The secret to automation – go slow to go fast

Recently, I sat in on a financial-services session at our annual Sage Transform conference for Sage Intacct customers and partners. The session focused on family offices and one of the panelists, a CFO at a firm with dozens of multiple entities,  described her journey building the firm’s financial tech stack. She spoke of taking months to analyze their business processes so their automation efforts would get it right the first time. Her elegant summary was “we went slow to go fast.” Brilliant.

During my flights back and forth to the conference, I read a great Winston Churchill biography, in which he was quoted to have said (and I paraphrase a bit) “…the longer one looks back, the further ahead one can see.”

Look back to look forward. Go slow to go fast. Great ideas when it comes to automation. With technologies such as robotic process automation, machine learning and artificial intelligence, it’s tempting to jump in with abandon. Here’s another phrase that I’ve long adhered to: “A bad process that’s automated is now an automated bad process.”

My point is that going slow, taking your time and doing it right, is essential. Looking back to analyze what’s worked and finding ways to streamline processes will reap great rewards. A methodical review and a deliberate phased-in approach are certainly more advantageous than “ready-fire-aim.”

There are some great places to start automation, including accounts payable, billing, payroll and tax compliance. Let’s look at each to find ways to go slow to go fast.

Accounts Payable Automation

One of the first processes accounting departments look to automate is accounts payable. Typically, the AP process includes receipt of the purchase order from the purchasing department, receipt of the invoice from the vendor, comparing the PO to the invoice to match and validate accuracy, and then paying the vendor. Some organizations use a two-way match while others use a three-way match to check the goods receipt.

While the process itself might be easy, it’s time-consuming lacking automation. (It might be easy, but no one has said it’s simple.) Depending on what you purchase (think goods or services), your AP process is most likely well-defined, but likely not without challenges that may include:

• Matching errors
• Exception management
• Missing documents
• Double payments
• Delayed payments
• Unnecessary or unauthorized purchases
• Theft and fraud

Automating AP offers the opportunity to significantly cut costs. Most studies put the cost to manually process an invoice at around $20, when factoring in time spent, error reconciliation, approvals and fully loaded labor costs. By automating AP, the cost per invoice drops by 90%.  For example, if you’re processing 2,000 invoices a month, the potential cost savings is $36,000 per month.

So how do you go slow to go fast? One area to review is the approval process. Depending on the amount of the invoice, you may have two or more levels of approval. Take a look at these levels and the number of invoices in each and see if there’s an opportunity to adjust the levels without adding risk. Also, look at who is approving invoices as the manager approving the invoice should be a different person than the individual approving payments.  If you don’t have it today, document your approvals matrix to define who the approvers are, their timelines to approve and who the secondary approvers are in their absences. This will make it easier to set up the right rules when automating routing, so you can create “if-then” rules. Of course, exceptions will happen, but AP automation can dramatically reduce the outliers and speed up the payments process.

Billing Automation

An automated billing system invoices customers without significant manual intervention. The system is ideal for businesses that charge customers a recurring amount every month through a subscription or retainer model. With automated pricing models and billing templates that match your business, you can “set it and forget it.” You get bills out faster, decrease days sales outstanding, and free up cash to grow your business. By driving your billing, revenue, and financials from a single source—the contract—you can manage a single revenue stream and automatically recognize revenue throughout the customer lifecycle. Contract changes, including renewals, upsells, downgrades and holds, drive automatic updates to revenue recognition, billing and your financials so that they are aligned. You save time, eliminate errors and reduce confusion.

For example, real-time bidirectional synchronization between Salesforce and your financials allows you to maintain templates and schedules in your financial solution while maintaining customers, contracts, changes and renewals in Salesforce. Billing and payments are easily visible to salespeople all in one place. Everyone stays up to date with your customers’ financial relationship to provide a more consistent customer experience.

Software-as-a-service is a great candidate for billing automation. Professional services and medical offices can also benefit from implementing an automated billing system, even if they don’t charge a uniform amount to clients and patients. Automated billing systems operate by invoicing customers and accepting payment or automatically charging customers with an on-file payment method.

Billing is another opportunity to go slow to go fast. There are some obvious business models where billing automation plays well, but your business might have less-than-easily apparent places where automation makes a lot of sense. For example, my local car wash offers a subscription package for unlimited car washes in addition to one-time charges. Using an automated billing system, they wouldn’t have to worry about manually processing the recurring charge.

Look at your invoices to find recurring charges to customers and clients, then automate these to cut costs.  More importantly, this can improve your cash flow.

Payroll Automation

Automating payroll all but eliminates the most labor-intensive aspects of the payroll process. Specific features vary from one provider to the next, but employers should be able to:

• Calculate wages earned
• Integrate payroll with time and attendance
• Withhold taxes and other deductions
• Pay employees
• Run payroll reports
• Access important tax forms

For example, payroll managers can automatically synchronize new employee records, managerial hierarchies and changes to employee information or status. As well, hierarchies synchronize across solutions and approval workflows, expenses, timesheets, journal entries and purchasing. These are automatically set up or updated once an employee is created or changes jobs. This allows you to generate payroll journal entries that accurately map to your general ledger. As well, it eliminates the need to manually key-in payroll journal entries or build and maintain complex integrations to accurately map payroll journal entries to your general ledger. With just a few clicks, you can automatically prepare and push payroll journal entries, including dimensions, so they fit into your existing chart of accounts and increase the ease of reporting.

One way to go slow to go fast is to ensure every employee, regardless of role, is correctly mapped and associated with cost centers, so as that employee moves within or exits the organization, payroll expenses are properly allocated. In some cases, it might mean creating new cost centers. Changes in employee roles might also lead to splitting allocations, so it makes sense to predefine these splits by role.

Another word on payroll. You might be using a popular payroll service today. If so, your “go slow” step might be looking at whether that service can integrate with a general ledger platform.

Tax Compliance

The process of manually managing the collection, calculation, and filing of taxes is problematic at best and a nightmare as companies scale and grow. Your company might be selling more goods and services in more places and ways than ever before. On top of that, tax rates are constantly changing. In the United States alone, there are hundreds of changes each year.

Chances are you’re already using some type of automation to help with tax compliance as the risks associated with noncompliance are great.   With that said, in a recent report IDC listed some questions you should be asking of your current vendor or any vendor touting tax compliance. Some of these questions include:

• Does the vendor have experience with my type of product, service and company size?
• Is the vendor knowledgeable about financial regulations and guidelines both locally and globally as they affect my company?
• Does the vendor understand the regulations that will impact my business? How are these regulations reflected in my current product and how will it change in the future?
• Can the vendor integrate with my company’s other IT systems and those of my partners?
• Will the vendor be a partner, helping my business grow now and in the long term?

Good questions to ask and not just of a tax-compliance vendor. These could apply to any vendor in your financial tech stack.

Why Automate?

If the complexities of accounts payable, billing, payroll, tax compliance and other financial processes aren’t enough to convince you to automate, let me share some reasons why you should look to automation to go fast.

• Automation cuts cost. Manual tasks, including account reconciliation and variance analysis, can turn into deep pits and you can avoid these with automation. Often, we talk about automation as a time saver, but I believe the cost reductions that result are more significant. Sure, we all want a faster close or continuous close, but taking cost out of these processes moves money to the bottom line.
• Automation reduces the chances for human error.  And if you go slow to go fast, you can greatly reduce the opportunities for any errors, human or otherwise. There will always be some percentage of outliers, but that percentage goes way down when you deploy smart, intelligent, purpose-built automation.
• Automation reduces the opportunity for fraud. Let’s face it, fraud happens. It might not be your number-one concern as you trust your colleagues, but it happens, nevertheless. And though you’ve vetted your vendors, there are humans at the other end of that invoice. Automation with outlier detection greatly reduces your risks.
• Automation ensures consistency. As you go slow to go fast, you’re going to discover that everyone has a slightly different way of doing things. Two persons might have different ways of approaching something as cut-and-dry as double-entry bookkeeping. Automating processes creates greater consistency within teams, reducing the chances of mistakes and information gaps.
• Automation gives you faster access to the information you need to make data-driven decisions. This is the biggest benefit of all and enables you to be more strategic.  You can get fast access to real-time key performance indicators to drive your business forward.

I’ve outlined just four processes where you can go slow to go fast. Others include expense management, commission tracking, bank reconciliation, contract management, revenue recognition and many more, but remember – a bad process automated is an automated bad process. Take your time and enjoy the rewards of getting it right from the start.

P.S.  If you’re interested in the Churchill biography, let me know and I’ll pass along the title and author.