Top Tech Adoption Trends for Finance in 2019 & Beyond

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While cloud was among the top priorities in terms of technology for the finance function in the past 24 months, CFOs and senior finance executives would have other technology priorities in 2019 and beyond alongside their continued cloud migration and optimization.

According to Raymond Yeo, CFO at Epsilon, Terry Smagh, senior vice president, Asia Pacific & Japan at BlackLine, and Dennis P. Gannon, VP, Advisory at Gartner, there are a couple of major technology adoption trends for the finance function.

BI, data warehouse, and tech that addresses IFRS 16 and 17

Connectivity provider Epsilon’s Singapore-based CFO Raymond Yeo said business intelligence, data warehousing and financial application software which can support new accounting standards such as revenue accounting and lease accounting are top technologies for the finance function in 2019.

“While we need data warehousing and BI to provide consistent data source and single source of truth for stakeholders’ decision making, finance teams need applications that can help them implement new accounting standards such as IFRS 16 and 17 especially if their organizations have voluminous contracts,” Yeo noted.

IFRS 16 is applicable to annual reporting periods beginning on or after Jan 1, 2019 while IFRS 17 has been delayed to Jan 1, 2021 after insurance firms’ lobbying effort.

As a result, the deployment of applications to support these new standards is urgent for organizations that need to comply with them. 

A major issue with this is that existing ERP systems were not built to support them. Thus, the finance function can’t be complacent though IFRS 17 deadline has been moved to a later date.

“This is an opportunity for the finance function to look at the areas—particularly in terms of technology—where they’re lagging,” said Terry Smagh, senior vice president, Asia Pacific & Japan at BlackLine—an accounting automation software provider.

Companies with voluminous billing transactions need to ensure smooth interface, proper reconciling tools between peripheral systems such as billings to financial reporting system when addressing those new standards, Yeo advised.

CFOs can start building digital competencies by experimenting with new roles and responsibilities for the more technologically savvy team members

Automation and continuous accounting

Automation and related technologies will help make continuous accounting possible, Smagh observed.

“With continuous accounting, finance teams can distribute their workloads continuously and more evenly over an accounting period instead of, say, closing the book in one-go in the last five days of a month,” he noted. “That’s possible when automation, control, and period-end tasks are embedded within daily activities.”

The finance team, as a result, will be able to provide up-to-date insights from real-time data to help drive more informed decisions for the organization.

“This immediate insight, instead of months-old data, enables leadership to pivot quickly to meet customer and stakeholder demands and seize new opportunities before the competition,” Smagh pointed out.

RPA is real

When it comes to automation, robotic process automation (RPA) is among the most talked about tech terms.

While RPA means different things to different organizations, Smagh defines it as a technology that automates manual tasks, manages workflow, and standardizes the close process across complex organizations and IT landscapes .

“RPA will enable accountants to finally do what they’re meant to be doing: performing analysis, advising the business, and providing impactful financial data to shape their companies’ future instead of simply generating reports” he said.

While RPA adoption remains at an early stage, Gartner predicts that 73% of controllers will embrace it by 2020, up from 19% in 2018.

This growth will be driven partly by essential differences between RPA and traditional finance IT solutions, said Gartner.

Unlike traditional technologies, RPA allows finance leaders to automate a process, or parts of a process, much more quickly than traditional technology implementations, the advisory firm added.

Yeo from Epsilon: Firms with voluminous billing transactions need
to ensure smooth interface, proper reconciling tools between
peripheral systems when addressing new accounting standards

RPA: short-term benefits and cumulative gains

According to Gartner, RPA offers finance departments multiple short-term benefits.

Creating capacity from day one. While some parts of the process are ready for automation today, finance teams can start taking out manual hours from the process immediately and free up human capacity to address the more complex, hard-to-automate portions of the process.

Getting rid of potential rework. During the automation process, teams build code using if/then logic, which helps identify underlying process inefficiencies and opportunities for standardization. Teams that standardize first will still need to automate and may have to re-do some of all this work during the coding process.

Minimizing disruption to the rest of the team. Process standardization that requires people to change the way in which they work often requires significant change management and is subject to disruption and employee resistance. Standardizing a process using robots instead of humans eliminates these challenges.

There are also cumulative benefits from RPA, the analyst firm observed.

They include a significant reshaping of the workforce, as full-time employees are redeployed from repetitive, manual tasks to higher-value tasks, it said.

In addition, as RPA implementations are increased within the organization, more benefits will accrue from combining disparate programs.

Unlike traditional technologies, RPA requires less ongoing upkeep, generates its own audit trail and as a result, minimizes additional work around regulatory compliance processes,” the firm pointed out.

RPA risks: how to address them

While RPA and automation offer the potential for huge benefits, it also carries risks, warned Dennis P. Gannon, VP, Advisory at Gartner.

While automation strengthens the controllership’s ability to meet its key mandates of financial integrity and continuous improvement by reducing sources of human error and process drag, it also raises the possibility of programming errors, he pointed out.

“Poorly designed automation solutions can lead to various types of processing errors, threatening the integrity of financial statements and regulatory reports,” he said. “But this risk, though, can be overcome with proper governance and oversight as well as new governance measures for automation tool programming.”

In an analog environment, the controllership puts in place various governance measures at each step of the financial reporting process to ensure financial integrity, Gannon said.

“In an automated environment, the controllership must embed these governance measures to some extent into the automation tools’ programming. Automation tools should cross-reference multiple sources of information and notify users of potential inconsistencies,” he noted.

Controllerships must also establish governance measures for automation tool design and implementation, including checkpoints for reviews of the information generated by automated tools, as well as periodic tool audits to check for both human and automated sources of error. He advised.

Smagh from BlackLine: Immediate insight from
continuous accounting enables leadership to
pivot quickly to seize new opportunities
before the competition

Mindset shift and new skill development

Gannon’s advice to senior management including CFOs when it comes to RPA adoption is to identify opportunities for new and continuous improvement and to develop staff’s skill-sets.

As automation eliminates many obvious sources of process inefficiency, controllers will need to find new ways to drive continuous improvement, he said.

Controllers and their teams will have to organize clear and efficient methods for responding to data entry and other forms of errors detected by their automated tools, he pointed out.

“Without an efficient method in place for addressing bottlenecks, automated processes will stall,” he warned.

Future continuous improvement efforts will require a mindset shift for the controllership, according to Gannon.

“Accountants will have to stop thinking of RPA as simply tools to reduce manual labor,” he advised. “Instead, they will have to consider them strategic partners that merit collaboration and support.

Automation will inevitably lead to a complete redesign of roles and responsibilities within the finance function.

Entry-level executives will feel the biggest immediate impact, Gannon said.

For instance, entry-level accountants in the past spent a large portion of their time learning the business by performing basic manual accounting activities, but automated systems and robots will do these in the future, he said.

The result is fewer entry-level posts in the finance function and it also means finance needs to devise new ways of developing entry-level talent as opportunities to learn by doing are fewer as well, Gannon said.

In-depth accounting knowledge and the ability to interpret new regulations will become increasingly important as technology develops

In transitioning to more automation, the finance function can’t afford to lose their more experienced talent.

“Finance must adhere to good change management principles to get buy-in from team members skilled in technical accounting,” he said. “Promoting a new, technology-savvy mindset for the team is also important.”

When the finance function will increasingly work hand in hand with technology to answer difficult judgment-based questions, such as how to estimate allowances for loan losses, and determine intangible asset impairment, it must also seek to develop skills that supplement automated tools, Gannon pointed out.

In-depth accounting knowledge and the ability to interpret new regulations will become increasingly important as technology develops, he added.

“To ensure they capture the full benefits of new technologies, CFOs and controllers will need to begin developing digital competencies on their teams,” Gannon advised. “They can start building these competencies by experimenting with new roles and responsibilities for the more technologically savvy team members.