Why Your Business Needs to Think About Financial Automation
Financial automation has far-reaching benefits for businesses, providing the power to create a more agile and competitive business environment. If your organization hasn’t yet explored or instituted some type financial automation, now is the time to start.
Simply put, financial automation uses emerging technologies to automate manual tasks in financial workflows for a company. This includes tasks associated with critical processes such as accounts payable, accounts receivable, payroll and cashflow forecasting.
To completely understand the benefits of financial automation, it helps to visualize how automation can reduce employee workloads. Currently, 50% of businesses still use paper checks for making vendor payments. It’s a process that requires the manual collection of invoices, manual entry into accounting systems, as well as cutting and mailing of checks. At many businesses, payments are even hand delivered, adding up to more time and expense.
In fact, paper checks can cost a business as much as $2,000 a month for every 500 checks processed when expenses associated with materials, labor and postage fees are added up. That’s a total of over $24,000 a year that could easily be eliminated in favor of the annual cost associated with automation.
In comparison, automating the accounts payables process with AP automation software can deliver cost savings in a number of ways. First, invoices are submitted electronically or scanned upon receipt. Then automated functions really kick into gear, automatically adding invoices to ledgers and sending them off to the appropriate authorities for approval, all without the aid of human intervention.
Approvers are even reminded when they don’t take action, ensuring that the invoice is processed in a timely fashion. Once approval is received, invoices are automatically sent for electronic payment, eliminating the need for paper checks.
The same holds true for automation in the accounts receivables (AR) process. The reconciliation process is a vital step in business accounting. Without this step, businesses risk following up on invoices that have already been paid or annoying customers with repeat payment requests. Even more problematic, without reconciling payments, the business has no clear visibility into cash flow, impeding business growth and profitability.
With AR automation, payments are entered or scanned into the system where they are automatically matched to an invoice and painlessly reconciled. The invoice is even seamlessly filed in a digital vault for easy retrieval if it is needed in the future.
In many cases, when tasks or end-to-end processes like these are automated, businesses have been able to provide employees with more time to concentrate on higher value tasks, creating a more efficient work environment. Businesses have seen capacity improvements of 12% by automating critical tasks and workflows.
Payroll processing is another area where automation can take over time-consuming manual tasks. For instance, automating tax functions reduces the need for employees to gather data, calculate tax rates and fill out forms. Even tax filings and payments can be automated, reducing an organization’s compliance risk.
Businesses can also automate payment calculations, such as those necessary to determine bonuses, commissions and wage deductions, to name a few. Payroll is then made without the need for human intervention, depositing funds into the employee’s designated bank account.
Businesses need cash to thrive, so uncovering an unanticipated deficiency is never a good surprise. By nature, it’s a situation that can hinder the future outlook for the organization and even lead to business failure.
One emerging area where automation is proving particularly beneficial is with cash flow forecasting. Artificial intelligence and machine learning are used to analyze data and predict important details, such as how long it will take a client to pay an invoice. Automated forecasting tools then use insights like these to identify gaps in cash flow and to create a plan of action designed to help the organization weather slow periods of income.
Overall, financial automation is emerging as a business’ best friend in the modern world, offering time-savings, greater efficiency and cost reductions. For example, it’s estimated that payroll processing costs could be reduced by 80% just by decreasing the number of errors in invoices and paychecks, something easily achieved by automating key processes.
Through automation, businesses now have the power to do more at lower cost, which is good news for the bottom line.
Interested in learning how FNBO can help your business automate financial tasks? Connect with our Treasury Management Team.