By Ashish Kumar Sinha, Director – Finance & Operations, South Asia, Hafele India Pvt Ltd
The finance function has been the key beneficiary of digitalisation and automation. Every function (e.g., accounts payable, accounts receivable, MIS, taxation, analytics, etc) under finance and accounts has something available to draw from the ongoing wave of digitalisation.
I would say opportunities are enormous when it comes benefits of digitalisation and automation, but this depends upon various factors (e.g., the complexity of the process, level of integration, system availability and accessibility, Cost, Goal of Digitisation, etc). Let’s understand the available opportunities a little more in detail within finance and accounts.
Automated real-time reporting
. Monthly reports no longer add significant value. Daily reporting brings massive opportunities to steer business and gain the maximum benefits and avoid things going out of hand. The information helps bring proactive control in managing business (be it Sales, COGS, SG&A, etc). There are plenty of tools available in the market to do this. You can build these reports in Qlik, and Power BI with the appropriate integration to the company’s ERP.
Complex but accurate analytics
In today’s world, visualisation software has a massive capability to perform automated analytics. Tools can be coded to perform complex analytics using data coming from multiple sources and present the required dashboard. Sometimes, in a complex organisation, we cannot do everything that we want in ERP due to inherent limitations as many such features may not be standard requirements. Such non-standard requirements can be programmed in the aforementioned tools to avoid additional customisation of ERP and still arrive at the desired outcome with enhanced control and compliance. Though such things require little programming but can be done without much effort.
Real-time receivable accounting
Accounts Receivable (AR) brings a massive opportunity for digitalisation to support business and wipe out key challenges (e.g. cash application, on-account collection, time lag between collection and accounting, non-availability of credit limit even if payments are done, etc.) which each of us faces. AR function is heavy on resources. We bear significant costs in managing AR functions and still cannot deliver the desired satisfaction to the customer and stakeholders. Thanks to startups and fintech, we have the solution available in the market to overcome all these issues. Trust me, all these problems would be things of the past if we tightly integrated the available automation in the market.
There is a higher possibility to ensure that TAT for all above can be reduced to the bare minimum or ZERO (bringing real-time accounting of incoming payments with proper cash application and unblocking customer’s available credit on a real-time basis). Essentially, through the tool, you transfer a chunk of your work to partners. Partners get to see and control their data and initiate payment by choosing appropriate due invoices. They do not even have to go outside of the tool and can make payments with OTP. Control and simplicity are the key USPs for adoption at the partner’s end. This certainly brings efficiency to the whole process and can become a major driver for revenue growth.
Real-time accounts payable
Account Payable (AP) is another low-hanging topic where digitisation can bring enormous benefits to the organisation. For AP to work seamlessly and in an automated way, the pre-requisite is the automation of the entire Purchase-to-pay (P2P) process. This can be done within the existing company’s ERP or through available P2P tools.
The digitalised process offers:
-Automation right from the RFQ phase (digital presentation of RFQ to suppliers and service providers)
-To choose and create Automated Purchase Orders from the ERP/ Tools
-Onboarding suppliers and service providers on the online tool
-Digital acceptance and acknowledgment of the Purchase Order (PO confirmation)
-Option to submit online invoices from suppliers and service providers
-Reading of incoming invoices (through OCR capability)
-Performing 3-way / 4-way match as required
-Accounting and posting of invoices for the matched ones.
-Automated workflow for deviated cases
-Sending for payment for approved cases on or before the due date
-Presenting payment acknowledgment to the supplier through the tool.
-Prepare and present a complete end-to-end Dashboard.
All of them can be done without much human intervention. This brings a massive opportunity to save costs and resources. In addition, brings transparency, speed, and compliance to the process which we might miss or sometimes compromise if handled manually.
Taxation
We all know how complicated our taxation system direct and indirect taxes. Thanks to the government driving digitalisation around taxation. I think we all agree we have better control to manage taxes more efficiently than before. With the GST introduction, this has further been simplified. Of late, a few start-ups and some big players, have developed capabilities around handling taxation and helping the company to ensure compliance and remove bottlenecks. To my knowledge, many aspects of taxation like vendor compliance (key to claim input tax credit), preparation, matching, and filling of indirect tax returns, and finding out accounted transactions requiring TDS/TCS compliance can be easily automated. Though I still suggest having a careful check on this as this would take some more time to mature considering this is a relatively new topic for digitalisation and automation.
Having spoken about available opportunities of digitalisation and automation in finance and accounts, it is worthwhile to speak about key challenges and threats it may pose which we should be cognizant about.
I would like to highlight some of them in the below order:
Cyber risk can derail: Cyber risk does not need an introduction. A host of companies have suffered in some or another way due to this threat. This is such a big challenge and threat that one such event or occurrence derails everything and in fact, survival is challenged for some of the companies. This necessarily warrants the need for appropriate Enterprises Risk Management (ERM) within the organisation. Therefore, before we undertake the sweet journey of automation and digitalisation, I request to re-evaluate the sufficiency and completeness of existing ERM within the organisation.
Over-dependence can spoil us: It goes without saying, excess of anything is not good. What is important is the right mix. Besides, handing over things to automatised tools for digitalisation, it is important to retain knowledge and process know-how. Sometimes, once automated, with the change of people, the process becomes too difficult to handle manually as we tend to miss know-how and become completely ignorant about that.
Technology changes very fast and is expensive: What is best today, may not be enough tomorrow. Yes, it changes very fast. We need to keep our eyes and ears open all the time to evaluate. But if we should move forward only when something new brings a significant return against investment. We should avoid upgrading just because somebody else is doing it.
Change management is the key: Digitalisation drive can bring improvement only when it is accepted and adopted. The key to acceptance and adoption remains with the people of the organisation. It is very important to involve HR and other key functions to ensure the impact is appropriately analysed and ascertained. People impacted are appropriately taken care of, re-skilled, and re-deployed to the best possible. Such messaging goes a long way to bring harmony and acceptance among the team, who in turn help to make such an initiative a big success. Taking this not seriously enough can dampen the expectation.
