February 18, 2021

How to Choose Between Robotic Process Automation & Financial Close Automation

How to Choose Between Robotic Process Automation & Financial Close Automation Image | BlackLine Magazine

With the acceleration of digital transformation initiatives, automation has become one of the hottest categories in software. And with the events of 2020, it’s now firmly cemented as one of the top technology priorities on the CFO’s agenda.

During the COVID-19 pandemic, automation can help ensure business continuity and resiliency while F&A organizations are in flux. It can also be crucial to enabling CFOs to redirect valuable resources away from manual accounting and toward more strategic tasks like analysis and business partnering—which is even more essential as we operate in the midst of so much uncertainty.

CFOs and Controllers are evaluating technologies to deliver the fastest, most sustained value, which are often cloud Financial Close (FC) solutions within Accounting and Robotic Process Automation (RPA) within the broader back office. With such a desire to deliver powerful results, it’s never been more critical to choose the right tool for the right purpose to maximize ROI.

What Is Robotic Process Automation?

Robotic Process Automation (RPA) is a general set of automation tools for replicating any manual, repetitive process at scale, often by automating manual processes performed on spreadsheets, homegrown, older applications, or other systems.

RPA developers typically use a low-code or no-code workflow builder to create a set of steps that constitute automating an otherwise manual task. They also use a screen recorder to record keyboard strokes and mouse movements and often write or edit detailed step-by-step scripts (like coding) that manage the automation logic.

The recorded actions are then played back against existing systems and spreadsheets, for example, typing, selecting fields, copying and pasting, by what’s called a Bot that performs the task in place of a human. Organizations develop RPA robots that can then be scaled up to automate repetitive work that may have otherwise consumed significant amounts of human resources.

What Are Cloud Financial Close Solutions?

Cloud Financial Close (FC) Solutions are purpose-built software specifically designed to be owned and autonomously managed by Accounting to automate the record-to-report process. Unlike RPA, they typically replace spreadsheets and paper-binders rather than augmenting them.

Instead, they act as a single centralized system of record, or hub, for core accounting processes like reconciliations, journal entries, and intercompany accounts. This one location for storing an audit trail, JEs, and underlying supporting detail is highly beneficial for enabling an efficient audit and balance sheet integrity.

FC solutions are built for Accounting, so unlike RPA, they provide dedicated dashboards and task management that enable Accounting to document their close process and all its dependencies. They route approvals and signoffs and monitor the close process, such as unreconciled balances or outstanding items awaiting approval.

Key Criteria to Determine the Right Solution

It’s important to recognize that in many cases, most enterprises use a combination of both RPA and cloud FC solutions, and they can be used together also. The key is choosing the proper tool for the right business process and team.

For example, many organizations use RPA for repetitive, often static invoice processing and order entry tasks, and they use cloud FC solutions to automate the record-to-report process because the latter usually requires more than simple automation at scale.

Start by asking these questions to determine the solution that’s right for your F&A organization.

Finance Owned or IT Dependent?

When many organizations are moving to modernize accounting, they’re often striving to be in control of technology and processes. Other organizations are sometimes comfortable relying on IT, developers, or technical finance professionals to manage and maintain technology.

If a finance and accounting team wants to be mostly autonomous from IT, this is typically an indicator that a cloud FC solution is a better fit versus a general RPA tool or bots.

Typical areas of desired independence from IT often include creating and changing reports or dashboards, updating close checklists and approval routing rules, modifying thresholds and criteria for matching accounts and transactions, automating new reconciliation or JE areas (e.g. adding Credit Card, AR/AP or Fixed Asset reconciliations), or changing a bank (or other) reconciliation process.

Also, a solution that is entirely cloud-delivered and managed by the provider—without the need for managing on-premise virtual desktops or requiring desktop automation tools—will further minimize IT dependency.

Further, empowering Finance and Accounting to own and configure the automations they need reduces the need for IT to be on the hook to accommodate ongoing change requests. This allows technical teams to focus on new project delivery versus handling frequent business change requests.

Unlike RPA, FC Solutions also provide a user experience for engaging with the aspects of the close, from reviewing to approving, entering journals, and running reports that all enable participants such as business unit teams, auditors, or other stakeholders to engage and add value.

Process Transformation or Process Automation?

RPA tools enable the automation of existing processes, typically by mirroring the exact steps a human would perform to accomplish them, usually in spreadsheets. This is ideal for scaling up hardened, reliable business processes that are already optimized for efficiency and aren’t expected to change.

Typically, RPA tools are ill-suited to process reworking, transforming, and ultimately improving existing processes, such as performing them a different way for a materially better process. They are designed to record, script, and scale up existing process flows rather than provide process flexibility so that accounting can continually improve them.

Many finance organizations are looking beyond automation toward process improvement and transformation so they can take the automation dividend further. In Accounting, process transformation versus simply automating existing steps (typically by automating spreadsheet activities and data entry) can appear in many forms.

Read this white paper for two more questions you should be asking, along with the eight signs you need to know whether RPA or financial close automation is the best fit for your accounting and finance teams.

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Michael Shultz
Director of Finance Transformation

Intelligent Automation