Until relatively recently, finance departments in companies usually performed a back-office role. This was typified by staff members entering manual data related to bookkeeping entries, bank statements, purchase orders, and invoices. In these environments, financial reporting is slow due to manual data entry and productivity being measured by employees' ability to enter a set number of transactions per hour.

However, this view of finance departments is in the process of undergoing radical change. Advancements in technology, mainly related to the cloud, empower CFOs and their teams to take advantage of automation and have most repetitive finance tasks completed by software. A 2017 report from McKinsey shows that close to half of work activities can be automated by technology already on the market. 

These changes are shifting the role of finance departments from purely processing data to becoming a centralised business function, providing intelligence and strategic inputs to the wider business. 

Automate or die

To move away from being a siloed back-office function finance departments must first automate as many workflows as possible. Doing so will allow them to benefit from real-time data and save time and resources from staff members.

The first step to doing this is to incorporate core cloud accounting software. Businesses that have not yet made this move will need to do so shortly due to the government-mandated Making Tax Digital (MTD) roadmap forcing companies to maintain digital accounting records.

Moving to cloud accounting software allows companies to leverage core automation functionality, including posting recurring monthly journals and matching bank transactions to invoices.

Ben Gothard, CFO at Strike, an innovative online estate agency, believes his company must automate wherever possible to be agile.

He says: “We offer estate agency services for free and earn money by helping buyers and sellers in other ways. This business model enables us to sell homes for free, and it doesn’t have room for a back-office processing function. This means it is critical for us to automate whatever processes we can and build a pro-active value add finance function.”

Time saved from moving to the cloud can be significant. Research from cloud accounting platform Xero shows that non-adopter of cloud software spend up to three hours per day on manual tasks. 

Automation can be further leveraged by using third-party integrations with core accounting software to provide features and functionality to remove manual workflows. This includes the likes of receipt capture, expense management, CRM, and payments.

Zapier, a service that moves data between web apps, can provide automation solutions for third parties that do not integrate accounting software directly.  It currently connects over 100 different providers to the main accounting platforms. 

Intelligence-led finance departments

Efficiencies and saved time from automation are transforming finance departments to perform a strategic role centred on analysing data to provide intelligence on a departmental and business-wide basis. This is helping companies be increasingly agile and make decisions to benefit commercial imperatives and fulfill compliance requirements.

Marchela Georgieva, co-founder of Capto, a company that transforms the way finance teams work by implementing automation solutions, says: 

“The rapid development of automation tools and technologies for intelligent visualisation of real-time data has resulted in finance departments being able to delegate many manual tasks to robots, with freed up time and resources being invested directly into their analytical function. An increasing number of companies are using automation and AI-powered solutions to obtain, analyse and report data more quickly. This has improved the quality and timeliness of financial insights exponentially.”

Business intelligence output includes reviewing financial and operational data to finetune KPIs related to revenue growth, customer acquisition costs, and the profitability of different products and services.

Data analytics tools, including Microsoft Power BI, Qlik, and Tableau, integrate with leading accounting providers, alongside other categories such as ERP and CRM apps, to automate data collection and analysis. This is often presented in the form of business dashboards so that finance teams and key stakeholders have a real-time view of the metrics most relevant to them. The speed of data processing provides CFOs with timely insights on business performance, allowing them to respond to trends. This could include increasing spending on a marketing channel with low customer acquisitions costs or purchasing additional stock of fast-moving inventory. 

Skills needs

To meet the demand for interpreting and analysing data, these changes require a new skill set for the finance leaders of tomorrow to develop and thrive.

Dynshaw Italia, CFO at spend management platform Soldo, thinks that data analysis is a challenge for many businesses due to the digital economy leading to an ever-increasing amount of data.

“The volume of data is doubling every two years, and finance teams now have to disseminate the data, interpret the data and present it (data visualisation) in an easy to understand way to enable management teams to make business decisions,” says Italia.

Julie Oey, Finance Director at WeGift, has noticed “many finance specialists learning SQL to leverage data, for commercial analysis but also for more accurate and timely accounting too.”

The need for data analysis skills is highlighted by research from Robert Half showing that almost a third of C-Suite executives have earmarked increased data analytics as a priority focus area for 2021. This is already being addressed by the UK’s accounting bodies, with ICAEW introducing a Data Analytics Certificate Programme to help upskill the profession.

To drive efficiencies and create value, greater collaboration between finance teams and other functions also requires accountants to hone their communication skills. This may present a challenge for hiring managers as many accountants are introverts on the basis of the old way of doing things, being heavily reliant on crunching numbers on spreadsheets. 

Conclusion

The adoption of cloud-based automation tools by finance teams leads to employees providing an on-demand service, empowering them to provide business intelligence on a regular and ad-hoc basis to fulfill the requirements of scaling companies.

To make the most of opportunities, CFOs should seek to automate as many manual processes as possible, connect business applications to accounting software, and recruit staff who have solid data analysis skills.

Running out of cash is one of the most commonly cited reasons for businesses failing. In simple terms, if you can’t collect cash fast enough from customers, you risk becoming insolvent. In critical scenarios, companies end up overtrading and have to be shut down.

The pandemic, and the stop-start nature of the economy, has put cash management under even greater pressure due to uncertainty around revenues and whether customers will be able to pay for all of their outstanding sales invoices. Automation technology is helping solve this problem with real-time insights helping to mitigate financial risk, access fast finance, and manage working capital with trends and predictions.  

Cash is king

The importance of businesses needing to manage their cash flow was heightened during the pandemic, with an ONS Survey from May 2020 showing that almost half of UK firms predicted they could run out of money in six months.  

This pressing issue has also been acknowledged by The European Parliament, who recently amended the Late Payments Directive to give business more protections against not getting paid. 

This is an issue for growing businesses, as well as those suffering from a drop in demand. 

Aarish Shah, Founder of EmergeONE, a business advisory firm for part-time FDs and CFOs, believes growing companies find this challenging due to less certainty of future performance and small cash reserves due to deploying funds to establish market share.

“Growing companies often operate with tight cash so have limited availability to absorb significant drops in revenue inflows, or unexpected costs, especially as they are in many cases aggressively investing spare capital into growth,” says Shah. 

However, the shift from desktop to cloud-based accounting software has made it easier to optimise cash flow by connecting core data to external providers.

Get paid faster with automated invoice chasing

In the UK, the issue of late payments is rife, with data from the government’s Prompt Payment Code revealing £23.4bn of late invoices are owed at any one time. 

Additionally, Intrum’s European Payment Report 2020 reveals that 43% of European businesses experience increased risk associated with late payments. 

Manually chasing invoices is time-consuming (56.4 million hours are spent chasing overdue payments each year), and this time would be better spent on higher-value finance tasks related to data analysis or financial reporting.

However, vendors such as Blackline chase outstanding invoices and erase friction by removing the need to liaise with late payers directly. These solutions leverage real-time data by connecting to accounting software, sending out automated personalised invoice reminders, and providing detailed aged debtor reports. They also flag the increased risk of customers not paying by providing information related to adverse changes to their credit scores.

Benefits of automated invoice chasing include both saved time and increased liquidity from faster cash collection.

Brian Morgan, Director of Product Marketing at Blackline says: “Too much time is spent on tasks that do not drive results. Blackline’s AR solutions automate tasks and allow more (human) time to connect to customers to influence payments being made quicker thus increasing cash flow.”

Instant access to finance 

Accessing finance can be an effective measure to alleviate the burden put on cash flow.

It is now possible to connect accounting software, and live bank feeds directly to the systems of online brokers to receive indicative offers of finance across the market in just a few minutes or seconds.

This functionality has been enhanced by the introduction of Open Banking APIs, which allow businesses to share their banking data with third-party financial services companies securely. 

Whereas traditionally, businesses had to rely on physical paper trails to access funding from their high street banks, new automation tools allow companies to receive finance options from an array of different alternative and traditional providers by making just one application.

“It can take four to six weeks for a loan to be approved by a high street bank, not taking into account the time it takes researching different loan options and lenders. Through the use of data analytics, Open Banking APIs and artificial intelligence in our Funding Cloud Platform, we have seen the time taken from application to approval of a loan down from just under three minutes, to 20 seconds,” says Simon Cureton, CEO of Funding Options, an online business finance price comparison platform. 

Intelligent cash flow forecasting

Intelligent cash flow tools enable businesses to generate more accurate insights around future cash balances, when they are likely to be paid, and the likelihood of needing to plan for short or long-term shortfalls.

Vendors such as Fluidly, Fathom, and Futrli make it possible to pull in the chart of accounts from accounting software and build out forecasts with minimum data entry. Multiple versions of forecasts can be created to cover for a variety of different scenarios. For example, this could include raising equity funding or introducing a new product line. 

AI technology can make accurate predictions based on trends related to when specific suppliers are likely to settle invoices rather than their terms.

Robert Collings, Head of Finance at Flux, says: “AI-driven cash flow management solutions can provide an early warning signal of a potential cash-flow gap which prompts the finance team to review in more detail. Team members can then take a more detailed look and work out how to fill the gap.”

Conclusion 

The tricky issue of managing cash flow is unlikely to go anywhere. However, CFOs should adopt automation tools to flag risks of non-payment and cash deficits before cash balances are put under severe strain leading to additional funding being required. 

The coronavirus crisis has prompted most organisations worldwide to spend big on automating their financial services – but only a tiny fraction have upgraded their accounts receivable processes. Today, with the advanced technology and pioneering tools available, those who fail to automate their AR processes miss a golden opportunity to empower the finance teams and unlock the cash held hostage.

In November 2019, months before the pandemic hit Europe, PricewaterhouseCoopers calculated that a staggering $1.2 trillion of excess working capital was tied up on global balance sheets. While there is clearly a latent opportunity to free this enormous amount of cash, ahead of the coronavirus crisis automating AR operations was not a priority for businesses.

Back then, the reluctance to focus on upgrading AR processes for the digital age was, to an extent, understandable, given the ease of borrowing for businesses. Now, though, organisations realise that optimising these processes has never been more critical. A recent Institute of Finance and Management survey suggests 55% of finance leaders are less than satisfied with how their company’s AR procedures have performed during the recession. And over half (52%) say that too many manual processes is the biggest weakness.

The combination of the lines of credit being significantly compressed and the increased demand to have cash more readily available – to drive innovation, boost agility and strengthen resilience – has elevated the need to embrace AR automation.

Historically, solution vendors possibly didn’t know how best to positioned the value and business benefits of automating AR processes. It’s so easy to pigeonhole AR automation as a single process primarily about headcount reduction and driving efficiencies. While these points are valid, there is so much more from which to benefit. 

Articulating the benefits of automating the AR process

Presenting the point that “if you deploy a technology like ours, you can reduce your headcount from, say, 16 to five people” does not go far enough – there are so many additional advantages now. However, if we reframe the case for AR automation, it becomes so much more compelling.

For example, a large, global B2B manufacturer with a high volume of low-value invoices might offer 30-day payment terms. Each day is worth $150 million, so customers paying 63 days late means $9.5bn late and at risk.

Not only is this woefully inefficient, but there is also friction generated between the increasingly frustrated finance team and the customers whom they are chasing for payment.

Deploying technology like BlackLine enables that cash to be collected and applied much faster, giving access to cash quicker, reducing the need to borrow to cover working capital exposure and tightens customer relationships. Ultimately, through artificial intelligence and machine learning, automating that process will enable businesses to unlock the cash held hostage.

More than that, investment in AR solutions starts a virtuous circle: the business becomes more agile, innovative, and resilient – all essential elements for organisations seeking to thrive in the coming months and years – because the cash is available. 

Looking at the broader picture, it’s a fallacy that robots are taking our jobs. On the contrary, they are enhancing and improving them. Humans are empowered to make smarter, data-driven decisions. And at BlackLine, we are transforming the relationship finance teams have with technology.

According to Adobe’s Future of Time study, published in late August, UK business employees waste more than a day a week on low-value tasks that should be automated. So much so that almost two-thirds (59%) of respondents are seeking new jobs with better technology to reclaim work-life balance.

Automation propels finance teams from the back office to driving strategy 

Indeed, the reduction of repetitive manual tasks transforms finance departments to be more human and less robotic – they become enablers rather than blockers. Automating the AR process means that risk is easier to manage. 

For instance, BlackLine AR Automation solutions put key information at the fingertips of organisations – from live payment data to debtor performance – so teams can quickly identify customer trends and maximise cash and debtor performance metrics.

It also helps to optimise relationships with customers. Access to and analysis of the data provides a markedly better understanding of customer behaviours, allowing the finance team to be more proactive, and helpful, when engaging. For example, how and when are they paying? What levels of credit are they on? With managing existing customers and looking for new customers crucial for growth, deepening these relationships is vital. 

Further, when supported by automation and data-hungry AI algorithms, finance teams are propelled from the “back office” to the heart of the business, driving both value and strategy.

Automated solutions, such as BlackLine’s, instantly improve a business’s cash flow, better protect revenue, and boost working capital and customer-centricity. We know what customers need to thrive in the digital age. Armed with our expert help and pioneering tools, they can unlock the cash held hostage while empowering their finance teams. Organisations that prioritise automating AR processes today will win tomorrow.

Small steps to accounts receivable automation – but large rewards

1. Understand that business outcomes are being challenged, unnecessarily. In 2019 PricewaterhouseCoopers estimated that $1.2 trillion of excess working capital was tied up on global balance sheets. A more recent IOFM survey suggests days sales outstanding (DSO) has increased by 59%. Additionally, PYMNTS’s B2B Payments Innovation Readiness Playbook shows businesses that rely on manual AR processes often have a 30% longer average DSO.

2. Most AR processes are not fit for purpose – so say finance leaders. The IOFM survey finds that 55% of respondents are less than satisfied with their AR operation. Over half (52%) report that too many manual processes are the biggest weakness. Further, only 23% have utilised some kind of cash application automation. Notably, the lowest number of days taken to collect debt for those businesses using AR automation is 12.

3. Realise the potential of automating AR processes. Organisations that have upgraded to BlackLine’s AR automation solutions all report huge – and immediate – benefits. “You can reduce your costs by at least 75%,” says the head of credit, Atkins Group. Meanwhile, Veolia’s UK credit manager says the solution “has allowed the credit controllers to focus on collecting cash and managing risk”.

4. BlackLine AR Intelligence delivers real-time insight into customer financial behaviour to mitigate financial risks and improve cashflow and working capital performance. With cash flow vital to every business, AR automation is a future-proofed solution.

The argument that robots will replace human jobs misses the crucial point that machines empower workers with a pulse. It has been this way for hundreds of years – since the original industrial revolution in the mid-18th century when the Luddites, led by Ned Ludd, a Leicester weaver fearful of change, attacked factories and their owners. However, it soon became obvious man worked much better alongside machine.

Now, as we stride into the fourth industrial revolution, which uses modern smart technology to automate traditional manufacturing and industrial practices, robots are taking over more menial, repetitive tasks. This capability frees up workers to be more human. For finance teams especially, this automation of processes enables them to be more human and drive value and strategy – here follow five ways how.

1. Paper processes are old news

In the finance world, paper has been essential for centuries – but in the digital age, we can speed up processes, and save the trees, argues Nitin Purwar, India-based industry practice director of banking at UiPath. “Within finance, data-intensive and repetitive tasks are commonplace,” he says. “Often further weighed down by legacy systems, paper-based documents and unstructured data, these processes can take up a large proportion of a professional’s day.”

Purwar argues that “this work isn’t what humans are best at and often isn’t what we enjoy doing. By automating these processes, finance professionals can be freed to spend more time on value-added, strategic activities that require judgement and skill, thus enhancing the employee experience all while saving the department time, money and improving the accuracy of processes.”

2. Manual ways of working are highly inefficient – and a turn off for talent

Businesses that embrace automation stand to gain a competitive advantage – not least when it comes to attracting and retaining talent. Adobe’s Future of Time study, published in late August, finds that UK business employees waste more than a day a week on low-value tasks that should be automated. Tellingly, almost two-thirds (59%) of respondents are seeking new jobs with better technology to reclaim work-life balance.

Purwar from UiPath uses an example to explain the benefits of automation in this regard. “One infrastructure solutions firm we work with used to process all invoices manually, printing, signing, scanning and uploading 400,000 invoices a year. Now, a robot affectionately named Archie processes all invoices digitally, freeing up on average 11 minutes per invoice of time that employees can now spend focusing on value-added tasks instead. That amounts to thousands of hours per year saved.” 

There is more potential to realise, which is why organisations should double down on automated solution. Kevin Kimber, managing director of global accounts receivable at BlackLine, suggests that while many businesses seek robotic process automation, now “advancements in artificial intelligence and machine learning take what is possible to the next level”.

3. Financial leaders can show their human skills and improve collaboration

Ash Finnegan, digital transformation officer at Conga, which provides commercial operations transformation solutions, points out that the pandemic has forced financial leaders to show their human sides and manage change.

“Out of necessity, most digital transformation journeys have been accelerated, with artificial intelligence being a major focus,” she says. “Financial leaders have invested heavily in AI and wider automation technology, entirely restructuring their back office to deliver their services remotely.”

Neil Murphy, global vice president at ABBYY, a digital intelligence company, posits workers who embrace automation can “work more efficiently, collaborate better, and ease the burden of administration in their day-to-day roles. Deploying AI-powered robots gives this opportunity, gifting finance teams more time to focus on more creative, problem-solving tasks and alleviate the pressure. Now more than ever, it’s time to put the human touch back into the finance.” 

4. Automation elevates financial professionals to become trusted advisors

Glen Foster, director of small business and partners at accounting software company Xero, says “time truly is money” for financial professionals. Xero data shows these workers can use up to 30% of their time on manual data entry – equivalent to 1.5 days a week.

By contrast, automation and digital software can free up most of that time. “Cloud accounting tools allow you to automate time-consuming tasks like data entry, bank reconciliation and payments so that you can spend more time advising, analysing data and focusing on growth,” he says. 

“Providing advice and insights on financials is more valuable to clients and businesses than manual, repetitive data entry skills. This ultimately sets accountants and finance professionals up as trusted advisors.”

5. Improve relationships with customers – and add value

A FreeAgent survey from 2020 calculated that 81% of accountants have discovered that using automated software has freed up an average of two working hours a week. The same report states  that this time saved could generate an additional £68,000 in revenue a year.

John Miller, chief operations officer of Addition, a London-based financial services firm, adds: “Automation has allowed humans to do what they do best: offer advice to the client, knowing that the routine tasks are done robustly and accurately.”