Finance Automation: Benefits, Risks, and Implementation

What is finance automation?

Finance automation involves leveraging technology to automate repetitive tasks, such as invoicing and expense tracking, freeing more time for finance teams to handle complex processes. A fitting automation example is sending payment reminders to customers who have yet to renew their subscription. Your subscription management software can send these emails automatically, rather than having finance personnel manually scan the list for customers who haven’t subscribed and send emails to each customer. This seemingly trivial automation saves your finance team a lot of time. Artificial intelligence (AI) and machine learning (ML) systems enable even more complex automations, such as analysing transactions for suspicious patterns and blocking them if needed.

Key finance processes to automate

Implementing financial automation begins with understanding which tasks can be automated with little to no human intervention. Some of these tasks can feel enormously complex, but they can be fully or partly automated with the right strategy. Let’s explore the key processes you can automate.

Core bookkeeping

Bookkeeping is the foundation of every company’s financial operations. It involves recording and categorising transactions accurately for future reference. Bookkeeping tasks are mostly repetitive, such as classifying income and expenses and recording how much your business is owed or owes to other suppliers. You can easily automate these repetitive tasks, saving considerable time.

The best bookkeeping software tools have built-in automation features. With these tools, incoming and outgoing transactions are automatically recorded and categorised according to their source. At the end of a fiscal period, you’ll just have to take a final look and address any discrepancies. Automatic bookkeeping reduces errors, so there will be fewer discrepancies to deal with.

Invoicing and accounts receivable

Every business sends invoices to customers, and accuracy is non-negotiable. Every pending invoice reflects in your accounts receivable, i.e., money owed to your business by customers. Rather than prepare each invoice manually and chase after customers for payments, you can automate this key process.

Your invoicing tool can automatically generate invoices based on preset requirements and send them to the customer's email address. Customers who don’t pay by the deadline will receive reminder emails to complete the payment. Any paid invoices are automatically removed from accounts receivable and recorded as actual revenue.

Accounts payable

Accounts payable is the opposite of accounts receivable. It’s the money your business owes to vendors and suppliers, and keeping accurate records of this money is necessary. Processing each account payable to pay the right vendor can be stressful, but automation has your back.

Your accounting tool can automatically classify every incoming invoice as accounts payable, then send you payment reminders at the right time. You can authorise invoice payments at the click of a button. When you pay an invoice, the amount is automatically deducted from the accounts payable and added to the expense reports.

Tax compliance and reporting

Tax management is one of the most important accounting processes. As your business makes sales, it’s your responsibility to calculate its net profit and corresponding taxes. In the past, calculating this tax involved enlisting tax professionals to review your records, but that is no longer the case. Your accounting tool can calculate the proper tax based on your bookkeeping records, then remit it to the tax authority after your final approval.

That’s not to say that tax professionals are no longer needed. They remain important, but they’re more dedicated to complex tax issues, not simple ones like calculating how much basic tax to pay. Automation has made tax management easier than ever for businesses.

Payroll

Payroll processing is a priority for every business, as employees have to be paid their due wages. Different employees have different salary levels, and part-time employees may be paid based on their working hours. Employees also have various entitlements, such as health insurance and pension contributions. Calculating all these details manually will be cumbersome and lead to errors. Instead, payroll tools automatically calculate each employee’s salary and entitlements and send them accordingly.

Payroll tools also calculate income tax for each employee and remit the taxes to the right authorities after your approval. Payroll automation software helps your business run smoothly. Without it, you’ll face a burdensome process and likely make errors when calculating employee payroll.

Expense management

Ask every accountant what frustrates them most, and expense management will likely be the answer. Typically, expense tracking involves employees scanning receipts to extract the details, then filling out expense reports based on these receipts before submitting them for final approval from managers and reimbursement, if required. Repeating this process for every expense is as cumbersome as it sounds.

The best expense management tools have automation features to make things easier for your accounting team. For example, an employee can snap their receipts, and the pricing details will be automatically extracted, instead of the employee inputting these details step by step.

Automatic receipt scanning, real-time expense reporting, pre-scheduled reimbursements, and fraud detection are some key automated workflows you can deploy with the right expense management platform.

Expense management tools also let you create virtual corporate cards and set automatic spending limits for employees. Likewise, you can generate automatic reports for an individual employee’s expenses or those of an entire team. These automation features make managing expenses much easier for your finance team.

Key benefits of financial automation

Your business will benefit greatly from automating as many finance processes as possible. Generally, your business becomes more productive, with less time spent on managing finances, yet achieving better results. This operational efficiency enables you to have a lean finance team or even handle the processes yourself instead of hiring a separate team. Let’s examine the benefits in detail.

Saving time

Financial process automation means spending less time on mundane tasks and dedicating more time to complex financial transactions. You’ll save a lot of time that otherwise would have been spent processing invoices, scanning expense reports, inputting transactions into accounting systems, etc. This productivity boost helps your business attend to customers faster and stay generally competitive.

Minimizing errors

Manually entering financial data isn’t just cumbersome. It’s also prone to errors. Imagine having to enter each sale into your accounting software, then do the same for every outgoing expense. You’ll likely mix up figures and record wrong revenue and profit statements. Imagine having to manually handle payroll, invoice payments, and taxes. You’ll likely encounter errors that can have major consequences, e.g., remitting the wrong taxes or losing money to duplicate invoice payments. However, automation minimises errors and ensures you use accurate figures.

Improving process consistency

Automation ensures consistency even when different employees handle the same financial tasks. The process follows a standardised workflow, so if a key finance team member gets replaced, your business will continue operating smoothly.

Making smarter use of data

Accounting tools enable automatic collection and analysis of financial data. Earlier on, we mentioned the ability to generate expense reports for individual employees, and that’s just a simple example. You can do much more, such as generating revenue and profit charts for specific years and comparing them to each other, or generating automatic tax reports based on payroll data.

Digital finance tools let you collect and analyse data in the most complex ways, without manual effort. Insights generated from this data can guide your business decisions, for example, by observing higher product demand at specific intervals and stocking more goods beforehand to fulfil this increased demand.

Reducing the chance of fraud

Automatic data collection reduces the chances of fraud perpetrated by internal or external actors. Your accounting software ensures that every transaction is immediately recorded into the books, with no figures altered in transit.

On your accounting software, you control who can access specific data. For example, only key finance personnel will be allowed to view revenue and profit figures. User activities are logged in an audit trail, so you can easily identify who accessed specific transaction data. Automatic recording, access control, and audit trails significantly reduce the likelihood of fraud compared to manual processes.

Implementing finance automation: What works

Financial process automation should be implemented gradually in your organisation. It’s advisable to start with pilot projects and give your employees ample time to get used to these automated processes. Then, you can scale the process gradually before final implementation.

When implementing robotic process automation (RPA) or other forms of automation in finance, it’s always important to provide training and support resources for your staff. These resources, including hands-on guidance from in-house IT teams, class sessions, and access to detailed manuals and user guides, help your staff get familiarised faster with the automation tools.

Most importantly, choose finance automation tools with user-friendly interfaces and APIs to enable seamless integration with your existing IT systems. Bivial offers a robust API with multiple ways to integrate with your financial systems, allowing you to conduct batch payments and set up recurring payments. Try Bivial today and automate your vendor payments seamlessly.

Finance automation challenges

Implementing automation in banking and financial tasks presents its unique challenges. The first is the need to reskill and upskill staff to get used to the automation tools. There’s also a risk of wrongly configured systems or security breaches that can cause serious damage. Let’s explore these challenges in more detail.

Reskilling and upskilling employees

When introducing automation tools to your business, employees need learning and support resources to get familiar with these tools. Depending on the tool, you may need external help to ensure seamless integration and train your employees on using it. This outside assistance costs money and consumes significant time.

Reskilling and upskilling employees to use automation tools is a wise investment that’ll pay off in the long run, but the initial cost can pose a challenge for small to mid-sized businesses with strained budgets. You can mitigate this risk by selecting tools that are user-friendly and easy to integrate, e.g., Bivial. This ease of use translates to less need for paid external assistance.

Potential for mistakes

Earlier on, we emphasised error reduction as a key benefit of finance automation. That remains true, but a poorly configured tool can negate this benefit. When implementing automated workflows, there’s a risk that a poorly configured tool will increase errors rather than decrease them. For example, it could feed wrong data or outdated rather than up-to-date information. Some key data points may not be transmitted at all, causing financial discrepancies.

When integrating a new automation tool, thoroughly test it during deployment and solicit detailed feedback from employees. Complaints should be addressed by the software’s developer or your in-house IT team before final deployment.

Security issues

Finance tools introduce security risks, just like all digital platforms. It doesn’t help that hackers often target finance tools to steal funds or sensitive information. A little mishap, such as a weak password, can be a loophole for hackers to breach financial systems, and breaches have serious consequences. Hackers could steal and sell sensitive customer information, damaging customer trust, or divert money outright. Regulators can also fine companies that fail to secure financial data.

You can minimise this challenge by choosing trusted finance tools with robust security features. At a minimum, a finance tool should incorporate advanced encryption techniques to prevent external breaches and offer access control features to prevent internal security breaches.

Conclusion

Finance automation covers many key processes, from expense management to payroll, invoicing, bookkeeping, and tax compliance. With various software tools, you can automate the most repetitive tasks and spend more effort on complex ones. Automation has many benefits and also challenges, which you can mitigate with a gradual implementation process and by providing support resources for employees.

Bivial is an example of a finance automation tool, enabling businesses to automate recurring payments without hassle. With a user-friendly interface, simple API integration process, and Swiss accounts, Bivial is your best choice for handling global payments.