Three ‘Must Have’ Advanced Technologies for Financial Functions
The defining characteristic of the past decade is the widespread explosion of advanced technologies that changed the way which we lived and worked. Beyond the consumer delights of virtual reality, advanced technology has changed expectations of how crucial corporate functions such as financial reporting and auditing should be done.
Advanced technologies are now seen as crucial by senior executives. KPMG conducted a survey of 261 senior executives in 2017. 26% noted that advanced technologies are a ‘must have’ within 1 to 2 years and 55% agreed and set a timeline between 3 to 5 years for their financial reporting. If they were to follow through on their targets, we will see a vastly different landscape by the year 2022.
Senior executives are motivated by the above-mentioned benefits for their organization when it comes to important financial reporting functions such as audits. Existing methods of harnessing data and analytics can be enhanced with advanced technologies. Here are some of the relevant key advanced technologies:
For any business, the process infrastructure is crucial to their success, whether you are running a restaurant or spearheading a cross border e-commerce operation. The explosion of information means that there are less resources to handle them effectively and workflow automation is crucial to ease the workload on employees. They can then handle higher value-added services and deliver them with higher standards.
For instance, AI Accountant had been setup to automate the entire workflow process of company incorporation and secretarial services. For any aspiring founders, they will simply have to key in simple information such as their company name and details, personal information and other regulatory information in a form. The system will automate the entire workflow such as creating the company constitution and other information which will be sent to ACRA for approval.
The entire process would take less than 1 hour to complete without human intervention. This allowed for massive savings. Manual company incorporation would cost around $1,500 if done manually, given the professional manhour cost. However, with the fully automated process which allows for digital signature from the client and live support conducted via live chat if necessary, the entire incorporation process would cost a mere $450 including the $315 ACRA fee. Yearly company secretary fee used to cost as much as $800 with manual labour. However, the automated process means that the same service can be done at just $250 with a chartered accountant at the helm.
Robotic Process Automation
Robotic Process Automation (RPA) is slightly different from workflow automation. For one, there are unique definitions for each chain of activities which sets in motion after user activity. RPA automates repetitive and manual work for back-office activities. These include finance, procurement, supply chain management, accounting, accounts receivables, and the financial close.
RPA can be applied to the following financial close activities:
- Reconcile balances by comparing the ledger account to back-up for that account
- Automate journal entry where a robot proposes the journal entry and the workflow process sends it to a human to approve.
- Orchestrating a series of automated inter-dependent tasks associated with financial closing with time and event-based triggers.
- Aggregating information automatically across the business for a complete view of the financial closing status.
All these can work with software algorithms (BOTs) to perform a repetitive task at a fraction of the cost of fully proficient finance professional. RPA can reverse the wave of offshoring for jobs that don’t require much judgment and mental application. Besides the benefit of cost, RPA brings about standardization, process predictability, and throughput optimization.
The blockchain is an immutable ledger system that serves as a record of all transactions. When the financial system uses blockchain, it can connect easily to a system without a central party. This will revolutionize the double accounting entry system where an accountant will have to record each transaction separately. Organizations can write their transaction in a joint register and create an interlocking system of long-lasting accounting records.
Source: Dev Team
There are literally thousands of cases for blockchain, including payment, mortgages, insurance, accounting, and audit. 80% of the banks have initiated some form of blockchain projects to integrate into their existing infrastructure. This smoothens the entire payment to financial auditing process in the market. The blockchain industry is so promising that venture capitalists have invested $3 billion of the past 3 years.
Future of Financial Functions
While we have these advanced technologies that will transform corporate functions, many businesses are not ready for the changes. As a result, organizations don’t fully capitalize on these advancements.
Whether we like it or not, financial functions would increasingly function like a ‘factory’ model where they are automatic and predictable. Information will be readily available, and they will be protected by cyber-security. Chief financial officers will have to play more strategic roles in their companies. Also, businesses that can evolve their financial functions will stay relevant in the marketplace.