This article originally appeared in FEI Canada’s February Edition.
Pop the hood on your finance and accounting organization, and underneath you’ll still see spreadsheets—and lots of them, buried in emails, file shares, local folders, and cloud stores.
You’ll probably find way too many paper binders in file cabinets too, full of financial reports, journal entries, intercompany accounting details, reconciliations, ticking and tying variances, ERP extracts, budgets, allocations, and so much more.
It’s kind of painful to admit, but today, in an era that’s meant to be about digital and finance transformation, much of the function still relies almost exclusively on spreadsheets. A Hackett Survey found that nearly 70% of F&A leaders still say manual effort is the number one bottleneck in the financial close process, while a recent study conducted by the Financial Education & Research Foundation found that nearly 50% of GL reconciliations are still manual.
Time, and ultimately the valuable investment in talent, is hurt by manual accounting, whether it is weekends spent on closing the books or late nights creating financial reports. But that isn’t the only issue.
Manual accounting also creates risk. Research conducted by Censuswide found that over half of the finance leaders surveyed aren’t entirely confident they can identify financial errors before reporting results, with less than 40% saying they trusted the numbers.
Manual accounting is the biggest roadblock on the road to finance transformation.
New Manual Accounting Processes: They Keep on Coming
But one of the biggest challenges that both Finance and IT face is that new manual accounting processes keep on growing. New digital business models and the reconciliations they inevitably require, regulatory reporting requirements, implementation of revenue recognition rules, and international tax reporting all inevitably end up requiring manual accounting.
The changing demands on Accounting are too fast-moving for a single monolithic ERP to keep up with, and so manual accounting often floods in to fill the gaps. In fact, one leading analyst predicts that by 2022, at least 70% of global enterprises will have revisited their single-instance ERP approach because it just isn’t responsive enough to meet their current needs.
Businesses are quietly evolving toward a post-ERP approach. Of course, they plan to still use the ERP for core transactional processing needs like invoicing, purchasing, and the GL. But they’re building out a set of agile enterprise business capabilities that integrate with it and extend it, deployed in the cloud, to enable Finance to quickly tackle areas like reconciliations, journal entries, and intercompany accounting.
Use Tech to Cut Manual Process & Sequence Adoption
The good news is that the availability of technology that enhances Finance’s effectiveness has evolved at a terrific pace and seems to be accelerating. And that technology is having an impact on the way Finance operates, with leaders like The Coca-Cola Company, who are using the latest automation to reduce some accounting workloads by 55% and saving millions in resources that can be refocused more on analysis.
It’s no surprise then that a recent survey by Grant Thornton notes that 95% of financial leaders state their organizations must work to possess increased levels of technology expertise.
Technology Is Driving Rapid Change
Finance technology has undergone and is undergoing rapid change. Just over a decade ago at the end of the ’00s, cloud computing for Finance was in its infancy. Now it’s the de facto for new app deployments and the target architecture for ERP migrations.
Real technology to drive financial close automation was firmly out of reach. Now it’s a whole new category of cloud-delivered software, Cloud Financial Close Solutions, with a leading analyst predicting its adoption by around 60% of upper mid-size companies and enterprises in just the next four years.
Until relatively recently, most business applications weren’t mobile. Robotic process automation wasn’t in the lexicon. Technologies like Artificial intelligence and machine learning have now moved from finance science fiction and hyperbole to a practical option, especially for high-volume activities like matching and validating transactions.
Building Your Finance Technology Roadmap
So, what’s the holdup? Part of it is navigating the array of new technology that’s now available. The other part is sequencing adoption. How do you build a finance technology roadmap that taps into the tech that is ripe to deliver the most value and least risk, and ensure that it provides a stepping-stone that directly leads to the next transformation initiative?
To answer these questions, we put together a playbook for CFOs that’s also highly relevant for IT leaders.
Get your copy to begin building a game plan that will help you get started on the right track, keep moving in the right direction, and use technology to continuously improve.