Automation in FinOps: The Key Areas & Ways to Automate
Automation in FinOps primarily focuses on leveraging technology to streamline the manual processes, thereby improving efficiency and accuracy. With improved operational efficiency, enhanced cost savings, and a better regulatory compliance system, financial automation has enabled the business leadership to concentrate more on their strategic decision-making. Irrespective of being a large business house or an MSME (Micro, Small, and Medium Enterprises), finance automation helps businesses to operate more effectively, reduces manual error, and makes them time efficient.
A survey has indicated that more than 26% of automation in businesses in the year 2023 fell under the finance processes, followed by IT operations[1]. With modern technology and tools readily available, even the small businesses are engaging in the automation of their finance processes and extracting the maximum benefit out of it. There are multiple functions in FinOps where automation can be implemented, and benefits can be reaped. Let us examine how the entire process of automation works in various FinOps processes in the following sections.
Key Areas of Automation in Finance for Enhanced Efficiency and Growth
Automation in finance begins with tracking all the tasks that need standardization, be it transaction processing, financial reporting, or data analysis. Advanced tools such as Robotic Process Automation (RPA), Artificial Intelligence (AI), and machine learning are increasingly being deployed these days to automate such tasks, minimizing the human involvement in these processes. Integrating with existing financial software, these tools have enabled:
• Real-time data analysis
• Effective predictive insights
• Error minimization
Listed below are some of the financial functions where automation can be applied to achieve maximum growth and expansion in business.
Tools & Techniques for Financial Automation
10 Major Ways of Automation in FinOps
Business organizations have deployed several practices to automate their financial operations. Let us have a look at 10 major applications of automation used extensively in finance processes worldwide.
1. Automating Invoice Generation & Processing
Manual invoice creation and processing is time-consuming and error prone. Several automated invoicing tools are used these days to generate invoices, forward the invoices to the respective clients, and track the transaction status involving minimal manual work. These tools can integrate with accounting software, ensuring smooth transactions and an efficient cash flow monitoring system. These tools are also programmed to timely follow up with all the parties concerned and send automated reminders and notifications to keep everyone updated on the payments due, reducing the delays, especially in cases of recurring payments.
2. Leveraging Automated Cost Management Tools
Tracking and taking care of the entire expenses of a business, from the requisitions and procurement to payment through all the steps involved manually, is a huge and clumsy process. The deployment of automated cost management tools helps businesses monitor both fixed and variable expenses in real time. These tools can synchronize with corporate credit cards, enabling channelized transactions, and create a much more efficient expense reimbursement process. With the advent of these cost management tools, businesses of even the small and micro-level are now fully equipped with a consolidated spending database enabling them to take much faster data-driven decisions regarding their spending policies and largely avoid financial risks.
3. Robotic Process Automation (RPA) in Financial Operations
Robotic Process Automation (RPA) in FinOps comprises chiefly a set of automated systems devised specifically to regulate repetitive and rule-based tasks, enhancing the speed, efficiency, and accuracy of the entire process. These systems are programmed to handle tasks like data entry, bank reconciliations, and payroll processing in an efficient manner. With the deployment of RPA tools in tasks such as reporting, accounts payable, and sales quote preparation, even the small and microlevel businesses are leveraging a highly cost-effective system of operation.
4. Automated Reporting System and MIS Generation
Management Information System (MIS) reports are crucial for any organization, be it a large corporate body or a small or microlevel enterprise, to ensure an effective and efficient decision-making process. By implementing a robust MIS reporting system that generated real-time and accurate financial reports, one of our client organizations: a global pharma company that had recently ventured into its India operations, was able to track its cash flow, profit margins, and expenses to a much greater precision, enabling their leadership team to make informed decisions, minimize the risk of financial crises, and improve their overall efficiency in financial operations (FinOps) with readily available data in a clear and concise format. Therefore, it is imperative for any business to engage an effective MIS reporting system in its FinOps which would help them avail themselves of the critical data in a clear, user-friendly format making decision-making smooth and seamless.
5. Automating the Payroll Process
Human resources are pivotal for any business organization to thrive. Ensuring a smooth and error-free payroll process is critical for any business, small or large, to sustain. Manually operated payroll processes have several drawbacks since a huge collaborative process is required for it to work smoothly where the HR professionals, the finance team, and the professionals involved in bank transactions need to coordinate in a rigorous manner. With the advent and use of composite automated tools, it has become easier to perform salary calculations, compute tax deductions, and track attendance, all on one single platform in an efficient and errorless way, enabling the FinOps team to focus on their core area of operation.
6. Deploying Cloud-Based Accounting Software Systems
Accessing and sharing all the relevant transaction data of an organization through the cloud is critical these days for the efficient functioning of financial operations in any business. Several cloud-based accounting platforms, such as Xero, QuickBooks, and Zoho Books are providing real-time access to this critical data for the efficient functioning of bookkeeping. These tools also facilitate automated transaction reminders and cost tracking alerts for finance professionals to ensure that they don’t miss any of these crucial updates.
7. Engaging Tax Software Solutions
The application of various tax software and automated solutions has significantly impacted tax management, especially the processes of tracking the due dates and tax reminders. These systems are equipped to automatically monitor the tax deadlines and send timely alerts to ensure compliance with various regulations and reduce the chances of penalties being imposed for the failure to do so. Automation has also streamlined the process of tracking the acknowledgements of tax submission through electronically generated receipts or confirmations, creating a transparent and efficient management of documentation. An automated reconciliation process also enables streamlining of all the financial records with tax filings, identifying the possible loopholes and ensuring accurate reporting of the entire process.
8. Integrating CRM Systems with Finance Tools
In addition to the automation processes discussed above, integrating the Customer Relationship Management (CRM) systems with various financial tools helps in automating numerous operational tasks and a smooth transition of a prospective client base into the process of revenue generation.
9. Streamlining Auditing with Automation
With the introduction of automation in auditing, companies and business organizations have been able to streamline their workflows and maintain a regular check on regulatory compliance. Some of the key benefits of automation in auditing are
10. Adopting AI-Driven Forecasting Tools
Specifically designed and developed AI (Artificial Intelligence) tools are tailored to perform an in-depth analysis of the available historical data of the finances to predict accurate cash flow and revenue forecasts. These tools are crucial for the accounting as well as market research sections of the businesses and for financial planning and service providers for various clients. A recent survey has shown that 50% of the companies that have deployed AI-enabled tools in their FinOps have attained benefits in their businesses including the ease of program management in their overall operations. The survey also shows that the companies adopting AI-powered tools in their FinOps have a 53% more likelihood of generating more than 20% of cost saving.[1]
Key Benefits of Automating the Financial Processes
Conclusions
The introduction and adoption of automation in FinOps has become crucial for companies and business houses to sustain and thrive in today’s highly competitive corporate landscape. The implementation of various automation tools in the financial processes has helped the Global Capability Centres (GCCs) to evolve into Centres of Excellence (CoE), leveraging the advanced technologies in their areas of expertise. Thus, enabling them to focus more on strategic value-added tasks, ensuring a key transformation of business for their clients.
At Advith ITeC Private Limited, our approach has been to focus on automating the FinOps with a 9-step Digital Process Automation (DPA) strategy that includes identifying objectives, mapping current processes, selecting the right tools, designing the automated process, integrating systems, testing, deploying, monitoring, and optimizing the financial processes. This approach has enhanced productivity, reduced costs, provided a higher rate of accuracy, and the ability to quickly adapt to changing business needs. By automating repetitive tasks in FinOps, our strategy has allowed businesses to focus more on innovation and strategic growth.