finance processes to automate

7 Financial Processes Every Business Should Automate

Financial processes aren’t the most exciting tasks to undertake. They also take time and focus to complete. Automation of these tasks takes them off the schedule, leaving time for more important matters. With Business Process Outsourcing (BPO), financial processes can be delegated to professionals. Here’s why financial processes should be automated and the processes that every business should automate.

Why Automate?

Automating financial processes is a critical tool in the financial sector, simplifying tasks and increasing productivity. One of the main benefits of automation is the ability to streamline repetitive and time-consuming tasks, allowing team members to focus their efforts on higher-level responsibilities.

Automation software also excels at identifying errors and discrepancies, which is essential for ensuring the accuracy of financial data. This leads to a more efficient process that generates accurate information in a fraction of the time it would take to complete manually.

Automation also promotes consistency and accessibility in data processing, enabling finance teams to make informed decisions quickly and efficiently. Furthermore, automated systems can enhance the security of financial data by reducing the risk of fraud and errors, tracking and monitoring transactions, and creating alerts for unusual activity. These features help to deter fraud and increase the overall security of financial operations.

Overall, the benefits of automation in finance include increased accuracy, time savings, enhanced security, and improved efficiency, enabling finance teams to achieve better outcomes for their organisation.

Which processes to automate

To initiate process automation and reap its advantages, businesses can focus on several aspects. Initially, enterprises opt for technology-based solutions to automate various aspects of accounting and finance-related processes. As financial data holds paramount importance in all business operations, ensuring its precision and timeliness is crucial. Once this foundation is established, what should be the next focus of companies regarding automation? The following are 7 of the most common and effective types of automation. Automation of these tedious and time-consuming systems will greatly increase productivity.

Data Entry

When companies implement an accounting system, they typically introduce automation to some extent, with data entry and collection often being the first areas to be automated. There are different levels of technology available for automating data entry, ranging from importing data and enabling rules-based workflows to robotic process automation (RPA) and advanced artificial intelligence (AI) technologies.

Automation at a basic level involves importing and reconciling bank statements or integrating with other business systems, while fully automated data entry tools can extract information from structured and unstructured documents using optical character recognition (OCR) technology. The benefits of automating data entry and capture processes include increased accuracy, less time spent verifying and reconciling data, and more time available for analysis to drive process improvements and greater efficiency. Machine learning capabilities can further improve this process over time as the software becomes more familiar with the tasks assigned to it.

Invoicing and accounts receivable

Generating invoices, routing them to various stakeholders for approval, and automatically emailing them to customers are standard features of many accounting systems. However, more advanced accounting software offers additional automation capabilities, such as integrating credit management to establish credit limits for customers and monitoring accounts to identify early signs of financial issues and respond appropriately.

Automation of invoicing creates a more predictable cash flow as responsible clients are identified and payments are made accurately and in a timely manner. This process is beneficial to all businesses, not just those with high volumes of invoicing.

Accounts payable

Automating the accounts payable process is crucial to ensure timely payment of bills and take advantage of optimal payment terms, which can help to retain cash for a longer duration and receive discounts (if available). AP automation technology matches invoices with supporting documents, such as purchase orders and receiving forms, to simplify the laborious task of manually matching documents.

Moreover, the software can set rules to automatically assign the correct general ledger code to each invoice, which eliminates the need for manual coding and minimises inconsistencies. Digital workflows can also notify the relevant approvers when actions are required to ensure that invoices are authorised and paid promptly.

Tax compliance and reporting

Keeping track of taxes and tax compliance is a complex process. Be it sales tax or payroll, it is important to ensure compliance. Taxes demand accuracy which automation can provide.

Tracking exempt customers such as government agencies and non-profits is a common concern for sales taxes. Failure to track these exemptions can affect customer relationships. Collecting and tracking tax exemption certificates manually is time-consuming and prone to errors. Therefore, businesses should eliminate manual tax calculations by using an accounting system with built-in tax logic. A robust platform will determine taxability and the amount to collect for every sales transaction. It will also update automatically to reflect changes in tax laws and provide flexibility to accommodate sales tax holidays or products. This will reduce the burden on businesses in calculating proper sales tax and accounting for it, ensuring that customers are not charged sales tax when they are exempt.

Purchase Orders

The purchasing order (PO) process is a crucial link between procurement and accounts payable involving various departments, often leading to lengthy communication that is difficult to track. Delayed approvals or missed deadlines for POs can impact production, profits, and vendor relationships. Automation and integrating of finance and procurement systems help enhance visibility, accuracy, and efficiency. Automated workflows alert approvers, enabling timely PO approval. Integrating procurement and AP systems helps vendors receive prompt payment by automating the matching of invoices with purchase orders and receipts. By automating the PO process, employees can identify potential problems such as fraud, improving payroll efficiency and accuracy. This shift in focus helps identify outliers and patterns, improving efficiency and saving time.

Expense processing and management

Managing expenses manually involves storing, organising, and handling numerous papers and spreadsheets on both the payable and receivable sides. It is a wasteful process that exhausts resources and patience of employees as they meticulously arrange receipts, mileage logs, and other items to submit manual expense reports for reimbursement to the accounting team. This often leads to multiple interactions, either because the accounting team cannot understand something or because the expense is beyond the defined policy. Companies are turning to expense management automation to simplify the entire process of submitting, processing, and reimbursing expenses.

Moreover, automating expense management has other benefits, such as reducing paper usage, gaining visibility into spending trends to control areas of high expenditure (by modifying the expense policy), preventing expense fraud, and enhancing policy compliance. Automating expense management can even make it easier to prepare and pay federal income taxes by tracking and calculating deductible expenses.

Budgeting and forecasting

Integrating a financial planning and budgeting system with an accounting system can help manage the complexity and challenges of budgeting and forecasting as an organisation grows. The integration allows for accurate and real-time data, eliminating the need for manual data entry or importing and exporting data.

It also enables stakeholders to easily track and stick to budgets and access the data for forecasting purposes. Prebuilt reports and dashboards help compare numbers, spot trends and use the data to make decisions. While full automation of the budgeting and forecasting process may not be possible, the system can help reduce the time and energy spent by accounting teams. Overall, a planning and budgeting application enhances efficiency, accuracy, and accessibility of financial data for better decision-making.

Automation through software and BPO can massively increase the productivity and efficiency of any business. LinkedERP, and partner NetSuite, can provide the tools and resources to ensure effective automation of finance processes. Reach out to LinkedERP for all finance automation and BPO needs.