CFOs have always been interested in improving the way their finance department works because the impact on the rest of the organisation is so massive.
Positive benefits include better cash flow management, smoother payment of invoices, easier and more accurate regulatory compliance and, above all, more up-to-date information that managers can use to drive market share and profitability.
A key enabler of finance department efficiency is the automation of its processes. Accenture suggests that 80% of finance processes can be automated, with the result that documents are much more accurate because manual input is minimised or eliminated, and finance professionals find themselves with more time to perform work that adds value.
Given the benefits, it’s astonishing that more South African companies have not implemented the automation of their finance processes. On the one hand, many cite budget issues, while others express concern about potential job losses. Overall, it seems as though “if it ain’t broke, don’t fix it” prevails.
That won’t cut it anymore. Business as a whole is digitalising rapidly, and with competitors actively pursuing the gains associated with financial process automation (FPA), there is every indication that 2023 is the year when even mid-market companies begin to move in this direction. Trends supporting this move include:
Hybrid work styles. The remote work of the hard lockdowns ushered in a permanent new work style combining remote and on-premises working. Because finance departments deal with multiple types of documents − many paper-based − automating their capture is critical for enabling the productivity of remote workers.
Data emerges as a critical success lever. Digitalisation is generating huge volumes of valuable data that smart companies are using to mine actionable insights. Finance, which touches every part of the organisation, is under particular pressure to provide accurate, timely information that can assist managers to make better decisions. Economic headwinds, not the least of which is inflation, and geopolitical uncertainty mean that managing cash flows accurately in near-real-time, avoiding penalties, ensuring the best payment terms, financing the supply chain and managing working capital, are all very much on the CFO’s agenda. Automation not only means that finance’s reporting is radically better, but that it is accurate because it minimises manual inputting, a significant cause of inaccuracies.
Given the benefits, it’s astonishing that more SA companies have not implemented the automation of their finance processes.
Supply chains are a key issue. COVID-19 and the Russian invasion of Ukraine have driven home the importance − and fragility − of supply chains. Automated and thus smoother issuing of purchase orders and processing of invoices support stronger relationships with suppliers who are now holding the balance of power.
E-invoicing is becoming more prevalent globally. Some 50 countries have issued some sort of e-invoicing mandate, and there is no doubt that any company dealing with international suppliers or customers will increasingly have to be able to e-invoice. E-invoicing is not only more convenient, it’s also an important tool in the combatting of fraud and money-laundering, something that’s very relevant in a country that has recently been greylisted by the Financial Action Task Force and is beset by corruption on an operatic scale.
E-invoicing is becoming more popular in South Africa but SARS has not yet mandated an e-invoicing model for the country. However, it has implemented rules relating to how VAT-registered businesses must use e-invoicing. VAT-registered companies must submit their returns electronically and provide invoices as supporting documents.
Automation is becoming more practical and affordable. A new generation of automation platforms and a solid body of knowledge is making automation more realistic for even mid-market companies. And as take-up continues, prices inevitably come down. In addition, the availability of virtually unlimited processing capabilities on demand in the cloud is opening up the possibilities of automation to a greater number of companies.
Finance is increasingly adopting a customer-service mindset. This point really flows on from the earlier discussion about the increasingly important role that accurate, timely financial data is playing in supporting better decision-making. In parallel, finance processes have become much more visible to the rest of the organisation. In short, finance is no longer a black box, and as it emerges from the shadows of the back-office to become a key collaborator of multiple business units, a high proportion (70%, according to Ardent research) of companies believe a customer-service mindset is essential.
The business case for FPA is compelling from a number of perspectives. Digitalisation is being rapidly adopted across business and is now seen as essential to business survival by 27% of managers, and 70% of organisations are using technology to simplify workflows and manual processes.
Digitalisation is so valuable in large part because it enables the automation of many processes. Smart companies use digitalisation and automation first to streamline and optimise their existing business processes; as a result, their skilled financial staff are freed up to do more valuable work, either within finance or elsewhere in the company.
Perhaps most important of all, automation delivers what business now sees as one of its most important assets − good-quality data that can be used to support better decision-making across the organisation, and cement better relations with suppliers, customers and business partners.
In my second article in this series, I will explore the benefits to be obtained from FPA more closely, dispel the myths about job losses and look at how to go about it.
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