Ready or Not, Here Comes Accounting AutomationBy
Management accountants should prepare themselves to master the latest technology innovations to provide extra value and help their companies succeed.
During the last 50 years, technology and automation have fueled innovation, efficiency improvements, and cost reductions in the accounting and finance profession. Machines have become more intelligent as computers drive smarter and simplified processes. From 13-column green ledger paper to VisiCalc, Lotus 1-2-3, and Excel to workflow management systems, automation, and enterprise resource planning (ERP) systems, the role of management accountants has shifted dramatically from transaction processing to business analytics, strategic support, and cross-functional business process integration. What do we mean by accounting automation, and how can management accountants use technology to leverage it?
The basis of accounting automation is workflow automation, a set of rules-based processes that help an organization achieve its goals. Companies can use workflow automation software to automate the processing of accounting transactions such as travel claims, labor reporting and payroll processing, and accounts payable. The tools can speed up transaction processing, enforce internal controls, and identify processing bottlenecks. Process automation allows for the analysis of the steps and document flows involved to plan the automated process. Who needs to take action, and what information do they need to have at hand?
Some benefits of accounting automation are:
- Productivity improvements and cost reductions by automating repetitive tasks and reducing human error.
- Faster process cycle time, allowing more timely information with less effort.
- Improvements in internal control through consistent and verifiable application of business rules and processes.
Let’s take a look at an example of an accounts payable automation project.
ROCKWELL AUTOMATION’S ACCOUNTS PAYABLE AUTOMATION PROJECT
Rockwell Automation, based in Milwaukee, Wis., is a provider of industrial automation and information products. With annual revenues of more than $6 billion in FY 2015 and business operations in 80 countries, Rockwell transformed its global accounts payable function with an Accounts Payable Imaging and Workflow Solutions (APIWS) system. According to Paul Smith, manager, global treasury at Rockwell Automation, the company’s objective was to improve productivity and efficiency by migrating its accounts payable function from a legacy, manual, paper-based system to an automated system. The project goals were to reduce processing costs, create a more robust document storage and retention system, and standardize global accounts payable processing. When the project launched in 2009, the company’s U.S. and Canadian operations were processing 1.5 million invoices annually with a spend of $3 billion but were only 40% automated. By project completion, they were almost completely automated. Benefits included lower processing costs, fewer duplicate payments and lost invoices, fewer late payments, adoption of standardized global processes, and improved regulatory compliance for tax and Sarbanes-Oxley Act requirements through automated controls.
THE FUTURE OF ACCOUNTING AUTOMATION
Accounting automation forecasts range from continuing refinement of the tools and techniques to increased efficiency of financial management to full replacement of the accounting and finance functions by artificial intelligence (AI) machines. Additional trends include Big Data and analytics and smart machines. Big Data and analytics can scan large volumes of data and perform analytics with sophisticated algorithms to facilitate decision making in the accounting and finance function. The sheer volume of the data prohibits traditional spreadsheet analysis. Smart machines can be taught a set of decision rules and learn how to handle variations and new conditions while AI agents can perform analytical and judgmental tasks currently performed by humans.
Proponents of the AI future suggest that finance and accounting professionals primarily apply specific rules to a particular transaction or event and that a smart machine can codify and “learn” these rules. This machine would take the same inputs as today’s finance professional and derive the appropriate answer automatically, reviewing feedback to refine its logic and project how to handle unforeseen circumstances. This position was highlighted in an SF Technotes blog on November 24, 2015. (See http://bit.ly/1oMM8dZ.)
Also, the joint research study by IMA® (Institute of Management Accountants) and ACCA (Association of Chartered Certified Accountants), Tomorrow’s Finance Enterprise, looked at the key influences shaping the future role of the CFO and the finance enterprise of tomorrow (http://bit.ly/1otUOAy). One influence studied was automation and robots and how they will support business and help improve the core finance processes. But it isn’t a done deal, and Section 4 of the study, “New Technology Frontiers,” concludes with the caveat that “There are more opportunities for automation in many finance teams, yet the application of robotics software to core finance function activities needs to be better understood. At some level of maturity, further automation may not bring enough marginal return. Does investment become a question of agility rather than efficiency?” Management accountants can play a key role in identifying automation’s acceptable return on investment (ROI) for their organizations.
MANAGEMENT ACCOUNTANTS, TAKE ACTION
The accounting automation floodgate is open. Should management accountants be optimistic about a brighter professional future or be concerned about shrinking career options? Don’t sit back—take action, and prepare yourself for the future:
- Students, take courses that include IT and process improvement. Then you’ll be prepared to help your future employers leverage technology to make the finance and accounting function more efficient and effective. Professionals, do the same.
- Look for opportunities to use automation tools to improve the efficiency and effectiveness of your organization. Stay current on new tools and technologies, and make a business case for the ones that make sense.
- Don’t get complacent. Evaluate your current job functions and your ability to adapt and grow with the technology changes that are inevitable. If you are currently in a transaction processing job or maybe are the ruler of all things Excel, you may be at risk from automation. Take technology classes, and volunteer for technology projects at your company that expose you to new ways of thinking about your job. Attend IMA TechTalk webinars to learn about emerging trends. Take a big-picture look at ways to make your organization more competitive and efficient, and don’t be afraid to reinvent yourself into a new job. If you don’t, you may get left behind.
THE HUMAN FACTOR
Although robots may someday rule the world, it will be challenging to automate everything humans do. Management accountants bring an understanding of the context, culture, and history of their businesses. This is essential to the development, monitoring, and refinement of strategy and the application of appropriate accounting principles and standards. Accounting isn’t always black and white and is subject to judgment. Can automated accounting processes make the right call?