The coronavirus is pushing finance departments to address unprecedented levels of operational chaos and cash-flow uncertainty. This requires new ways of working and increased digitalization. Here’s how to get started.
The global pandemic notwithstanding, digital initiatives in the finance and accounting function have not always succeeded; non-standard processes and an evolving, complex technology landscape, among other things, have made it difficult. Amid the Covid-19 crisis, the need to digitize finance processes has now gone from nice-to-have to mandatory – and it needs to happen fast.
Given the uncertainty surrounding the virus, we believe that finance organizations should do the following to get through the near term, as well as to prepare for new world realities after the crisis recedes:
Procure to pay:
• E-invoicing: With a complete lockdown across many parts of the globe, managing paper invoices is a major challenge. Mailroom and scanning centers are not fully functional and vendors are realizing the value of electronic invoicing. Many e-invoicing initiatives failed in the past due to resistance from vendors. This is not the case anymore; vendors are more willing to adopt e-invoicing, which means we will see more finance organizations make it a standard operating procedure in the post-Covid-19 days.
• Payment on time: Organizations across sectors are cash strapped. Vendors want to be paid on time to ensure they survive the crisis. They need visibility into their payments and are keener than ever to know when their invoices will be paid and if discounts can result in earlier payments. A vendor portal that provides real-time visibility on invoices and payments along with a collaboration platform is therefore critical.
• Automating AP: Accounts payable process remains ridden with many manual handoffs and exceptions. For example, general ledger coding, Goods Receipt / Invoice Receipt (GR/IR) match, and price corrections contribute to many exceptions. These processes need to be streamlined and automated to enable faster and correct payment of invoices. AI/ML technology can enable automation of exceptions and approval workflows. For example, if invoices for a particular product have been consistently assigned a cost center code in the past, machine learning technology will automatically allocate future invoices for that product to the same cost center.
• Streamline procurement processes: Much value can be gained by streamlining upstream procurement processes, which can enable invoices to be paid on time and make downstream AP more effective. Vendors are willing to listen in today’s economic reality; use this opportunity to optimize the end-to-end procure to pay process.
Order to cash:
• Days Sales Outstanding: Given cash flow needs, DSO optimization is a key focus area for organizations seeking to shore up their cash flow. Managing the collections process more effectively, leveraging AI to review and update collection strategies regularly (taking into consideration the changing payment behavior of customers), and automating frequent follow-ups as needed, are all tasks in which technology can play a big role. For instance, AI can track changes to the cash flow situation, working capital, debt, and other parameters that impact the payment behavior of a customer and tweak the collections strategy accordingly.
• Credit management: Frequent reviews of clients’ credit profiles are crucial during times like these. Big data analytics and AI/ML can help tap multiple data sources and automate credit reviews.
Record to Report:
• Month-end visibility: With a workforce that is primarily working from home, visibility is key. As we write this, organizations have been through a couple of period-end closes in the Covid-19 world order; the need for real-time visibility into month-end activities has never been higher. New-age record-to-report platforms provide real-time visibility into month-end activities and flag delay risks.
• Automation of reconciliations and journal vouchers: Finance teams are stretched and realize they are better off automating repetitive and rule-based manual activities like journal vouchers and balance sheet account reconciliations. Robotic process automation technologies, enabled by process standardization, can help automate such processes.
Finance organizations can no longer survive with broken processes and outdated technology. They need to streamline and adopt modern tools and technologies fast if they are to survive this crisis and prepare for whatever comes thereafter. In a search for silver linings, we suggest that finance leaders control what they can by equipping their teams with future-forward tools, techniques, and strategies that will deliver a more efficient and effective tomorrow. We believe they will start by making changes that have been long overdue.
For more information about managing business continuity during the pandemic, visit our Covid-19 resources page.
Process automation is vital to banking’s future; 90% of the 302 industry leaders in our study appear convinced that process automation is either important or critical to their business. Yet many are struggling to move beyond early proofs of concept. Why is that?