Archives For Finance Transformation

2015: Year of the Robot?

accapr —  12 January 2015 — Leave a comment

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By David Poole, CEO of Symphony Ventures 

Automation of business processes through Robotic Process Automation and Artificial Intelligence is the subject of a great deal of speculation. Is the accounting profession on a collision course with these game-changing technologies? Is the future bleak or bright for today’s Accountant?

In the recent ACCA white paper, Digital Darwinism: Thriving In The Face Of Technology ChangeFaye Chua and her contributors make some very insightful predictions about the emerging role of technology in accountancy. The chapter on Artificial Intelligence (AI) and Robotics offers an interesting view into the potential role process automation can play in improving systems, reducing costs, and increasing accuracy. As an accountant by training, I am fascinated by what the future holds for this industry.

While far from envisioning a world where mechanical robots can credibly take over the complex and intuitive role of the accounting professional, I believe software robots, or Robotic Process Automation (RPA), are indeed capable of handling labour-intensive tasks in a highly efficient manner. These software robots don’t sit at a desk, but toil quietly behind the scenes, easing the burden of routine monthly tasks including data collection, reconciliations, complex journal entries, compliance testing and master data management (to name but a few). Once ‘taught’, they faithfully follow the processes accurately and reliably until told to stop. They don’t mind working 24/7 or skipping lunch breaks. They never quit, and a fleet of them can upskill as fast as you can say ‘copy/paste’. Millions of bits of data can be processed, analysed, and computed more quickly and efficiently by a handful of digital accountants than by dozens (even hundreds) of junior assistants.

An inevitable trend

The fact that robots can access multiple systems at once and make complex calculations means that as long as a process can be documented and the data is digital, the software can do the work.  The accounting world is well served by very good ERP and finance software which has automated many accounting tasks and created enormous value over the past 20 years. However, there are still a very large number of accounting staff and, some might say, more now than prior to the advent of ERP systems. It’s these human roles that are the target of robotic assistants.

So, how, you might ask, do you take advantage of this trend rather than being thrashed by it? It’s an important question, because automation in accounting is inevitable, and having a plan is critical.

Planning for Automation in Accounting

Your goal in the early days should be to gain a comfort level with automation and introduce it in ways that encourage adoption (rather than resistance).  One such area is for Digital Labour automation to take over the most onerous of tasks so that accountants can focus on the high-value work that best takes advantage of their background and knowledge. This will also create more fulfilling roles for junior staff as they can focus on analysis rather than process. Conservative estimates have such automation infiltrating most accounting offices within the next five years.

The robots can either work as assistants to teams of accountants, making them far more efficient, or can take over entire tasks and work independently in the background. For instance, it’s possible for robots to manage bank reconciliations in real-time and then escalate complex issues as they arise to a human colleague. And, as some have foreseen, the robot may then learn how to solve that problem independently next time it arises.

Areas of Opportunity

Once a comfort level has been achieved, one need not look far to find ripe areas of opportunity for automation. Firstly, look for areas where interfaces with business systems are either nonexistent or only partially implemented. This is robot nirvana. Robots are very efficient at completing integrations extremely quickly, cheaply, and often more reliably than building interfaces to legacy systems. For example, collecting, summarising, and posting sales data, order data, commitment data and so on.

Secondly, there is an ever increasing demand for analytics and reporting to add value to the business.  Robots can rapidly access data from multiple accounting and business systems and present results and insights to a human colleague. For the time being, robots are not as capable at interpreting the results of the analysis in the context of a specific business or industry. However, it’s only a matter of time before even the most nuanced and complex cerebral tasks are being automated as well – thanks to Artificial Intelligence software development being one of the hottest and fastest growing areas of R&D.

The Numbers

As accountants, it’s important that the numbers add up – that this is not just a management fad. Well, they do. All of the tasks described above can today be achieved at a fraction of the cost of employing humans. A single software robot can cost a small percentage of an FTE and yet perform the tasks of multiple humans, work longer hours, and do so with far more consistent results. They can also do so in a format that is highly compliant and auditable. Obviously the set up and implementation of a digital workforce is not straightforward and requires professional help and advice. Typically, however, even with the upfront investment and time taken to implement such automation, it is not uncommon to see a break-even within one year and a 3-4x payback on the initial investment over a period of three years.

With such a clear business case, the march of the robots is inevitable. The question is not ‘if’, but ‘when’ will you need to take a long hard look at the potential of Robotic Process Automation and Artificial Intelligence in your finance function? Many organisations are creating specific automation budgets for 2015 to start to develop their knowledge and capabilities around these new technologies.  The potential across the organisation, not just in finance, will be material in the coming years. Automation projects truly are transformational, but without the huge systems and wholesale restructuring that went along with ERP-grade transformations of the past.

The robots are indeed coming. The value they bring is real, and the competitive advantage they enable is significant. So make 2015 the year of the robot, and begin investing in the future of your profession and your firm.

Jamie Lyon NEW PHOTO

By Jamie Lyon, head of corporate sector, ACCA

Collaboration, collaboration, collaboration should be the new mantra for corporate evangelists. Speaking at our Asia CFO summit last week, I had the temerity to suggest that finance had to up its game in working cross-functionally, and that future business growth was dependant on greater collaboration between the CFO function and the rest of the executive team. In a customer focused and digital knowledge economy, collaboration is king to evolving the business model, realigning operational processes and mining (in particular) the enterprises’ intellectual capital to create value. Consider one of today’s most prized enterprise assets – data. Today, there are countless examples of savvy enterprises who continue to invest in breakthrough technologies to leverage the power of the data at their disposal. Yet we also know that many enterprises still aspire to a single source of data truth. Functional responsibilities continue to blur in the great data debate, and the unspoken question at the C Suite table remains this: who takes ownership or leads the enterprise wide agenda in this critical asset class?

I am duty bound to say the CFO function has an outstanding case to take the leadership role here. The CFO is the steward of corporate value, the keeper of the purse strings, and it is they who must primarily drive required enterprise ROI. But in today’s connected environment, understanding and leveraging the value of enterprise IP is critically dependant on reaching out and building alliances with the CMO, the CIO, the CHRO and other new emerging C suite roles; the assets and processes that create corporate wealth today typically have little respect for functional boundaries. The data example provides an outstanding opportunity for CFOs to move the dial on peer collaboration. Collaboration of this kind will bring much greater clarity and agreement across the executive table on the processes that will create value in the future, it will mean a much more effective capital allocation strategy for the business, and it should help the CFO lead a clearer line of sight tracking, measuring and reporting on the enterprise activities that matter most.

Collaboration, collaboration, collaboration. A new year’s resolution for every CFO.

Jamie Lyon

By Jamie Lyon, head of corporate sector, ACCA

We’ve been talking about finance transformation for some time. The early 1990s witnessed the first moves towards business shared service operations, and yet our programme of work suggests many finance departments are still in the early years of adoption; remarkably some haven’t even started yet.

You could be forgiven for thinking finance transformation should be an art that has been mastered by now. It hasn’t, because enterprise change is difficult and amongst many other things, it’s about people change. All the experience and all the evidence continues to point to massive change challenges in changing the finance enterprise to drive down cost (and yes, its still a cost play, contrary to what some may say), and improve efficiency and value. ACCA is currently leading a global programme of research on how finance functions can become more effective. Its smart finance function campaign seeks to understand what practices the CFO organisation is adopting to drive more value for the organisation. Finance transformation has been, and continues to be, one of the ways in which the value equation can be addressed. But truth be told, many enterprises and CFOs continue to struggle to deliver all the benefits once promised. So what goes wrong? Perhaps my colleague Deborah Kops of Sourcing Change hits the nail on the head: ‘One of the biggest challenges for finance leaders is acknowledging that there’s no set of regulations for change. Mastering what is often considered ‘soft stuff’ is key to transformation success. It’s generally not comfortable for a profession that lives by rules.’

ACCA’s think-tank on business and finance transformation, which includes senior executives from some of the world’s leading enterprises that has decades of change experience such as Deloitte, Shell, Accenture, Unisys, Pearson, and GSK, has just released its latest report on finance change, and identifies 10 key requirements needed for effective finance function change to take place.

They are:

  1. Establishing the vision – the criticality of spending time conveying the transformation vision and goal.
  2. Buy in – The importance of CEO and senior management support and sponsorship of the programme.
  3. Communication – The need for constant communication on what is changing and the rationale for change.
  4. Preparation – Ensuring finance teams are bought in and committed to the change, and having an effective plan to manage the change process.
  5. Resources – Access to adequate programme resources at each critical stage of the transformation process, from developing strategy to achieving ‘business as usual’ acceptance.
  6. Patience – Accepting that large finance transformation initiatives can be revolutionary and evolutionary with most change processes taking longer than expected.
  7. Organisation redesign – Remembering that redesign and use of finance shared services or outsourcing necessitates change in the retained finance function too – the imperative of changing the finance enterprise in its entirety.
  8. Maintaining middle management – Successful change management is key to retaining the middle layer of finance management that is critical to core processes. Yet all too often, middle managers’ numbers are aggressively reduced to justify a business case for shared services and outsourcing, or they are lost in the shuffle.
  9. Alignment between capability and ambition – Often finance leaders overstretch themselves to realise a vision that is way beyond their, or their enterprises’, ability to achieve. Being realistic about the organisation’s change potential is essential.
  10. Working within the culture – Those who implement complex, multi-scope, multi-geography finance transformation programmes, particularly in business-line-led organisations, will experience the greatest change challenges. Gauging the type of change the culture will allow is an imperative.

Find out more about our Smart Finance Function campaign at www.accaglobal.com/smart.

This blogpost was first featured in CFO World in July 2014 

Jamie Lyon

By Jamie Lyon, head of corporate sector, ACCA

How will the finance function fare in the face of significant disruptive future changes in our business and personal lives? Broad social changes, the unstoppable rise of digital, the new “technological” industrial revolution, a much more mobile connected and powerful consumer generation, transitioning business models, a much more challenging competitive landscape, the proliferation of risk, and so on. All of these, and other changes, present new challenges, as well as new opportunities, to businesses. By inference, they have significant implications for the future finance organisation too.

At ACCA, we believe the future for the finance organisation is bright, and the changing business landscape presents new opportunities for finance leaders. It is fair to say the historic reputation of the finance department has been biased towards stewardship, the control centre of the enterprise. But in an increasingly complex, volatile environment, whilst control and risk management responsibilities remain essential, too often the nomenclature of “back office” has been used to describe finance activities. This belies the increasingly critical role finance will have to play in leading the enterprise in its growth strategies, and providing the important financial insight it needs to drive value. Smart finance functions will ensure they strike the right balance.

Over the next 18 months ACCA will lead a global campaign to understand the leading practices finance functions are adopting in their goal to becoming smarter. How are best-in-class delivering the insights that make a real difference to corporate performance, whilst continuing to drive effective stewardship and control of the enterprise. The campaign has already identified a number of critical areas in which progressive finance functions must look to excel. Over the next 18 months, it will seek to understand and showcase the good practices, challenges, issues and opportunities corporate finance functions face in working smarter in four key areas: the quality of its leadership, the extent to which it effectively uses technology, its human capital practices, and its ongoing ambitions to transform the function. Visit accaglobal.com/smart for further information and to access our ongoing thinking in this area.

Jamie Lyon

By Jamie Lyon, head of corporate sector, ACCA

To my eternal dismay I don’t really get much time on the iPad these days. I don’t have to look far, however to find where it is – invariably it’s in the clutches of either my seven year old daughter (worrying), or my three year old boy (worrying, but for different reasons). Their relationship with this sort of technology however seems very intuitive, dare I say almost hardwired. Technology will be even more coded into their future daily existence, probably beyond the realms we can imagine right now. It’s fascinating to watch, and it’s an extraordinary time to be alive.

Today’s rate of advancement in technology is exponential but I can’t help but think the technology we are becoming accustomed to in our private lives isn’t quite reflected in our business lives. There is no greater example of this than what’s been happening (or not happening) in corporate finance organisations over the last decade or so. If the finance organisation is serious about driving value and supporting the business in its strategic imperatives, one of the things it has to get serious about is the technology it has at its disposal. I don’t, however, subscribe to the view that technology is the panacea to all of finance’s problems, the one-stop solution to deliver the sorts of financial and operational insights the business is crying out for… but it would be naïve to underplay its growing importance, particularly with the digitisation agenda.

So what’s stopping finance technology delivering on its promise? The obvious one is investment costs and multiple legacy ERP systems not being fit for purpose; too much manual workaround, too much time trying to get to the number rather than understanding and explaining to the business the implication of the number. Where we have seen investment in finance technology, typically the investment is focused on streamlining and driving down cost, rather than investing in the sorts of capabilities that are predictive and insightful. But there are arguably other issues too. Has finance shown the necessary finance leadership in the technology agenda? Does it truly understand and can it explain the business case for finance technology investment? Does a typical finance function “culture” present challenges to really embrace the opportunities that technology provides? Is it because finance is too risk averse? Why isn’t it adopting the cloud much? Is the payback on technology that creates insight rather than headcount reduction just too hard to quantify? Is it a capability issue with finance playing “catch up” on the skills it needs to make technology truly deliver?

Lots of questions, not many answers. We explore all of these issues and more in ACCA’s latest CFO report Is finance function technology delivering on its promise? 

I’ll leave with you a final thought – I think the corporate insight agenda offers CFOs and the finance organisation a great opportunity for internal influence and moving the dial on the corporate reputation of the finance department. I also think embracing and making the case for technology and tools is essential to achieving this. My observation is this: if finance doesn’t take this opportunity to lead the insight agenda, perhaps someone else will…

This blogpost first featured in CFO World, February 2014