Gaining Speed and Productivity with Control and Auditability

Productivity in Key Finance and Accounting Processes

Automating accounts receivable (A/R) should be an immediate priority for finance and accounting executives as they develop a focus on productivity, not just efficiency. In the past, having to do more with less could be addressed by performing processes or steps more economically. However, that is not the right approach today. Instead of doing the same things faster or using fewer resources, the objective should be to avoid having to do steps or whole processes, using tools to automate operations that technology can do better than humans. An A/R automation system not only streamlines task execution, it also can improve departmental productivity, including by accelerating the close. And automation confers greater control to reduce risk and promote financial resilience.

An A/R automation system not only streamlines task execution, it also can improve departmental productivity, including by accelerating the close.

Today, digital technology can be a game changer, boosting productivity by eliminating the need for humans to do the work, either by having software do the work for them or by redesigning processes to eliminate the need to do the work in the first place. It can reduce friction across the invoice-to-cash process, promoting better customer relations. Technology is the key to having accurate, reliable and auditable financial statements sooner with less effort. A/R automation is part of a digital finance methodology that we call continuous accounting, which is designed to address today’s need for greater productivity.

Boost Productivity with Continuous Accounting

Ventana Research uses the term “continuous accounting” to describe a management approach that rests on three pillars:

• Using digital technology to handle processes continuously end-to-end to accelerate completion, reduce workloads and ensure data quality by automating data capture, data movements and data transformations.
• Spreading workloads continuously across the accounting calendar to avoid spikes and provide a better work-life balance for staff.
• Adopting a continuous improvement management style that boosts departmental performance.

Maintaining data quality end-to-end throughout an accounting process is essential for productivity and for achieving control and auditability with less effort. Automating processes end-to-end eliminates the need to perform manual tasks and removes the possibility of human errors at the source. This in turn eliminates the need for time-consuming checks, reconciliations and corrections, and spreading workloads across the month or quarter cuts unproductive period-end crunches. Replacing a “we’ve-always-done-it-this-way” culture with one that embraces continuous improvement promotes a staff mindset that is important for digital transformation. Departments often fail to get full value from their technology investments, either by not using more of what the software can deliver or by failing to redesign processes to take full advantage of the software’s capabilities.

Within the continuous accounting framework, A/R automation provides multiple benefits. By accelerating collections and reducing days sales outstanding, working capital efficiency is increased, reducing financing costs. A comprehensive approach to managing A/R harnesses data for better operational intelligence, enabling departments to fine tune their collection process to optimize customer relationships and reduce risk. Speeding cash application enables customers to better utilize their credit, potentially boosting revenue. Automation enables staff to focus on tasks that require their experience and expertise, helping to attract and retain the best talent. And in a broad sense, A/R automation contributes to the overall continuous accounting methodology designed to improve departmental performance by increasing process efficiency, thus helping to accelerate the close.

Automation to Accelerate the Close

By consensus, organizations should complete their close within one business week, yet our Office of Finance Benchmark Research found that only 50% can finish the quarterly close within six business days. Problems that arise in manual A/R processes—fumbled handoffs, approval roadblocks, rework needed due to errors, or poor data quality and availability—can all be factors in delaying the close.

Our research found that there is a correlation between the degree of automation in close processes and how quickly a company closes: 88% of organizations that have automated substantially all of their close processes can finish within six business days compared to 59% that have automated some and compared to just 40% of those that have automated little or none. In addition, automating workflows provides greater visibility into the status of processes, enabling accounting executives to manage by exception rather than spending time checking on whether work has started or is completed.

71% of organizations that have shortened or streamlined their close said controlling their processes more effectively was an important factor in pursuing this goal.

Consistent process execution in all facets of accounting is another benefit gained from automation. Our research found that 71% of organizations that have shortened or streamlined their close said controlling their processes more effectively was an important factor in pursuing this goal. Periodic reviews to identify root causes of roadblocks in the close and how to deal with them is essential. Our research also found that enterprises that were successful in accelerating their close cited better management of the process. A common reason for process issues is the overuse of spreadsheets. In the past, spreadsheets were the simplest way to gather information from multiple systems and perform a range of arithmetic and analytical functions to complete a step or series of steps in the close. But today’s systems can easily replace spreadsheets because they can automatically assemble data from multiple disparate authoritative sources to manage all forms of accounting processes in addition to A/R. Having confidence that the data used by the system is correct ensures a timelier completion of the close.

Taking Action to Move Forward

As finance and accounting executives look to achieve greater productivity using digital technologies, they must focus their transformation efforts on key areas where improvement allows for the department to have a more strategic impact on the enterprise. Applied to the invoice-to-cash cycle, technology enables a shift in emphasis, making the department more of a customer-facing organization dedicated to increasing revenue by reducing frictions in customer relationships. For example, faster and more accurate cash application can prevent an unnecessary bottleneck that can occur when a delay in crediting an account prevents a customer from completing another purchase. Technology makes it possible to identify and flag situations where a dependable customer has failed to pay within a few days of when they normally do. Rather than waiting for the receivable to age out to begin an antagonistic collections process, the first communication can begin with, “Did we do something wrong?” A good, dependable customer may have a solvable reason for the missed payment, so a proactive, positive reach-out can address issues early or show appreciation for the customer even if the delay was caused by a vacation, for instance.

Reducing frictions in any and all stages of a transaction makes a company easy to do business with, promoting retention and potentially boosting sales. Having better intelligence about the state of receivables makes it possible to produce more accurate near-term cash flow forecasts, thereby managing financial risk more effectively.

And finally, automating manual processes within the finance and accounting department allows staff to boost productivity, focus on more strategic work and improve their own skills, all of which will help the organization attract and retain key talent in competitive employment environments.

Finance and accounting departments must use available technology to streamline task execution in ways that boost departmental productivity and facilitate a faster close. Automation can confer greater control to reduce risk and promote financial resilience, so Ventana Research recommends that executives investigate how practical, affordable software can improve departmental performance. Automating accounts receivable should be a priority because of the multiple benefits enterprises can achieve, including improved working capital efficiency, reduced financing costs, improved operational intelligence, increased cash flow, and the ability to support better business relationships by removing unnecessary frictions in customer interactions.