Automation the way Forward

Working in Accounting and Finance arenas call for big volume of data handling with multiple parameters to be set (GL account, cost centre, profit centre, internal order, tax codes etc).  This brings in multiple complexity viz, trained manpower, adequate infrastructure, timely availability of data, processing data within time frames set, error free accounting, possibilities of fraud and many more.  With the above mentioned complexities becoming more pronounced it is always deemed fit to bring in an element of certainty to big volumes of data.  This certainty can be achieved through two modes 

1. Value Engineering - redefining processes to optimize on resources used so as to ensure timely completion of tasks with best usage of all human, financial and infrastructure resources  
2. Automation

Value Engineering may be less expensive and can be performed with existing resources and it will bring in small incremental positive changes over a period of time and it is a long drawn process which needs involvement and commitment of senior management at all times.

Automation on the other hand will be expensive, calls for a paradigm shift and it involves major decisive decisions to be taken by senior management.  However once it is achieved it can bring in bigger savings in costs, improves processes, decreases times spent and more importantly brings down risk of fraud and thereby having a better internal control.  Let me bring about an example of vendor invoices booking, payments, accounting and bank reconciliation.

In an organization of turnover size say about $ 1 billion with presence in multiple countries there may be around 200,000 vendor invoices to be processed every month.  Every country in which these invoices have to be accounted will follow the same accounting rules as they may follow group directives either under US GAAP or IFRS, however differences will be there in tax accounting.   Without automation every country have to set up their own processes for accounting these vendor invoices and set up procedures for payment and recording these payments and subsequent bank reconciliation.  Challenge is to ensure that these process are sound and there are no risk of internal controls.  Now, think about automation of invoice recording say through VIM (Vendor Invoice Management) wherein all vendor invoice booking is automated through multiple automated check points.  Once these invoices are auto booked & checked by a quality control setup there is error free accounting without manual intervention.  Next to payment, a set up of auto run based on dues dates and then a quality check by a payment team should link the payment run from the entities ERP system directly to bank servers meaning there should be an interface between entities server and bank server (through a secured communication line) so that on a trigger automatically all payments which are processed in auto run can be uploaded directly into bank system without manual intervention so that there is quick data upload and there is no issue on internal control.  Once payment is approved and paid bank should back flush payment details through set of secured communication lines bank to entities server which can account the same and reconcile with bank statement through a process of automatic bank reconciliation process.   Sounds quite complex?  No, it is not.  This can be set up fairly quickly for a company size of $ 1 billion turnover over a period of 6 months with minimal cost.  This will bring in savings and synergies and payback will be quite fast.

Conclusion

An organization to be successful should look to optimize its resource utilizations, which can be easily achieved through well thought off automation for which a good CFO is imperative who can lead this from the front.  

https://www.toptal.com/finance/interim-cfos