Finance can bolster organisational performance by strengthening monitoring and forecasting, risk management and ensuring transparency and control. The success of such initiatives, however, depends on the CFO’s ability to create an efficient, high performing Finance organisation. Understanding best-in-class standards and knowing where one stands relative to peers is a crucial first step. While global benchmarks on Finance department performance exist, the Indian reality is less well-researched. This paper examines one aspect of Finance excellence: automation in Finance. It draws insights from IMA India’s 2019 Finance Department Performance Benchmarks study as well as interviews with CFOs.

Spends on technology account for 10% of incremental Finance costs

Investments and scope
For decades, offshoring, outsourcing and centralisation have driven the Finance function’s productivity agenda. Today, tech-savvy CFOs are considering automation to drive next level efficiency improvements. IMA’s study highlights that spends on technology and systems are on the rise, accounting for up to 10% of all incremental Finance costs. There is clearly room for more: almost half of all CFOs claim their Finance systems investments are ‘inadequate’. Automation is also high on the agenda. However, most companies currently fall short in terms of automating to the degree their CFOs would like.

In-sourcing key finance activities is driven by the need for greater control over processes and data

Level of automation: current vs desired
According to IMA’s report, 35% of firms have a finance shared-service centre (SSC) and 24% have a Centre of Excellence (CoE). Another quarter plan to develop an SSC and 40% a CoE, in the coming years. This new trend of ‘in-sourcing’ of finance activities is driven by the need for greater control over processes and data, and to consolidate in-house expertise. Activities like payroll and transaction processing – which are the most outsourced – are expected to be moved to insourcing at a greater pace.

CFOs need a clearer understanding of what activities can be automated

Achieving greater automation internally raises a set of issues that Finance leaders must evaluate before committing resources. Automation appears enticing conceptually but the benefits can be elusive. CFOs need a clearer understanding of what activities can and should be automated. Transaction processing and internal reporting are currently the most automated of Finance activities, though CFOs would like to automate further. Our report delves deeper to understand the ‘actual vs desired’ gap at the activity level. For instance, in the case of external reporting, 25% automation is achieved versus 84% desired while in the case of Treasury 15% is actually achieved against 70% desired. In most other areas such as risk management, treasury, tax and business partnership, the extent of ‘manual work’ (as indicated in the table above) remains relatively high with over one-fifth of the work dependent on human intervention. In all these areas CFOs want to automate. Going forward, a combination of intelligent automation, advanced analytics and technology-enabled CoEs will have a greater impact in improving Finance partnership with business leaders, managing risks effectively and improving the quality and speed of tax compliance.

Excel is still used extensively

Almost two-fifth of finance departments still entirely rely on excel spread sheets for their budgeting, planning and forecasting. This is in sharp contrast to the belief that most CFOs have in their systems’ capabilities – a whopping ~90% are confident that their systems can generate ‘single version’ of the truth.

Improving performance through automation would require a portfolio of technologies

Key technologies: capabilities and type
Ultimately, improving the Finance function’s performance through automation would require a portfolio of technologies. Over time, technologies like Robotic Process Automation (RPA) have become better, cheaper and faster, and can enable automation of about half the work in Finance. The remainder can be automated by advanced cognitive-automation technologies such as machine learning algorithms and Natural Language Tools (NLT). Despite these being in their infancy, many leading Finance functions have started leveraging them to unlock new opportunities.

Going forward, predictive analytics will play an important role

Eventually, all processes that apply/depend on a fixed set of rules can be automated, freeing Finance professionals from such tasks. Further, advanced analytics, which may today seem of limited value – or may even sound like jargon to some – deserve consideration. In the world of tomorrow, one of the primary functions of Finance will be to ensure that the organisation can fully exploit internal/external cloud data, using it for ‘predictive’ purposes. AI, ML and blockchain will help drive this transformation and move Finance away from its traditional controllership role.

This paper is based on IMA India’s FY19 Finance Department Performance Benchmarks report, which examined the functioning of the Finance department of 250 companies in India through a detailed survey. The ensuing benchmarks are intended to serve as a baseline against which organisations can measure themselves on efficiency and effectiveness. These include Finance costs, spending patterns, headcount, qualifications, skill levels, organisational structures as well as a number of metrics for activities run by the CFO’s office, from transaction processing and taxation to treasury and finance automation. The report is available for purchase from IMA’s offices or online at this link.