AUTOMATION, TECHNOLOGICAL DEVELOPMENT AND ITS IMPACT ON FINANCE & ACCOUNTING

None of us knows for certain what the future will hold. However, we all do have a responsibility to consider future scenarios and how to prepare for them. What is certain is that the structure of traditional finance and accounting is changing, moving more towards finance business partnering. In this process automation becomes a key factor. In order for companies to keep themselves in the loop they must free up employee hours from routine tasks, otherwise F&A will be trapped producing routine reports. Automating routine tasks frees up capacity for F&A and its employees, (C.F Wong – FM-magazine, 12 Jan 2021, Rolling out finance automation with the right priorities). The development of automation brings the promise of higher productivity, increased efficiencies, safety and convenience. The technological changes within finance and companies will have a broad impact on finance departments, companies as whole and the nature of work itself, (McKinsey Global Institute, Harnessing automation for a future that works, Jan 2017). 

In the Finance department, within a company, it is crucial to prepare for the inevitable disruption ahead. This means that the right people must be recruited, and the technology set in place today, for the changes of tomorrow. Therefore, companies who want to succeed in the future must set a clear strategy how to face and take advantage of the technological changes that are already taking place around us, (Deloitte Development, 2018, Finance 2025 – Digital transformation in Finance). A study conducted by McKinsey concurs with this conclusion. In order to succeed in building a digital finance function, CFOs will be required to understand and address the challenges and the complexities that comes with digitalization and recruit finance people suitable to these criteria. There must be a clear vision of the target state for a digital finance function and how it should connect to the overall business, (McKinsey Global Institute, 2018, Memo to the CFO: Get in front of digital Finance – or get left back July 5, 2018).

The event of Finance departments disappearing may occur as likely to many speculators, under the crush of digital disruption. As automation and robotics becomes a bigger part of finance, the operational part of finance teams will probably become superfluous to a great extent and the traditional processes. Meanwhile, expectations for support from business finance and specialized finance will continue to grow. Some finance organizations will evolve into full-fledged business service centres, (ibid.).

In a research study conducted by McKinsey, back in 2017, they found that, with the current technologies at hand, 42 % of the finance activities can be fully automated and a further 19 % may be mostly so, (McKinsey Global Institute, 2017, a future that works; automation, employment and productivity). Basic task automation has existed for some time, but the technology is continuously getting faster, better and cheaper. It has been estimated that it would be profitable for companies to automate half of the work, that can be automated, within any company’s finance department. This share will continue to increase, (ibid.).

The development of the ERP market will also be crucial for the future look of the finance department. Cloud based ERP, with specialized applications and microservices integrated with the companies’ ERP platforms, will keep companies up to date with the constant development in Finance technologies. This will reduce the complexity and cost of technology, without sacrificing functionality Finance is entering a golden age of technology, but too few companies are currently doing the hard work needed to align and integrate data. Therefore, they won’t capture the full value of digital transformation, (Deloitte Development, 2018, Finance 2025 – Digital transformation in Finance).

CFOs and their teams are the gatekeepers for critical data companies’ strategic plans and decisions. Automation and robotics are among the most promising techniques in order to elevate the use of this data and thereby improve strategic decision making and profitability, (McKinsey Global Institute, 2018, Memo to the CFO:Get in front of digital Finance – or get left back, July 5 2018).

Automation will not happen overnight, but the impact of how finance teams, and companies in general, will be affected over many decades to come is not without precedent. It may be of a similar order of magnitude to the long-term technology-enabled shifts away from agriculture in developed countries´ workforces in the 20th century. However, these historical events did not result in a long-term mass unemployment, but rather a shift to new types of work. It will be critical though for companies to adapt to the ongoing and future technological development, in order to survive. This will fundamentally alter the workplace, requiring a new degree of cooperation between workers and technology, (McKinsey Global Institute, Harnessing automation for a future that works, Jan 2017).

Sources

https://www.fm-magazine.com/news/2021/jan/roll-out-finance-automation-with-the-right-priorities.html

https://www2.deloitte.com/us/en/pages/finance-transformation/articles/finance-digital-transformation-for-cfos.html

https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/bots-algorithms-and-the-future-of-the-finance-function#

https://www.mckinsey.com/featured-insights/digital-disruption/harnessing-automation-for-a-future-that-works

https://blog.workday.com/en-us/2020/how-intelligent-automation-transform-finance-function.html

https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/memo-to-the-cfo-get-in-front-of-digital-finance-or-get-left-back?cid=other-eml-alt-mip-mck-oth-1807&hlkid=36f87cad3bcf4122bf73da670f22955b&hctky=1312575&hdpid=0f00baf6-f25a-44e4-a75b-edb3465eeec8

https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/bots-algorithms-and-the-future-of-the-finance-function

https://blog.workday.com/en-us/2020/how-intelligent-automation-transform-finance-function.html

https://www.adaptiveinsights.com/sites/default/files/assets/Adaptive-Insights-CFO-Indicator-full-steam-ahead-automation.pdf

https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/the-next-acronym-you-need-to-know-about-rpa