It’s Time to Make Meaningful Strides in Finance Transformation

5-minute read

During the last ten years, Finance and Accounting have been facing a degree of challenge and change that has been outpaced in previous decades. A booming economy has created a growing war for talent, with significant competition for expertise to run accounting operations, planning, reporting, and analysis.

The regulatory, accounting, and auditing standards landscape has continued to evolve at a pace that reflects globalization and evolving digital business models. These include new global tax and transfer pricing regulations, revenue recognition, contracts, lease accounting rules, and new PCAOB audit standards, which all place a more substantial burden on accounting teams.

The expectations that CEOs have for Finance have shifted too because they need a partner in this age of rapid disruption. Purely keeping score and managing compliance is no longer enough.

The new role requires acting as a business partner, a steward of data and analytics, and playing an active role in business operations and strategy to help the business keep pace—which has placed a strain both on resources and the talent mix.

Manual Accounting: The Handbrake on Finance Transformation

But for many organizations, despite a decade of disruption, one thing has barely changed: manual accounting. It’s a massive drag on finance and accounting resources and the most substantial barrier to a transformed finance function. 

Manual journal entries and adjustments, reconciliations by hand, hunting for paper trails to meet audit demands, and repetitive data extracts from ERP and sub-ledgers still consume a vast amount of talent and resources. With transaction volumes and disparate systems at an all-time high, many organizations have seen manual accounting processes increase, not decrease.

For example, a recent Robert Half/FERF study found that  48% of North America finance executives say even core GL account reconciliations are still manual, it still takes 24 days on average for year-end and this is trending upwards, and 40% of finance executives say the costs of managing compliance are still increasing.

A Flywheel of Competitive Advantage

The goal is to reallocate workloads from transactional accounting to the new demands on Finance by cutting lengthy period-end blackouts, repetitious workloads, and turning data into analytics faster. The only difference will be how fast and far each finance organization progresses on the journey.

But first movers are already gaining significant advantages for their organizations and companies—which is why the time to start is now.

First movers are better positioned to attract talent. They are resourced to enable their companies to compete more effectively through more time for business partnering and analytics. And their teams are more able to act as an enabler to launch new business models and services that drive competitive advantage—all because Accounting has more time to both analyze and model impacts and adjust accounting processes. It creates a flywheel that puts those transformed finance functions on the fast track.

Three Big Enablers to Break the Inertia

Automation

Near term, the first automation opportunities are real and significant, such as auto-certifying reconciliations, automating journal entry postings, auto-matching transactional detail using AI, and using workflow engines to orchestrate each task and dependency at period end, in addition to other accounting processes.

While automation is often bandied around, the truth is that in Accounting, thousands of organizations are already benefiting from significant workload reductions as a result—with paybacks often measured in months, not years.

For example, at a Fortune 500 healthcare diagnostics company, the accounting team was using a combination of spreadsheets and paper filing systems to perform the financial close. Switching to automation enabled Accounting to save time on matching and reconciling the hundreds of accounts in their general ledger. This is also saving their organization over $500K in close-related costs every year, and they’re now able to devote more personnel to tasks that support the company’s long-term objectives.

At a large $2BN enterprise that specializes in commercial insights, the accounting team used a combination of SharePoint, spreadsheets, and physical printouts to track and manage its account reconciliations, which numbered in the thousands from over 50 entities spread around the world. The complexity and volume of accounts forced accounting personnel to manually reconcile many of the accounts, which was both time-consuming and inefficient.

Using automation boosted productivity, so their personnel no longer needed to touch about 40% of the company’s reconciliations, resulting in substantial efficiencies in resources otherwise devoted to accounting and audit-related activities. And that meant they were positioned to reallocate where the team spent their time toward more strategic activities.

People & Talent

Automation and bridging the finance talent gap go hand in hand. Automation will reduce accounting workloads, which makes it an enabler that frees Finance and Accounting to nurture their skillsets around analysis, achieve more business exposure, and begin to carve out time to support business teams.

For finance leaders, achieving early wins with automation provides another benefit. It enables organizations to advertise that they’re a modern accounting department, one that has substantially less repetitive workloads and period-end crunches than companies who have yet to automate—an internal win that is also attracting top talent.

Change Management & Process Reinvention

Automation is hot in Accounting. But the truth is that automating a bad process will provide improvements, albeit far more modest than when a process has been redesigned. In some cases, merely automating a lousy process may even create more risk.

For example, migrating a detailed period-end checklist that’s buried in spreadsheets, documents, and tribal knowledge to a close management automation application will provide benefits. But taking the time to question if specific existing steps are necessary to migrate during the move will take the value much further, and also often reduce risks.

In other cases, where new technology designed to facilitate transformation is introduced but adoption remains low, manual accounting processes will remain stubbornly high.

Therefore, change management is essential with any finance transformation process: evaluating candidate processes, taking the time for process redesign if necessary, applying technology like automation, and then ensuring the team is trained and enabled to use it.

A key enabler for any organization embarking on this kind of initiative is to ensure they are plugged into a connected, collaborative community of peers to share insights and best practices around the right way to best tackle manual accounting processes.

Making the Move to Modern Accounting

The need for finance transformation is accelerating, with forward-looking organizations ready to modernize. To be successful in our digital landscape, processes must become more unified and automated so Accounting can progress from the period-end crunch to a more continuous way of working.

The first step on the journey to finance transformation is to finally make a real, meaningful dent in timely, costly, and risky manual accounting—and make the move to modern accounting. The best way to begin is by attending one of our virtual Finance Transformation events.

Join F&A professionals from across the US on April 22 for our Finance Transformation Virtual Event. We’ll be talking about how to implement a unified, automated, and continuous accounting methodology.

The event is complimentary, but reserve your spot today as space is limited.