solution for your business. Let’s see all this in detail.
Today’s technological revolution: What is it really about?
If you want to automate your business, the first thing you need to understand is the nature of the technological revolution we are witnessing today. To begin with, automation is only one of the many components of this revolution. In fact, one of the most prominent features of this revolution is that there are many kinds of technologies converging at the same time. Some of those technologies include cloud platforms, Artificial Intelligence (AI), robotics, advanced analytics, machine learning, and cognitive, just to mention a few.
However, it isn’t just about the number of technologies that are coming together but also about the speed and pace in which those technologies are evolving. This pace is, indeed, unprecedented in history and we are living in times where some of those technologies can easily grow exponentially in just a couple of years.
Considering all of this, we are facing a technological disruption that is already transforming businesses around the world. In fact, this dramatic change is seen as a new industrial revolution that is going to affect every aspect of the business organization, including the finance department.
In spite of its impact, this technological revolution is still in its initial steps. As explained by Todd Lohr, principal in KPMG’s Technology Enabled Transformation practice, in an HBR webinar on AI and the CFO’s agenda, most of today’s companies are still using basic automation technology. In particular, companies are using rules-based technology such as workflow automation and the most recent robotic process automation (RPA) to replicate how people interact with technologies.
Along those lines, and according to a survey featured on Deloitte’s report From Mirage to Reality: Bringing Finance into Focus in a Digital World, several companies have already implemented or are currently implementing foundational tools such as cloud-based accounting solutions, budgeting, forecasting and reporting tools as well as data analytics and visualization. “Based on the survey results, automation will become a reality for organizations once they implement these foundational systems,” concludes the report.
There are some companies, however, that are already moving into the next phase of this revolution with enhanced automation and solutions based on machine learning and pattern recognition. In general terms, this technological revolution is moving from basic automation solutions that act like a human to more advanced solutions that think like a human.
While this technological disruption is largely seen as an opportunity by CEOs and CFOs, there are also some concerns. The first one, of course, is about how to choose a particular technology and how to integrate it into the daily operations of an organization, its finances, decision making, reporting and FP&A processes. There are also concerns in terms of the lack of skills that companies have today to deal with this kind of technology, the dramatic pace of the current disruption and the inability to adapt quickly, and the overall costs associated with all this technology.
Finally, there are also some barriers in terms of the adoption of this technology. According to an EY CFO Survey, “the biggest barriers to finance driving sophisticated, real-time data analytics are: “a culture of reporting the past, not predicting the future” (25%); “lack of urgency, with decision-making weighted toward intuition over data” (23%); and “data security and privacy concerns” (23%).”
The future of finance and the CFO
In spite of all the concerns and barriers we just mentioned, the financial world is going to be heavily transformed by all this technological disruption. According to the Deloitte survey, “financial reporting, operational accounting, and general ledger and close accounting would be the tasks most impacted in the next five years, which is indicative of an enterprise transformation as these are the main foundational areas across finance.”
This disruption also means a new agenda for the CFO and the world of finance. As stated by Don Mailliard, KPMG’s Corporate Services lead, in the HBR webinar mentioned before, this agenda will be shaped around the following four elements:
Insights and analysis
Skills and talent
In terms of extreme automation, the financial world is already adopting very specific technologies. “Right now we are already seeing the move to the cloud ERPs, RPA (Robotic Process Automation) being used heavily in the finance organization predominantly for some clerical and pretty basic transactions and processes,” explains Don Maillard.
Next to that process of extreme automation, the area of insights and analysis is the financial area that is going to gain more value as a result of the current technological disruption, especially as it continues to move from descriptive analysis (what happened?) to predictive ones (what is going to happen?).
Because of those changes, and the fact that clerical work is going to be automated, there is going to be a reduction in terms of people in the financial unit, which implies some important attention to organizational simplification.This doesn’t necessarily mean that machines are going to replace humans but rather that they will help humans to work better and add more value to the organization.
In order to add that value, CFOs and finance professionals will need to update their professional skills, especially in terms of data analysis and strategic thinking. “We are going to grow and see more analytical skills, we are absolutely going to see data modeling skills, we will see data scientists in the financial organization,” explains Don Maillard. Updating those skills and talents will be a crucial step to take in order to move from descriptive analysis to predictive ones.
Considering all of the above, financial departments will move towards a more strategic role within the organization. This will have an enormous impact in terms of the structure of finance because we will see fewer people taking care of foundational and transactional tasks and more people delivering insights and contributing to the decision making process. In other words, there will be an inversion of the traditional pyramid that defines finance today.
4 steps for embracing automation by finance teams
As we mentioned before, one of the biggest questions that CEOs and CFOs are asking themselves today is this: How do I bring all the technologies we have previously mentioned into my day-to-day finance processes? What kind of investments should I make? The answer is actually quite simple: it depends. “Every company is going to have a very different path,” argues Todd Lohr. However, if you want to effectively tackle this fast race to automation, we advise you to implement the following four steps.
1. Start your journey from your business strategy
When investing in automation and all the surrounding technology, every company should start from its business strategy and operating model. In other words, you need to evaluate your needs and see what is the technical maturity and prevalence of the technologies that are currently available in the market. You need to define how you want to navigate throughout this disruptive world.
2. Make sure your company is data-enabled
All the technologies that we have mentioned throughout this article relied on data. Because of that, and regardless of the kind of technology you want to invest in, you need to make sure that data is gathered correctly. “You need to start thinking today about how you are going to put your data in a way that you can take advantage of,” argues Todd Lohr.
In fact, some of the companies that are struggling in this race to automation already have the technology they need in place but their data is not organized enough to analyze. As stated in the Deloitte report, “successful automation depends on a reliable, clean data infrastructure that is often a challenge in many organizations, especially when an organization has been using the same ERP system for more than 20 years.”
3. Jump into the extreme automation journey
As we mentioned before, extreme automation is one of the most important elements of the future agenda of CFOs and finance departments. Because of this, we advise you to choose a standard solution that allows you to jump into the extreme automation process now. “Cloud platforms in the finance area from ERP and EPM are pretty much becoming the base line and integrating RPA into those processes are also becoming fairly standard. If you are not there yet, your initial step needs to be a move to that first step in the extreme automation journey,” suggests Don Maillard.
Furthermore, if automation is still out of your range, you should definitely get some of the foundational tools and solutions that will help your company to embrace more advanced automated processes in the future. For example, you could consider investing in a project time tracking system with automated reporting and API integrations that not only allows you to automate some of your most clerical tasks but also provides you with useful insights for your decision making process.
4. Incorporate finance into your strategic process
Finally, you need to look at finance in a different way. Even if we are still in the initial steps of this technological revolution and most of today’s financial departments are still gathering data to elaborate descriptive analysis, the future will be dominated by predictive analysis and financial units with a more strategic role. “If you are not moving from the scorekeeper to the strategist, you are almost going to become irrelevant to the organization,” warns Don Mailliard.
Because of this, you need to analyze what finance is doing for your organization right now, what kinds of tasks you can automate, and what kind of skills you need to bring into your organization in order to help finance to become the strategic unit you need for your business.
Automate for the future
As we have seen throughout this article, automation will be crucial for the future of the finance organization. If you decide to wait or stay away from the current race to automation, your business will miss all the benefits that come from it. If you want to improve your reporting capabilities, enhance speed-to-value across your organization, make better investments, improve the skills of your workforce, gather better insights, and make better decisions, you need to automate for the future. We hope this article gave you some insights about how to do that.