If you want to successfully compete in today's market, you have to respond to numerous new challenges and uncertainties in your day-to-day business. In 2020 in particular, the degree of digitization tipped the scales and companies with paper-based processes in particular struggled to cope with the changing requirements. Far more so than digitally set-up organizations. Since then, the digital transformation of business models and processes has topped the list of priorities.
CFOs, controllers, accounting professionals and accounting managers who had already implemented process automation software had long been able to reap the benefits of digital workflow management. They were able to respond quickly to change and build on their competitive advantage. But companies with accounting departments that are still trapped in an analog world are falling further and further behind.
Decision-makers in a wide range of industries have had to increasingly address the question of how to automate their business processes, not least to better support employees working from home. While some executives have found ways to help their teams achieve greater efficiency, productivity and revenue, others have delayed the inevitable. Still others are somewhere in between. They're struggling to implement the right tools, but can't seem to break free from some manual processes. Although individual industries are already starting to recover in 2021, accounting executives around the world are looking to efficiently manage their risks and fully digitize their operations for a more resilient future.
6 Accounting Challenges: Limitations and dangers of manual processes
Often companies don’t realize the high cost of manual processes until they see the effects of low productivity on their bottom line. That's because even if the company can achieve growth, executives find it difficult to scale smoothly. The following challenges can negatively impact further expansion of the business:
- Changing Compliance Requirements. Teams often align processes and workflows with applicable state or regional regulations. But when those requirements change a short time later, they must drastically revise their workflows.
- Inhibited productivity. Manual processes can mean extensive training for new employees. It doesn't matter if they have to fill out a purchase requisition or manage accounts receivable and payable. Each team member is likely to complete tasks in their own way, leading to inconsistent results. When they leave the company, they take valuable institutional knowledge with them.
- Added burden of paperwork. From searching for documents to gathering the right data for compliance audits, paperwork always involves costly and inherent delays. In addition, companies often have to pay to archive records and store them off-site.
- Lack of oversight. What’s the status of an overdue invoice? Has a purchase requisition or accounts payable invoice been approved? Without oversight across projects and accounts, managers risk approving erroneous transactions or failing to notice growing problems until it’s too late.
- High-consequence errors. People are the weakest link in the digital age. While this is true in any industry, manual accounting errors can put customers or suppliers in dire straits and result in financial losses for the company. The department may not collect what it is truly owed, pay when it shouldn't, confuse suppliers or lose profitable customers.
- Talent loss and declining morale. It is now very likely that a mix of working from home and working from an office will become the norm. However, manual processes do not support this model. In addition, the cost of employee motivation for an analog workplace is comparatively high in the digital age. This is because employees know that there are available tools that can make time-consuming tasks easier. Generation Z and Millennial employees are especially dissatisfied with non-digitized workplaces. The first time a new accounting manager tries to run a report that requires an hour of manually inputting data into a spreadsheet may be the day they update their resume.
Adaptability and resilience: digitizing accounting in 2021
Last year's challenges exposed weaknesses in accounting departments that depended on paper-based and manual processes. It became clear that companies that had already started their digital transformation journey were better positioned. They were able to swiftly manage the shift to work-from-home and the need for secure remote processes. Nevertheless, these companies also had to act quickly and implement short-term solutions to keep their operations running.
Consequently, digitization and automation of these paper-laden processes was the focus for those companies that were able to lead the way as trailblazers during pandemic times. But not all of them were equally successful. This is because many factors play a significant role in the digitization of accounting through a process automation solution. These factors determine the added value of the digital processes and the potential of the modernized workflows. Therefore, decision-makers should pay attention to a number of functions when selecting a suitable solution:
8 important functions of digital process automation:
- Low-code for fast and flexible process automation, validation and optimization by citizen developers
- Mobile functions for document capture, processing, and approval
- Matching supplier invoices with purchases orders, goods receipts and contracts
- Integration with your existing (and future) IT landscape
- Capture, extraction, processing, creation, storage and retrieval of documents
- Flexibility to scale as your business grows
- Control and compliance with audit trails and role- and rule-based access controls
And, last but not least
8. And, last but not least – it should be easy:
- Easy for users with roll-outs that are quickly adopted and require little or no training, customizable user dashboards, and personalized language choice for users in global organizations
- Easy for managers with full visibility, automated reminders and escalations, and numerous ways to analyze data for process improvement and optimization
- Easy for executives with scheduled real-time and on-demand reporting that supports data-driven decision making for the business
Achieve greater efficiency in digital accounting with process automation
For any business, no matter where it is on the digitalization journey, now is a good time to take stock. What might the future of accounting or bookkeeping work look like? What lessons have we learned from the challenges that have emerged? How can we ensure that accounting and finance functions are resilient, efficient and adaptable over the long term? Prioritizing process automation has been the overwhelming answer for many decision makers – and according to McKinsey & Company, as much as 93% of payment processing, 79% of invoice processing, and 88% of order processing can be ‘mostly or fully automated’. With that much digital process potential, now is the time to find the right solution to create future-proof and modern digital accounting.