While invoices used to require manual analysis and approval for payment, now, automation software can analyze them without human intervention, processing them efficiently by sending them directly to your accounting system. This is one of many examples of automation in finance that improves management efficiency as employees can spend time on other tasks that need their attention. Automation software can also involve tools like Trustpair which automate anti-fraud controls and remove all the time-consuming manual tasks usually involved in bank account verification. Request a demo to learn more about our account validation platform!
What is automation in finance and how does it work?
Automation in finance involves using automated tools and software to automate previously manual processes. Automation in finance is part of the greater digital transformation that has affecting businesses in the last decade.
For example, by automatically matching invoices to purchase orders, you can ensure payment accuracy and avoid overpaying for products. Moreover, by interlinking inventory to orders, you can automate reordering processes after your current stock drops below a certain threshold to increase efficiency.
Examples of automation in finance
Accounts receivable
Accounts receivable automation includes setting payment reminders for your suppliers. Using software to handle reminders, like Upflow, means you don’t have to send tedious manual emails. By waiting for the end of your payment terms, you can use working capital to invest in growing operations. Then, an automatic notification on the 30-day mark, for example, means you’ll have been paid by your customers, and can pay your suppliers on time. This helps build strong relationships throughout the supply chain.
Payroll
Payroll automation simplifies pay runs and payroll reports, reducing the risk of manual errors with platforms like Xero. It allows for continuous wage processing, ensuring salaried employees are paid consistently each month without additional management effort.
Reports
As for data insights, financial reporting can be automated with systems like Xceptor. If detailed numbers are important to the business to manage performance, automated financial reporting can be set up for daily, or even hourly KPIs. This gives an instant snapshot of progress towards goals and helps leaders to make quick decisions with confidence.
The reports can look at traditional financial data including cash flow and expenses, or targeted KPIs such as units sold per day.
Accounts Payable
Accounts payable automation could involve setting recurring invoice payments for regular suppliers. This is likely to increase accuracy, as it removes the risk of manual error, and saves your company time.
Invoices can be automatically analyzed by software such as Auto Entry and uploaded to your accounting software without intervention.
Learn more about improving and securing your AP processes right here.
Summary calls
When call handlers are on the phone to potential customers and hosting meetings, some companies enable AI automation to record and summarize the call and the response to the inquiry is provided via letter automatically. Tools like Leexi are used as an AI notetaker.
Alternatively, the creation of voice technology makes it possible to complete customer queries using AI chatbots, as they are now advanced enough to recognize specific words and provide relevant responses.
Audit
Audit software such as Inflo can automatically analyze a company’s financial records to assess where higher-risk areas may be. It also looks at the completeness and accuracy of data, meaning you can rely on the output of the audit.
Automating your financial audits can be useful if you’re looking to increase overall efficiency, and can help reveal previously unknown areas of expense.
What are the benefits of finance automation
Data accuracy
Account validation software ensures you are paying the right person or supplier. It reduces the risk of duplicate transactions, which can be both frustrating and costly, and guarantees you won’t miss the right account altogether.
By relying on machines, you can completely cut the risk of human error from all systems. That’s not to say that automated processes carry zero risk of error, but plugging in an algorithm significantly improves data accuracy.
In cases like the invoice automation examples we’ve discussed, this can eliminate the risk of embarrassing mistakes that cause friction with suppliers, so accuracy makes a big impact.
Ensure compliance
In heavily regulated industries, automation helps to comply with the rules. That’s because setting up automation in finance gives you the control to hit requirements.
For example, some audit software like CCH helps ensure compliance with audit rules. New master packs are regularly released to ensure procedures performed are in line with International Standards on Auditing (ISA).
Limited chance of fraud
The risk of internal fraud is greatly reduced when you rely on machinery – for example, machine learning – to manage and complete tasks because there is less staff risk of being fraudulent. Also, you can better protect against external cyberattackers because most software programs track and store factors like data access and record changes, meaning faster detection of suspicious behavior.
Saves time and resources
Automating financial processes frees up staff time, allowing them to focus on more valuable tasks like strategy development and improving customer relations. By focusing on high-priority, revenue-generating activities, automation helps your organization optimize its resources.
What are the challenges and risks of finance automation?
Being too dependant on technology
Automating so many finance tasks can mean that if some software or form of automation is down, it could hamper operations and cause disruption. Not to mention that, temporarily, tasks would have to return to their manual nature until the error with technology is fixed. For example, invoices would have to be manually analyzed rather than being automatically checked.
Initial cost
Financial automation software is often viewed as an investment. Rather than paying a person a yearly salary to complete manual tasks, a sum up front would be spent on software.
However, while there is an initial cost associated with automation software if done right, it’s likely to save money and produce a healthy ROI in the long term.
Skilled staff shortages
As automation is still on the rise, there is a current shortage of experienced staff to implement software transformations. Currently, less than one in four companies surveyed (22.4%) have largely automated processes, with only 1.4% of businesses fully automated.
While these few staff are incredibly valuable, expect to pay above-market rates for their expertise to limit disruption to your operations.
How to set up the right automation for your business
To determine which automation solution fits your needs, ask these key questions:
- Where are the gaps in your current processes, and where could automation increase efficiency?
- Would automation help streamline your organization’s operations and management?
- Do you have the resources and time to implement automation and measure its success?
- Is automation scalable with your business strategy and financial feasibility?
- Will it integrate smoothly with your existing systems?
Checking whether an automation solution ticks the boxes will help you decide if it sounds like it’s right for your business. From there, you can explore examples of automation in finance and work out what aligns best with your needs.
Recap
Automation in finance is an industry that is growing to support businesses and streamline operations. Although it can be costly, automation in finance helps companies comply with policies and guarantee their payments. Also, fraud prevention software such as Trustpair makes bank account verification much more efficient.