Advances in automated payment technology are unshackling finance professionals from purely operational tasks, while also improving cashflow and reducing fraud
This article was first published in the September 2017 UK edition of Accounting and Business magazine.
Are we now witnessing a perfect alignment in the finance function that allows technology to automate many processes, while also offering data that can inform senior executives as they set goals for their business and increase productivity?
According to a recent ACCA study, Professional accountants – the future, 55% of senior accounting professionals believe the development of intelligent automated accounting systems is the external factor that is likely to have the highest impact on their jobs over the next decade. The information generated by this shift will in turn allow professionals to shift their own positions away from operational tasks towards more strategic, data-led roles.
As an example, look at how the way customers expect to make payments has shifted. Earlier this year, industry body Payments UK reported how changing customer preferences and expectations have quickly extended to the payments’ environment, while new technology and the adaptation of existing technology have provided new ways to pay – smartphones and an ever-expanding range of apps that allow payments to be made in a quick and secure environment, as well as competitive and collaborative opportunities driving new innovations.
The implications for the finance function are clear: technology is allowing greater automation of processes that can remove the human element from many transactions, whether in payments or receipts, payroll or report production. At the same time, automation will give the finance function and senior executives a wealth of data that can be used to inform strategic decisions.
Take the invoice cycle – at its simplest level, improvements in a payment process can be a life-saver for businesses. The Federation of Small Businesses (FSB) has campaigned over many years for improvements in the timeliness of payments, as overdue invoices can have such a damaging impact on all businesses. According to its latest figures, a third of payments to small businesses are late, with more than a third (37%) of these businesses reporting cashflow difficulties, and one in five (20%) reporting a slowdown in profit growth as a result. The FSB calculates that 50,000 more businesses could have been kept afloat if they had been paid on time.
The FSB goes on to point out that technology can have a significant impact on reducing these late payments. For instance, ‘request to pay’ features of accountancy and payment mechanisms have the potential to reshape existing relationships between business debtors and suppliers, cheque imaging can reduce the time taken for funds to clear, and electronic invoicing offers shorter payment cycles, reduced printing costs and fewer errors.
Intelenet, a business process services supplier, reports that at just one of its clients, automation has improved turnaround time for vendor payables from 14 days to three days. ‘Right from the purchase order being issued, there is visibility of acceptance of the PO by the vendor. There is also visibility over when the vendor supplies the goods or services, including auto-triggers close to the date of supply for both the vendor and the purchaser,’ says Hitesh Behal, head of Intelenet’s finance and accounting centre of excellence.
The FSB says the possibilities that electronic invoicing provides for greater automation are particularly significant, with integrated processing allowing e-invoices to be generated directly to trading parties. And proponents also point to a reduced risk of fraud, given that businesses will undergo a series of background checks by software providers before being accepted on to their e-invoicing systems.
‘You can clip the invoice to the purchase order so there is no manual intervention, it goes into the payment queue and is then automatically paid,’ says Behal. He adds that disputes over payments can be settled more quickly, as instead of lengthy email chain discussions, vendors and clients alike can use a portal to directly address any issues. ‘This increases the visibility of the number of invoices that are being queried,’ Behal argues.
He also points to the advantages of a system that can be used ‘out in the field’. ‘Sales teams can complete orders on the road instead of having to return to the office,’ says Behal. ‘This can reduce mistakes and ensures the team collect the right name, location and quantity, all of which can be tracked in real time.’
This real-time aspect can be very important for the agility of senior finance professionals. At any given time they will have up-to-date data on sales and purchases, rather than having to wait until month-end reports are produced.
How to use the data
This, of course, is just a snapshot of the data that will be available. All financial data is key to many other business-decision processes and, according to EY’s study Do you define your CFO role? Or does it define you? finance functions must get better at processing and extracting forward-looking insights from large amounts of data, keeping track of new types of data and incorporating them into their models as they emerge.
There are, of course, obstacles that need to be overcome. Intelenet reckons that only one third of businesses have any significant level of automation in place, as it can be a struggle to find the right fit for their business needs. But it is worth trying. As Intelenet’s chief executive Bhupender Singh says: ‘Eliminating the hefty amounts of paperwork that finance professionals have to deal with on a regular basis will save businesses an incredible amount of time in the long run. We see automation playing the biggest role in helping professional services in the areas of connectivity, and information-filtering and analysis. Ultimately, it will allow accounting professionals to become more proactive and less reactive in managing client relationships and driving company growth.’
Philip Smith, journalist
"Sales teams can complete orders on the road instead of having to return to the office, and processes can be tracked in real time"