Uday Hegde is CEO & Co-Founder at USEReady a NYC head quartered firm focused on data and people.
Technical debt is apparent in no other department more than finance departments. Covid-19 effects have thrown light at the plight of finance departments. A recent example is how banks handled U.S. SBA-administered Paycheck Protection Program. As borrowers lined up to the banks with an added pressure of first come, first served, banks’ technology investments were put to test.
Some of the largest banks in the country failed to support their small and midsize business customers and received flak for it. Interestingly, several smaller regional banks did more loan processing than their larger national counterparts. It was clear that digitally transformed banks have emerged as clear winners in this test.
On the other hand, borrowers’ own finance departments were no exception. As the borrowers were under a strict deadline to submit their application, finance departments scrambled to get their documents out to the borrowers. There are several cases of employees’ personal information being exchanged via unsecured means. How prepared are we for another such pandemic?
This begs for a disciplined approach in which organizations identify, invest in and automate as many approved business and IT processes as possible. Automation and hyperautomation emerge from this school of thought. Below are seven different automation opportunity scenarios that exist within a finance department.
1. Monthly employee expense and forecast process: The process typically involves one or several employees manually pulling data from multiple source systems and saving them into multiple Excel files for management reporting needs.
2. IT cost allocation exercise: As part of its IT cost allocation exercise, the finance team pulls its cost data into Excel format from a third-party vendor system.
3. Ad-hoc requests to information: Decision-makers across departments at times require details of a particular expense transaction that may not be readily available in the reports being made available to them — and even if they are available, they don’t have access to the latest snapshot of data.
4. Manual error-checking tools (e.g., accrued interest or similar transaction-level details): Finance analysts spend a lot of time in data entry, which can lead to typos. In many instances, middle office employees made mistakes in how they entered details of a trade into their internal system (e.g., data for one field was being mistakenly entered into another).
5. Ledger system alignment for regulatory needs: For example, a ledger system used by the finance department wasn’t capturing the P&L on derivative instruments in a manner that would make it suitable for the firm to calculate its tax exposure. This regulatory need required a manual adjustment to the ledger data by relevant process owners.
6. Flash reports for interim use: Finance teams are typically requested to produce flash reports on a regular basis. The demand for flash reports comes from various departments, such as sales, marketing and operations. Typically, these reports are emailed out to concerned people who, in turn, may enhance it with additional attributes and distribute further.
7. Reconciliation and review reports: In a larger establishment, finance analysts from different regions are typically involved in the review process, which basically reconciles details booked in the company’s order entry system with the client’s signed confirmation of the PO in a PDF or unstructured format.
Routine tasks are the smallest units of work that are ideal candidates for automation. Identifying them in every department within an organization is not hard, as most of the labor is typically tied to such tasks. One suggested approach is to examine the headcount in a department and dig deeper into activities that each headcount is tied to. A list of such activities can be created to serve as an initial draft of an automation candidate. Once you have a list of candidates for automation, progress toward the process of automation. This process can happen in stages starting from identifying tasks, business processes and business operations.
People, Process And Technology
From a recent engagement with a large financial institution, we learned that the success of automation depends on people and processes more than technology.
Process decentralization enables us to identify high-value and low-complexity tasks. The “people” factor could become a big impediment if handled incorrectly. Automation is perceived as a threat to job security. This perception often confuses people, and they hesitate to contribute or participate in automation. This fear has no merit if you look at the big picture and involve people in the process. While investing in automation, budgeting for training and education within a department could go a long way in creating psychological safety.
Technology selection plays a critical factor, too. Automation technology vendors are slowly crowding the market, and buyers have a difficult choice with minimizing feature differentiators. In our experience, selecting an automation tool that is easy for nontechnical people with low code or no coding options would be better. Also, consider appointing automation stewards, whose job is to empower people to participate in automation.
Return On Investment
Quite often, decision-makers are asked to justify any investment in automation. One way to establish ROI for the cost of automation is by creating value capture metrics. Few examples of value capture metrics are effort before, effort to automate, saved effort with automation, percentage of improvement, FTE savings, X-factor (x times improvement), the financial impact to the top or bottom line and influence to analyst’s life/career. Don’t forget to share value capture metrics on a regular basis with the broader organization.
Chief Automation Officers
Cultivating a culture of automation requires focus and dedication. Creating the role of chief automation officer or champion at the department level could serve an organization well in generating awareness and developing automation muscle. Every department leader should be incentivized to identify opportunities for automation.
Automation is the next big opportunity to build a competitive advantage and resiliency in the midst of the global pandemic, and I am excited to see this driving transformation in finance departments.
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Uday Hegde is CEO & Co-Founder at USEReady a NYC head quartered firm focused on data and people. Read Uday Hegde’s full executive profile here.
Uday Hegde is CEO & Co-Founder at USEReady a NYC head quartered firm focused on data and people. Read Uday Hegde’s full executive profile here.