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Finance Automation or Autonomy: What’s Right for Your Teams?

21 October, 2022
5 min read
Brett Johnson, AVP, Global Enablement
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What you'll learn

  • Discover the five stages of digital transformation.
  • Examine the impacts of finance automation and autonomy on your operations, cash flow, and business growth.
  • Uncover four indicators of the optimal time for a digital transformation.
CONTENT
Introduction
Defining Milestones: Automation vs. Autonomy
The Groundwork: Roadmap to Level Up!
Conclusion
Level Your Digital Transformation with HighRadius
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Introduction

“Finance autonomy” and “digital transformation” are not merely fads; they are becoming essential functions for many businesses.

In the years ahead, cloud-based ERP, touchless back office automation, and cognitive innovation will continue apace, creating opportunities to streamline operations and free analysts’ time radically.

It is no surprise that finance teams have become leaner, primarily a headcount function in operational finance (order-to-cash, procure-to-pay, transactional accounting).

Meanwhile, expectations for support from business finance (reporting, planning, budgeting, forecasting) and specialized finance (record-to-report, treasury) will continue to grow.

According to the State of CFO’s Office Report 2022, “outdated technology stacks are one of the leading causes of business inefficiencies.” Workflow digitization is the new norm and a necessity for firms to sustain and flourish.

But how can a business determine the ideal time for a digital transformation, particularly in finance operations and back-office functions?

There are usually clear indicators that a business is ready for digitalization, and recognizing these indicators and their impact on your revenue and performance will help you determine the appropriate timing.

This article explores two universal indicators of transformation readiness. These criteria are evaluated based on potential optimization opportunities in your company’s financial operations.

Defining Milestones: Automation vs. Autonomy

Understanding why it’s essential to invest in digitalization is a good start. Understanding how CFOs can be visionary drivers of an organization’s financial success and fiscally responsible can be a significant next step.

Where to begin? Here are five levels of digitalization indicators:

Levels of Automation

Level 0: 100% Manual Finance Operations

Companies falling under this category don’t employ technology to automate their finance operations. This level is often the starting point for most businesses. They typically rely on the following:

  1. Manual and paper-intensive processes
  2. Error-prone tools such as spreadsheets

This phase leaves no room for reevaluating workflows and fine-tuning processes, making technological investments necessary for scalability.

Level 1: Introduction to Automation

The level marks the start of a company’s financial digitalization. This phase focuses on specific repetitive and manual tasks and seeks to automate their management on a daily or weekly basis, such as three-way matching, invoice creation, and sending customer payment reminders.

This level of automation leaves room for human intervention in holistic operations, despite the potential of a minor efficiency boost.
For instance, a lack of data standardization leads to inconsistencies in financial procedures, and cost coding can yield results that cannot be consolidated and compared without significant manual work. This could cause ambiguous collaboration for analysts and conflicting reporting for stakeholders.

Level 2: 80% Automation of a Process

At this stage, the company uses accounting software, such as an ERP, to automate individual holistic processes, such as ‘cash application’ or ‘eInvoicing.’ This phase refocuses analysts on higher-value strategic tasks. This automation is entirely workflow-based and governed by a set of rules.

Some advanced systems may provide real-time data and reporting dashboards, including KPIs, enabling leaders to monitor results closely and react quickly.

However, finance teams must continue to track these operations and ensure they are always accurate and valid.

Moreover, from a cost-reduction perspective, several software vendors are cutting support and mandating upgrades to the cloud or SaaS platforms while simultaneously optimizing their development and maintenance structure.

If technology suppliers have issued a sunset timeline, it is crucial to consider a replacement and optimize the financial processes with better API connectors and organizational structure surrounding that application.

Level 3: Introduction to Autonomy

This level leverages AI and Machine learning to seamlessly collaborate and exchange data across individual operational and specialized financial functions (order-to-cash, procure-to-pay, record-to-report, treasury), anchored by holistic automation.

For example, with an autonomous receivables solution, CFOs can gauge the financial health of each customer, including credit risk scores and the likelihood of bad debt from a single user interface.

To enable recession-proof scalability, CFOs need a holistic view of the business to ensure it operates as efficiently as possible.

At this level, CFOs can:

  1. Forecast critical triggers even amid uncertainty
  2. Project workflow costs and avenues to reduce OpEx
  3. Keep tabs on customer aging analysis
  4. Implement a rolling forecast methodology
  5. Take immediate steps to maximize cash on hand

However, as your business expands across geographies and regions, it demands adaptable end-to-end finance software with enterprise-level autonomy so that your teams can evolve from problem solvers to revenue generators globally.

Level 4: 80% Autonomy of End-To-End Finance

At this level, autonomy aims to transform the entire finance process world-class, which can only be achieved through AI across all operations.

At this stage, your finance software can act as the single source of truth, connecting multiple data nodes to create a complete view of all your operations.

This level of autonomy uses real-time analysis and forecasting across all locations to respond to changing customer patterns and suggest intelligent actions to maximize cash flow.

Levels with Drivers

The Groundwork: Roadmap to Level Up!

Once you identify your business digitalization level, a CFO’s next steps are critical to determine the feasibility of an upgrade and set the stage for a successful transformation journey.

There are four main factors to determine whether the next solution enables more efficient finance processes compared to the current expenditures.

Assess Gaps

Understanding the current situation and the barrier to achieving the company’s transformation objectives is essential. A business should thoroughly assess all problem areas, pain points, and improvement opportunities.

Typically, this process answers concerns such as:

  1. What factors are lagging indicators of increased churn rates and bad debts?
  2. What’s my business’s four-to-six-month recession and gradual recovery plan?
  3. How will customer demand and supply availability change as the economy slows?

Evaluate External Change

CFOs must evaluate transformation against other changes across the company, considering factors such as resource commitment, duration, risk, budget, and level of change, among others.

Every company is in a different position, and CFOs must align on the importance and extent of transformation to meet the overall company strategy.

Redesign Processes

Reassess how the solution required to transform your digitalization level impacts your cash flow and profitability. By building a nimble strategy, CFOs can create a framework that helps stakeholders make decisions, then track investment results in real time.

This process typically answers questions like:

  1. Can the steps of the process be modified to adopt an alternative approach? For instance, are there steps that need to be keyed in manually but could be automated because the data is static and the process is straightforward?
  2. What procedural steps can be eliminated? Are there any automation solutions that, if deployed, could potentially negate the requirement for specific steps?
  3. Which processes could be accomplished without human intervention?

Develop Strategic Cost Cuts

Consider employing a modified version of zero-based budgeting wherein expenses are justified one by one, and budget owners must exemplify how spending is aligned with defined essential capabilities. The key is determining when and which cuts to make.

One approach is to create tiered forecasts that reflect cuts in response to revenue reductions of 10%, 20%, and 30%. Keep all line items on the table and provide sufficient detail to ensure you’ll achieve the desired ROI.

This process typically answers questions like:

  1. Will my spending make a difference over a set time to reduce financial churn?
  2. How do I keep the teams as lean as possible?

Conclusion

Now is an opportune time to invest in technology that can automate manual tasks and free up analysts for upskilling and more strategic work.

When growth is slowing, your analysts are forced to work harder. Restructuring when everyone is paddling as hard as they can is painful.

Don’t wait until all you can do is slash spending and schedule layoffs. So start working to ensure your business is ready to ride out the storm.

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Level Your Digital Transformation with HighRadius

The desired state of financial transformation and the roadmap on how to get there helps mid-market CFOs plan out their digitization roadmaps, even with:

  • Lean working teams
  • Manual operating systems
  • Lack of proper resource allocation

Undergoing finance digital transformation allows your finance to make informed and data-backed decisions, which helps boost efficiency even with lean teams and frees up time to concentrate on more strategic tasks.

HighRadius offers the entire suite of Financial help with offerings such as Autonomous Receivables, Autonomous Treasury, and Autonomous Accounting for the Office of the CFO. More than 700 of the world’s leading companies have transformed their order to cash, treasury, and record to report processes with HighRadius. Our customers include 3M, Unilever, Anheuser-Busch InBev, Sanofi, Kellogg Company, Danone, Hershey’s, and many more, guiding them on their finance digitization journey from a mid-sized business to an enterprise.

Learn how HighRadius can help you in your journey of transitioning from Level 0 to Level 4 of finance digital transformation.

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HighRadius Integrated Receivables Software Platform is the world’s only end-to-end accounts receivable software platform to lower DSO and bad-debt, automate cash posting, speed-up collections, and dispute resolution, and improve team productivity. It leverages RivanaTM Artificial Intelligence for Accounts Receivable to convert receivables faster and more effectively by using machine learning for accurate decision making across both credit and receivable processes and also enables suppliers to digitally connect with buyers via the radiusOneTM network, closing the loop from the supplier accounts receivable process to the buyer accounts payable process. Integrated Receivables have been divided into 6 distinct applications: Credit Software, EIPP Software, Cash Application Software, Deductions Software, Collections Software, and ERP Payment Gateway – covering the entire gamut of credit-to-cash.

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