Archives For IT

By Andrew Burgess, Director, Source

As a sourcing advisor, I’ve been telling anyone who will listen that the robotic automation of business processes is set to fundamentally change the nature of the BPO market. The stark truth is that, to date, most of the real-life success stories have been in industry verticals such as telecoms, so, if robotic automation is to really live up to its full potential, then it should be able to have a significant impact on those generic business processes that are carried out across all industries, in particular finance and accounting, specifically accounts payable (AP).

To date, the biggest improvements in AP processing have been down to three approaches:

  • Getting manual information into the system electronically e.g. scanning and optical character recognition
  • Automating the processing as much as possible through workflow
  • Standardising the data fields to improve interfaces e.g. electronic data interchange

Through our research at Source, we believe that robotic software automation presents significant further opportunities in a number of areas, including: cross-system manual processing, data gathering and reporting, reconciliation of matching errors, monthly account closure, bulk data updates and ERP IT processes. Some of the key ones are discussed below.

Cross-System Manual Processing

Typically, humans are used to providing a flexible interface between a number of different systems that are used in a process – this is colloquially referred to as ‘swivel chair processing’ – data is read by the human on one system or screen and keyed into another system, sometimes with additional steps inbetween.

Middleware can provide solutions to these interfaces but they are typically expensive and complex to implement. Software robots provide a much simpler implementation of the interface, carrying out exactly the same steps as the human but at a fraction of the price. This requires no or minimal system intrusion and provides 100% consistency with the process requirements.

For example: Barclays Bank work with robotic automation software has resulted in a £175 million p.a. reduction in bad debt provision in their Accounts Receivable function and over 120 FTE saved.

Reconciliation of Matching Errors

One of the most manually intensive processes in the finance function, and in AP particularly, is the reconciliation of errors due to incorrect matching of data between documents. Because this process requires inputs from different systems is inherently non-standard in each case and can require some judgement, it is usually carried out by humans.

By using inputs from other data sources, processing different matching options far faster, and applying semantic reasoning, robotic software automation can replace much of the reconciliation task, thus significantly reducing the number of people required.

For example, the excess queue procedure at the Co-operative Bank is carried out daily to accept, reject and return direct debits, cheques and standing orders. Overnight BACS (Bankers’ automated clearing services) processing results in a daily ‘queue’ of customers with payments due to leave their accounts and with insufficient funds to meet these payments. A nine-person team in the bank would have the daily responsibility of manually reviewing the 2,500 or so higher risk accounts. The automation of the entire procedure means that the bank now has a ‘virtual’ team of 20 people completing the workloads by 11am each day instead of a team of employees working to meet a 3pm daily processing deadline.

Monthly Account Closure

The monthly account closure is typically a complex process involving many data inputs, plenty of reconciliation and some elements of judgement. The number of people involved in the process is typically very high, and the time taken to close the accounts has a direct impact on the financial position of the company, but must be 100% accurate.

Previously, much of the reconciliation work has required human input across many data sources – robotic software automation combines a number of the approaches already mentioned into one critical process. By being able to access multiple data sources, make fast but relatively complex decisions (and to do that 24×7) software robots can significantly reduce the labour required, and the time taken, to close monthly accounts.

For example: a group of 250 NHS trusts have automated their month-end-close process. The process initially took 15 people 12 days; but it is now down to 2 people and half a day through automation.

With a software agent costing around one-third of a typical offshore Business Process Outsourcer FTE, and one-ninth of an onshore FTE, there are clearly some significant benefits to be gained from exploiting this new technology. Therefore, I would suggest a consumer of BPO services should be considering an ‘automation strategy’ as the best way forward. At the same time, I would urge the software vendors and BPO providers themselves to focus attention on this potentially huge opportunity. If you’d like to attend a free event on 27 November 2014 and hear from four speakers who have implemented RPA in their own organisations, then visit: http://www.source.co.uk/opinion/automation-blog/item/208-event-the-naked-truth-about-robotic-process-automation

cloud computing

By Raef Lawson, Ph.D., CMA, CPA, vice president of research, IMA

Some metaphors are perfect, enabling you to conjure up a precise image in your mind. Other metaphors: not so much. If you’re confused by the term ‘the cloud,’ you’re not alone. But ‘the cloud’ is easier to understand than you think – and it has the potential to reshape the business and accountancy profession over the next decade and beyond, according to a recent report from ACCA and IMA, Digital Darwinism: Thriving in the Face of Technology Change,

In the early days, ‘the cloud’ was simply a metaphor for the internet. As this evolved from a network that connects millions of computers into a network of interactive computing platforms, the metaphor evolved too.

Organisations of all kinds now supply and use a growing range of cloud-based IT resources ‘as a service’ rather than ‘as a product’. Physically remote software applications, computing power, and data storage can be accessed online from fixed and mobile devices, providing benefits that can include:

  • 24/7 access
  • ability to scale up and down to meet demand
  • reduced up-front costs
  • pay-as-you-go charges based on consumption
  • lower management overheads
  • reduced maintenance costs
  • rapid implementation times
  • easier data-sharing and collaboration.

As with many types of technology, levels of adoption vary across geography, industry, size and type of organisation, and profession. In our profession, accountants are already exploiting different types of cloud and cloud-based services. For example, systems for bookkeeping and accounting were among the first software applications available as online services.

There are two types of cloud deployments – public and private – and each brings its own challenges. A recent survey of IT professionals (IDG Enterprise 2013) found that private cloud deployments outnumbered public ones. That’s likely the result of concerns over public cloud resources, including data security, privacy and sovereignty, and the transmission and storage of data outside national boundaries. Many of these concerns are driven by regulations, such as the UK Data Protection Act and the US Patriot Act.

There are other areas where public cloud services and their consumption-based, pay-as-you-go approach can create challenges for accountants and their organisations. For example, lack of integration between systems and their associated data can be a barrier to efficiency. Other concerns range from the expectation that IT systems will be (because they are online) available at all times to the widespread misconception that pay-as-you-go is always the most cost-effective way to resource IT.

Despite these and other challenges, most organisations will continue to access IT resources using both traditional and cloud-based systems well into the foreseeable future. What’s more, the ACCA and IMA research found unanimous agreement on the significance that cloud computing will have as it becomes increasingly adopted by accountants and the finance function; some 72% expect this to happen during 2014-2015.

You can read more about this and other technology trends that are impacting the accounting profession by visiting the ACCA and IMA website, www.roleofcfo.com.

By Jason Piper, technical officer, ACCA

To people of a certain age, programmable digital computers were The Future, promising 3 day working weeks, the end of manual labour and untold leisure time. For another generation, they are all about social interaction, and keeping in touch with all your friends and contacts from the comfort of your own sofa.

But for one group of people, computers are the cause of misery, delays, frustration and expense, the cause of longer working hours and a replacement for human interaction. Those people of course are tax agents, taxpayers and in fact anyone who has any dealings with HMRC. Over the past few years, HMRC has pushed technology as the solution to all its woes, and the replacement for all (well, a sizeable chunk) of its staff. And has the computer really improved things?

Case study 1: Penalties. In October 2008, the Revenue computer sent out a penalty notice to a taxpayer, in the name of Mike Christensen. Unfortunately, Mike Christensen had retired that August, and so the penalty was invalid and had to be withdrawn. But because no-one had told (ok, reprogrammed) the computer, it had issued several months worth of invalid penalties – and Mike Christensen was the Area Director, so it had probably issued thousands of invalid demands to taxpayers in that time. Verdict: an embarrassing error, though many of the actual penalties had probably been rightfully assessed and could have been reissued.

Case Study 2: CIS refusals. Up until a couple of months ago, HMRC routinely refused building companies the benefit of “Gross Payment Status” in the Construction Industry Scheme for three technical failures in tax compliance – and the letters were sent out automatically by the computer. However, the tax tribunals pointed out that the legislation required HMRC to exercise some discretion, and that meant human intervention into the process. To their credit, the CIS team instantly dropped all their ongoing disputed cases where the computer had issued refusal letters (around 50, an indication of how dissatisfied businesses were with the computer’s decisions), and revised the process so that judgement is now exercised by an HMRC officer. Verdict: A failure to fully appreciate the terms of the underlying legislation, but a prompt and reasonable response by HMRC.

Case Study 3: Debt Collection. Described by one MP as “scaring old ladies and pensioners”*, one of the computer’s finest moments came when it started sending threatening letters out to taxpayers, warning them of impending bailiffs and auctions of their goods to settle tax debts. Not only were the letters short on contact details for the taxpayers to respond, they were also light on the details of the tax debt. For the very good reason that in many cases, there wasn’t one. Verdict: No excuse. A basic programming error left the machine responding incorrectly to nil submissions. We can and should demand better of a publicly funded body.

So what’s the overall conclusion? No doubt computers have a (huge) role to play in administering tax in the UK – I haven’t listed the tax code debacle under NPS (National Insurance and PAYE Services System) above, for the reason that I still believe NPS is a Good Thing; the coding issues arose from HMRC failures in project planning and communication. But taxpayers (and their agents) are all, ultimately, human. We need human contact, and the good sense that humans can bring to the mind numbing complexity that is the UK tax system. Maybe we can’t go back to a Dixon of Dock Green style policing of our tax system, but we need to stop the headlong rush into the Big Brother ‘steel plate in the wall’ dystopia. Digital by default is fine as a communication channel, with humans at each end, but must not become a digital abyss into which taxpayers time, money and efforts are poured with no guiding mind to make sure that things run sensibly. Administrative efficiency is only useful so long as it is also effective, and computers cannot measure that, only properly trained Revenue officers.

*Taken from uncorrected committee evidence