Automating the F&A Function:Eight Areas of Impact

White Paper

Business Process Services

Rajasekar G.

Rajasekar is a business analyst of the Process Automation Team in the Business Process Services (BPS) Unit at TCS, with a focus on the F&A domain. He has over 15 years of experience in the BPS industry in the areas of quality assurance, customer management, vendor management, and improvement initiatives using Lean and Six Sigma practice. He is a certified Six Sigma Black Belt professional and an internal quality auditor.

About the Author

The finance and accounting (F&A) function plays a critical role in not only reducing operational costs of an organization, but also in giving business leaders visibility into the larger financial impact of day-to-day operating decisions. The nature and complexities of this function combined with external factors and competitive pressures faced by businesses give rise to many challenges. These challenges are related to regulatory compliance, globalization, service expansion, use of varied billing models, and the management of high growth in certain business sectors. The resulting issues impact cost optimization, revenue growth, and other business metrics. Organizations need to embrace an approach that addresses these issues and also balances the bottom line.

This paper focuses on the demands of the F&A function in today's environment and how automation of F&A processes can add value to the business while providing agility and growth to an organization. The suggested approach can be applied across sectors for efficient invoice handling, enhanced allocation of invoice management, supplier audit and recovery, as well as monitoring and reporting of various processes and tasks.

Contents

Introduction 5

F&A Challenges: Trigger Points for Improvement 5

Automating the F&A Function: Eight Areas of Impact 6

Benefits Resulting from Automating F&A 7

Conclusion 7

IntroductionWith increased globalization and inorganic growth across industries, organizations typically deal with different finance and accounting (F&A) processes and operations across units and locations. Different countries or regions may have differing regulatory and operational requirements. This leads to skilled F&A resources being predominantly utilized for handling large volumes of routine, low-value tasks, and increases the effort for each task, thereby resulting in higher costs.

The processing of F&A activities requires a holistic and transformational approach to ensure accurate and efficient results. Technology can play an important role in simplifying and transforming F&A processing, helping managers meet business commitments.

In this paper, we look at the challenges in F&A management and explore an approach that streamlines and enhances the function by leveraging technology. We also look at current trends in the field and explore how an efficient and effective technological approach can ensure seamless processing of F&A activities for improved business outcomes.

F&A Challenges: Trigger Points for Improvement F&A teams need to react to the environmental challenges of globalization, pervasive computing, compliance, and data overload, and at the same time proactively arm themselves and the organization to better anticipate and tackle them.

In order to make the F&A function efficient and effective, several challenges need to be addressed in the following areas:

n Invoicing: Businesses handle large volumes of invoices manually that need stringent monitoring. Posting incorrect ledger entries or entering wrong invoice amounts poses a business risk. In some cases, invoices are misplaced. Also, matching¹ and posting invoices manually consumes a large amount of manpower and is prone to human errors. For instance, in the case of businesses with manufacturing units, creating invoices at the point of manufacture is not easy. This task demands skilled resources with requisite knowledge in computerized, but not automated, F&A systems, which might not be available at the location.

On the other hand, bulk invoice processing with standard action triggers requires human intervention only for ensuring authorization and performing sanity checks. They also tend to be repetitive and monotonous and affect process efficiency and effectiveness.

n Payments: Among other challenges, an effective F&A function should be able to handle early payments and reduce duplicate payments. Duplicate payments lead to revenue leakage, and rectifying them requires additional effort and time. Early payments help organizations receive trade and cash discounts. However, it is not easy for companies to manually make dynamic adjustments in accounts and budgeting, or adjust revenues to avail trade discounts using legacy accounting systems.

n Allocation of tasks: Unit F&A managers typically allocate tasks by moving them to a common folder, and then manually assigning them to respective associates, based on criteria such as - action required, speed, and manner

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[1] Matching the invoice number in the invoice copy against that in the goods receipt note and in the purchase order. These need to be matched to ensure correct posting and correct payment and lead to correct reconciliations.

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of file transfer. It is difficult for managers to have a complete and real time view of the invoices and assign them to associates periodically.

n Customer queries: The F&A function needs to manage customer queries satisfactorily and without delay. The queries could either be 'standard', requiring standard responses and notifications to relevant mangers, or 'non-standard' queries requiring allocation to a resource for necessary action.

n Compliance: Financial and accounting regulatory compliance is a challenge when the regulatory environment is in flux, or when the business operates in multiple locations with differing regulations as well as degrees of regulation.

n Integration: Many organizations end up with individual systems for each unit or process due to legacy IT systems, inorganic growth, and multiple locations. They need to integrate across processes and systems, as well as locations, to efficiently allocate and monitor F&A tasks, as well as ensure governance of customer interactions.

They also require a multi-lingual platform for processing F&A tasks where each unit and location might conduct business in the local or national language.

Automating the F&A Function: Eight Areas of ImpactEffective F&A management requires that processes are followed diligently, regulations are complied with, and risks are mitigated and minimized. In order to achieve this, we recommend the use of an efficient and effective automated F&A solution, hosted on a common platform, which can be accessed and operated from multiple locations. By leveraging a flexible, unified and integrated technology platform, organizations can create a lean, automated, and efficient F&A function:

n Automated invoicing resolves the problems in invoice matching by using unique identifiers for each invoice. Using a unique identifier, such as the invoice number, in conjugation with the invoice date and total amount of the invoice, can also reduce duplicate payments.

n An efficient automated system allocates workload based on business rules to ensure that all invoices are processed within predetermined targets, and facilitates load balancing amongst associates and process queues.

n An effective system makes processes user friendly and easily integrates with existing systems and processes for greater efficiency. Seamless interaction between systems and people facilitates the complete invoice processing cycle from invoice capture to payment. It also helps in ensuring data integrity by establishing an efficient document workflow across functions such as finance, accounting, marketing, legal, and supplier management.

n Such a solution has pre-configured features to facilitate better control over data and processes, enabling real-time tracking of invoices, purchase orders, and payments. Ideally, the system should also provide scalability to suit an organization's changing needs and demands. A common multi-lingual platform for processing invoices in organizations with global operations can be used to ensure seamless delivery.

n To eliminate missing invoices, front-end imaging can be used for paper based invoices, while e-invoicing can be used in other instances. Automated solutions help handle bulk invoicing and set off trigger emails with a standard response template for specific invoice types to save time and effort. The automated responses can address standard queries, and immediately notify the relevant function to manage the requisite action. Non-standard queries can be quickly allocated to an associate for drafting a suitable response and taking the relevant action.

n An automated solution can post dynamic discounts during payment runs², processing the ensuing payments correctly and rewarding clients who make early payments with discounts as per corporate guidelines.

n An effective system enforces compliance with the requisite regulatory norms across the organization as well as specific requirements at a local level, and provides the flexibility to easily incorporate changes in regulations at both levels.

n Finally, automation offers greater visibility through easy-to-use portals, both internally as well as on the supplier side. Platforms can also be integrated with external systems, thus providing alerts and notifications on regulatory changes as well as global industry trends.

Benefits Resulting from Automating F&A Adopting an effective automated solution for supporting and executing F&A tasks helps a business realize four major benefits:

n Increased efficiency and accuracy: Automation reduces manual work and subsequently, the time taken for each task. It also eliminates errors due to human intervention, time lag, and handovers. Also, revenue leakage due to double payment or non-realization of discounts is minimized.

n Partner satisfaction: Accurate, timely transactions ensure that both suppliers and customers realize greater satisfaction from their engagement with the organization.

n Reduced costs: By relieving skilled personnel and allowing them to focus on higher-value tasks, automation reduces operational costs. It also reduces the processing cost per invoice, including the routing costs for approval.

n Greater visibility: Automation reduces the time and effort for collation of F&A information from operational silos, and thus enables organization-wide visibility for leaders. It facilitates data gathering in real-time to generate effective reports for better decision-making.

ConclusionManual processes for operating and managing the F&A function are resource-intensive, uneconomical, and are fast becoming outdated. Organizations need to leverage technology to make the right decisions and reduce operating costs associated with the function.

Automation can help standardize the similarities across the organization, smooth out the differences at the local level, and even out the dissimilarities in F&A operations across units. It can also help managers derive higher value from their F&A personnel who can now engage in non-routine, value adding tasks.

Implementing an effective automated solution not only helps reduce costs but also transforms the function through the adoption of best practices and process improvements. The transformation comes from simplifying F&A processes, ensuring process adherence and regulatory compliance, and creating greater transparency for all stakeholders. However, any such solution must be easily and seamlessly integrated with the existing systems within the organization. It must also be scalable and flexible in handling the changing needs of the business within a dynamic economic and regulatory environment.

7[2] A payment run is a one-time activity in a given period when firms in an industry can avail better discounts.

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About TCS' Business Process Services Unit (BPS)

Enterprises seek to drive business growth and agility through innovation in an increasingly regulated, competitive, and global market. TCS helps clients achieve these goals by managing and executing their business operations effectively and efficiently.

TCS' Business Process Services (BPS) include core industry-specific processes, analytics and insights, and enterprise services such as finance and accounting, HR, and supply chain management. TCS

TMcreates value through its FORE simplification and transformation methodology, backed by its deep TMdomain expertise, extensive technology experience, and TRAPEZE governance enablers and

solutions. TCS complements its experience and expertise with innovative delivery models such as using robotic automation and providing Business Processes as a Service (BPaaS).

TCS' BPS unit has been positioned in the leaders' quadrant for various service lines by many leading analyst firms. With over four decades of global experience and a delivery footprint spanning six continents, TCS is one of the largest BPS providers today.