Automation Within Finance - What Does It Mean?
When we think of the wider world of financial technology, especially in the wake of COVID, we could be excused for thinking of fintech unicorns, the rise of challenger banks, and blockchain fuelling the perpetual rise of crypto and monetary security in a rapidly digitising world.
This corner of fintech parallels other innovations in marketing technology, manufacturing and logistics technology. The elevator pitch of automation is taking mundane, routine workflows that require repeated inputting of data, or simple uploading or forwarding of data, automating it, and giving your enterprise more time to focus efforts elsewhere. Like other industries, especially ones that are administrative heavy, automation within finance has already been a brutally effective innovation, saving millions of man-hours and reducing the administrative burden on teams across the world.
The move to machine-first administration is not slowing down, and innovation in our sector is still running at a pace. From AI chatbots automating (and improving) online customer relationships and troubleshooting, to machine learning mapping investment risks or security issues through rapid digital auditing, automation has shown it’s hand as easy to understand and quantify, quick to implement, value driven and good for the bottom line.
But it has only been achievable through cultural change (the acceptance of both secure cloud data centres, challenger banks, and SaaS accounting software), technological accessibility (usable tech is cheaper, latency improved, SaaS more effective and more value-driven), and CFOs understanding what automotive processes they specifically need, and how they can derive value from them.
It’s also wise to see automation as one part of your organisation’s future – in a McKinsey report titled Harnessing automation for a future that works, “very few occupations – less than 5 percent – are candidates for full automation”, but “we estimate that about half of all the activities people are paid to do in the world’s workforce could potentially be automated by adapting currently demonstrated technologies”. Interestingly, the report notes that macro-levels of automotive change may take decades to implement, but on a micro-level – within small organisations and individually – automation will make itself felt much more prominently and immediately.
So how is automation changing finance and what do companies need to be aware of?
The weight of your legacy
- Legacy systems and legacy thinking will stymie any digital transformation.
- Legacy systems are the bane of CTO’s and CFO’s all over the world and will continue to limit innovation, encourage security risks and slow down business.
- Legacy thinking, however, is a more subtle barrier to change – finance managers need to understand that traditional, human-centric models of workflow management, assessment and change cannot be applied to machines – digital tools are expressly designed to speed up the process of data transfer between departments, reconcile accounts immediately, even prepare journal entries and reports and map future spends through algorithms. This, somewhat, comes down to trust.
The threat of a machine takeover
In another McKinsey report, Bots, algorithms, and the future of the finance function, the changes to workforces have not been understated – in one example, one global financial firm is looking to release a quarter of their 20,000 strong workforce over the next 24 months due to rapid automation of tasks. It cannot be ignored that automation will cause labour flux.
Their advice was simple:
- Slow down the roll out of automotive tasks,
- Focus on how automation works alongside new forms of staff and task governance,
- Be thoughtful in your redeployment and understand that the human and machine can and should work together,
- Revamp your retention tools on retraining and quantifying what automation does,
What are the main finance tasks that can be automated?
- General accounting operations
- Cash disbursement
- Revenue management
- Financial control and reporting
- Tax functions
- Financial planning
- Risk management
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