UPDATES&INSIGHTS: Advisory – Digitize or Die: 7 Ways to Automate Your Business Today

By Robert Wagner, CPA, HoganTaylor Partner and Advisory Practice Lead

The business world is buzzing about the coming wave of disruption in the accounting, finance, and auditing functions. Depending on which survey you choose to believe, artificial intelligence, robotic process automation, and advanced analytics will transform traditional roles for accounting and finance in the next two to ten years. For some companies, the future is now. There are thousands of examples of how these technologies are already impacting processes and jobs in large enterprise level companies and the big accounting firms that audit them.

But what about middle market and smaller businesses? What impact will these technologies have on your businesses? Eventually, your cost of capital, profitability and market position will be impacted by automation or, better said, by your failure to jump on board and digitize your business. You will pay more for audit and tax services than your competitors. Your competitors will have valuable decision-making data readily and easily accessible. Your cost of production and administration will be higher than your competitors’ because you will still be processing paper transactions and living with the inevitable errors associated with manual processes. Both customers and vendors will prefer doing business with your competitors because of the ease of interfacing with them. Finally, future competitors will enjoy the advantages of being “born digital,” meaning they will create and shape their businesses to take advantage of current technologies, thereby avoiding the need to “change” systems, processes, and old habits.

Many of the highly sophisticated tools and applications available to enterprise level companies are not yet available or affordable to mid-sized and smaller businesses, but there are many, many steps you can take now to begin digitizing your business and be ready for the highly competitive future.

7 Ways You Can Automate Your Business Today

1. Upgrade and Integrate Your Accounting and Operational Systems

Many companies come to us frustrated with their current accounting and/or operational systems (production or services applications) and are considering diving into the expensive and risky process of changing these applications. We recommend clients first reach out to their software vendors and find out what features and functions are available in the latest releases of their software. In most cases, software manufacturers are keeping up with both technology trends and competition and are building automation and data-centric features into new releases.

Executing a major upgrade to your key software applications can be disruptive and often requires additional training of staff, as well as incorporation of new processes.  However,  these small disruptions will pale in comparison to the disruption, time, and cost associated with actually implementing the new applications.

2. Fully Utilize Your Key Software Applications by Ditching Old, Manual Processes

In our experience, the refusal to give up old processes is the number one issue holding companies back from a quantum improvement in the quality of their data and the efficiency of their back-office processes.

Today’s leading software applications have built into their systems the best practices for handling transactions, as well as strong internal controls over key processes (and as soon as you upgrade to the latest version (see discussion above), you can enjoy these features).  Too many companies, however, refuse to change how they process certain (or all) transactions, thereby requiring system customizations or work-arounds that spoil data integrity and efficiency.

Examples of the reluctance to change include refusing to:

  • use the purchase order functionality inherent in the system
  • invoice customers out of the accounting system so that each invoice can be “customized”
  • use system generated part requisitions with accurate part numbers.

Holding onto these processes creates difficulty in training new staff on all the processes you “just have to know.” That’s because these transactions are essentially being performed manually outside the software application. As a result time is wasted manually creating documents and searching for information.  In addition, there is a higher frequency of errors due to entering data multiple times. All these issues make your business slower in producing meaningful reports, more expensive to run, and more difficult and expensive to audit.

3. Declare the Spreadsheet an Analog Device and Attack Its Prevalence in Your Business

The electronic spreadsheet has been the most powerful and transformative tool for the accounting and finance profession in the last 35 years. That said, nearly every accountant who is willing to be honest will admit to its overuse in day-to-day accounting for most middle-market and smaller companies.

It’s one thing to use spreadsheets for summarizing and analyzing data, it’s quite another to use spreadsheets to manipulate data and to make calculations that are then fed back into accounting and operational applications for transaction processing.

Many companies use spreadsheets to calculate overhead allocations, sales commissions, bonus accruals, payroll transactions, and revenue recognition in percentage of completion accounting and then input those calculations as transactions into the accounting system. When this happens, often key meta data that normally and effortlessly travels with system-generated transactions is lost, thereby spoiling the usefulness of reports.

A frequent example of this occurs when a company uses percentage of completion accounting to recognize revenue. At the end of the month, they calculate the percent complete on each project in progress and the resulting revenue to be recognized for each.  But because of the volume of projects, the entry to record for this revenue adjustment is recorded as a lump sum in the accounting software. The result is that profitability reports for that month cannot be analyzed by project, location, product line, customer, or sales representative because the key revenue entry was made without that data.

In one client situation, their accounting system had the capability of recording percentage of completion revenue entries, but the company refused to give up the comfort and flexibility of their spreadsheets, thereby forgoing the numerous benefits inherent in processing the transactions inside their system. Not to mention they continued to live with the ever-present risk of mathematical errors in their spreadsheets.

Look at how spreadsheets are being used in your business to value or process transactions and then commit to reducing their impact, if at all possible.

4. Automate the Accounts Payable Process

Regardless of the size of your company, software tools are already available to allow you to automate the accounts payable process. Using either the inherent functionality in your accounting software or a fully integrated add-on such as Bill.com, you should be able to direct all vendor invoices to a single email address. From there, the automation software will recognize the vendor name and will attempt to code the invoice to your general ledger system. Once coded, the invoice will be routed electronically for approval based on preset rules. Approvals can usually be achieved via desktop or smartphone/tablet app from any location that has access to the internet. After it’s approved, the invoice is set for payment based on pay terms established in your accounting system, and the payment is made electronically via the federal reserve automated clearing house system. The vendor invoice and payment information are then stored for easy electronic search and retrieval if needed.

The degree to which your personnel will have to review the coding of vendor invoices will depend upon the application you use and the complexity of your general ledger and cost accounting system. However, even if a staff must pull up and code every invoice that comes in, the automation of the remaining processes is worth implementing these tools.

5. Automate the Travel and Entertainment Expense Process

Very similar to the accounts payable process described previously, native and third-party applications are available to nearly fully automate the processing, approval, and reimbursement of travel and entertainment expenses. In most applications, travelers can simply use their smartphone applications to take a picture of a receipt, and the application will start building the expense report. The processes for coding, routing approval, and reimbursement are like the accounts payable automation process discussed above.

6. Automate Bank Account and Credit Card Statement Reconciliation

Nearly all banks and credit card issuers now have tools to download statement information in a format that can be used to record transactions and/or reconcile against transactions already recorded in your accounting system.

Even more elegantly, many cloud-based software applications now have statement retrieval through tightly integrated third party applications or as native functionality in their systems. Using these features will greatly reduce tedious manual entry of credit card, investment statement, and bank transactions.

7. Integrate the Processing of Payroll with Your Key Systems

We often recommend that clients outsource the processing of their payroll to third party companies who specialize in this service. This is especially true for clients operating in multiple states and with extensive payroll compliance requirements.

However, every company who chooses to outsource their payroll should pay strict attention to the ability of their payroll provider to integrate the data as seamlessly as possible with your accounting and/or operational applications. Service providers who cannot provide the payroll data in the detail needed and in the form necessary for you to upload it to your system(s) with minimal manipulation should be eliminated from consideration. There are many good providers in the market who will do a great job paying your people and keeping you in compliance while also making it relatively easy for you to record your payroll.

It is not clear how soon full automation of back office functions is coming. There will be a day when software bots, artificial intelligence, and sophisticated decision-support tools will be normal, everyday aspects of businesses, both large and small. In the interim, do all you can to digitize your business and thereby gain the many advantages already available for those willing to adapt.