November 21, 2016 - A mobile payments app links your phone number to your bank account and uses face-recognition technology to make transferring money as seamless as a WhatsApp chat. Not long ago, there was only one way to open an account: go to your local bank, find a clerk, and ask them for help. Today, you can still do it at a branch, but also over the phone, or on your desktop, smartphone, or tablet. Across every channel, the time it takes to process an account-opening application has become dramatically shorter.
Digital disruption of the finance function
The impact of digital is being felt beyond consumer-facing technology. A recent survey exploring finance functions in the digital age by analyst firm HfS Research in association with the Genpact Research Institute reveals that over 80% of respondents believe that the adoption of digital technologies will impact cycle-time optimization by 2018. The digital technologies highlighted in below image offer two key attributes that enable on-demand financial close, i.e., at any time during the month:
- Significant computing capabilities to process and automate accounting transactions
- Interoperability with different systems and technology platforms
Digital technologies that enable on-demand financial close: Current and future state
Three themes that offer computing and interoperability capabilities to enable on-demand financial close are:
- The evolution of ERPs: Market leaders SAP and Oracle are adopting digital technologies as part of their ERPs' core design. The latest SAP release, S4/HANA, radically automates accounting and reporting through, for example, in-memory cloud computing, simplified data models, and SAP Fiori to port business applications across devices while personalizing and simplifying the user experience. As a by-product, cycle times across the board are significantly reduced with on average 75–80% faster financial close, 77% faster planning and budget cycles, and real-time processing and reporting
- Wider adoption of fit-for-purpose micro platforms: Cloud-based micro-platforms like Blackline are agile, modular, and interoperable. Blackline includes various components, such as account reconciliation, transaction matching, task management, financial-close tools (from its acquisition of Runbook), variance analysis, journal entry, and consolidation integrity management, that embed automation, control, and period-end tasks in day-to-day activities. This allows continuous accounting and eliminates sub-ledger interface issues. Finance teams can reduce process costs and cut cycle time significantly by improving the ability to continually capture, validate, and provide timely and accurate financial data for reporting
- Maturing robotic automation: Robotics is not a new concept and continues to evolve. Excel macros and optical card readers are the most rudimentary and widely used examples. What has changed is the ability to combine advanced robotic software with other technologies like machine learning, natural language generation, artificial intelligence, and advanced visualization. This has the power to automate >60% of accounting activities including tasks that were otherwise reserved for humans. For example, Genpact has developed a digital solution that uses natural language generation and machine learning algorithms with robotics at its core has the power to automate over 70% of management reports, including commentary writing, which cuts the time to report to one day or few hours.
The first step towards on-demand financial close: Standardization and structured approaches
Process standardization facilitates a common understanding of how processes operate, enables smooth handoffs across process boundaries, and allows comparative measures of performance. Standardization can deliver uniform information systems within companies, and common system interfaces across different firms. In fact, the ROI on technology deployment can vary between five and ten times when comparing organizations with standardized versus non-standardized processes.
In addition, a recent study on the impact of digital technologies by Harvard Business Review Analytic Services, in association with Genpact, reveals that only 23% of finance organizations use structured approaches, such as design thinking, to identify ways to create value for customers before designing solutions with digital technologies. Without this level of rigor, finance initiatives are unlikely to deliver the expected business outcomes.
Case study: Internet of things drives end-to-end, cross-platform automation
The energy division of a global conglomerate installed sensors on wind turbines to capture and transmit critical performance information to a center of excellence at Genpact. Our data-mining solution structures the data to identify true events, differentiates between faults and failures, and determines the impact on downtime.
The solution predicts turbine failure and maintenance or capital requirements, significantly reducing the downtime of turbines. This, in turn, improves working capital, reduces inventory cost, and lowers the risk of lost revenue.
This can also be extended to feed information into Blackline and an accrual engine that automates month-end accruals for turbine repairs and maintenance, provisions for downtime or failures, and uses machine learning to identify expenses to be capitalized.
Automation will enable on-demand financial close and give finance staff more time to generate forward-looking business insights.
This story illustrates how ERPs, machine learning, and Blackline solutions can work together to deliver on-demand financial close. Progressive organizations are embracing real-time accounting by embedding digital technologies into standardized processes to shape a more responsive, forward-looking, and agile finance function, reinforced by on-demand financial close.