Automation holds the promise of real value for finance leaders and their departments – provided best practice is followed.
No matter what part of the organisation you care to mention, across multiple sectors, all one seems to hear at present is the promise of automation. While there is inevitably a lot of hype associated with any new technology, there’s no doubt that a carefully designed automation programme has the capacity to revolutionise the corporate finance department.
I can vouch for that, because I’ve not only helped many clients achieve good results, I did the same in my own company.
In cases like these, the initial driver is frequently related to cost and efficiency, which are so often intertwined. But, and this is particularly true when it comes to finance departments, change carries with it significant risks. Based on my experience, I want to look at what the risks are and how best to mitigate them. But first we need to explore why such an effort is worth undertaking in the first place.
Two key drivers for considering automation are accuracy and efficiency. On the accuracy front, it is surely a given that getting the figures right is mandatory. And yet many finance departments, as ours used to, still have manual processes to transfer data from one system to another – for example, from the sales application into the invoicing one, to name one. Manual processes like this are both time-consuming and boring. More worryingly, of course, they allow human error into the process, with predictable consequences.
The pressures of month/year end
Efficiency is also critical, because much of the finance department’s activity tends to be concentrated over certain periods, such as month or year-end. Frenetic activity is a feature of many finance departments over month-end, rendering the manual transfer of data even less reliable. Automating the transfer of data between systems can save what seems a relatively small amount of time: in our case it was a saving of 90 minutes. But on the busiest day of the month, that was simply priceless.
These aren’t the only drivers. Automation also removes a great deal of the “key-man risk” that bedevils these part-manual processes. It also eliminates the over-reliance on spreadsheets and all the risks attendant on multiple versions of the “truth” floating around the company.
Cost reduction is also a significant factor. As part of the automation exercise, it is necessary to look at the existing systems in great detail and it often turns out that a lot of the functionality needed for the automation is already present in the company’s existing software. It may also emerge that certain programmes are not fit for purpose and a better one needs to be chosen.
A major factor in our process was whether the systems could be made to talk to each other or not. When we automated our finance department, we had to replace some applications and find out how to use others better, but in the end, we were able to realise considerable savings while improving the performance of the department on all fronts.
Another major cost reduction is that the elimination of manual processing reduced the required staff complement while, as noted, generating substantially better outcomes.
Lessons learned
Based on our experience, the following factors should be carefully considered:
- Take an incremental approach. As noted, changes in the finance department are inherently risky.
- Plan carefully. An extremely granular approach is necessary. It is critical to understand exactly how the finance business processes work and what the data flows are. The automation project will run into snags if it doesn’t take into account the interdependencies between systems and processes. The recommended incremental approach would obviously underpin the plan.
- Understand what you are automating. It’s key not simply to automate the existing processes but to optimise the processes first, based on the careful analysis conducted in the previous step.
- Get buy-in from the top. Like most critical projects, this one needs buy-in from the executive team and board.
- Choose the right partners. Like many others before me, I initially did not see any real value from engaging with the consulting teams of the various vendors, or specialist third parties. How wrong I was. They played a pivotal role in guiding us through the journey, and in maximising the value out of each application. This was really money well spent.
Finance is a critical area of the business, and automation can play an important role in taking it to the next level. Approached in the right way and with due circumspection, the benefits can be quite startling– in our case, a net saving of R50,000 was achieved, which made the project essentially self-funding within a short time. Even better, our finance department is now positioned to scale easily as the business grows without a corresponding increase in costs.
I call that a good deal.
