Don’t forget fraud-protection on your automation journey

The digital transformation has reached the finance department and changed the job of a CFO drastically in the past few years. Automation and analytics should now be part of their job descriptions as much as traditional duties. However, for those who have just started the digitalization journey, the temptation is high to just retrofit it into their existing processes. To grasp the whole potential of automation, a new approach is needed.

How automation changed the role of the CFO and puts it at the center of innovation

The role of the CFO has become broader and more complex. Today, a CFO is expected to not only perform traditional duties such as cash management but also leverage new possibilities like automation tools and artificial intelligence (AI) to make the Finance function more efficient, faster and competitive in the market. A McKinsey study brings it to the point when writing that after the CEO, the CFO is the second-most-common leader, identified as initiating a transformation. “Between M&A, digital transformation and analytics, never before have CFOs been the center of so much disruptive innovation. The demands on CFOs are rising, along with the scale and influence of the role.” While quarterly- and monthly reports were considered best practices in the past, today, real-time reporting is expected. And in the best case, all of that on an app on the phone. Business decisions are nowadays taken faster and data insights are a must. Such a change is huge and requires not only new technical capabilities but also fundamentally different processes. It is the role of the CFOs and their teams to define such processes and find the tools capable of bringing value to their stakeholders.

The potential of automation in finance processes is not yet exhausted

When looking at the numbers, the potential of automation is however not yet exhausted at all. In a representative survey among global finance experts, the vast majority said that only 25% or less of their tasks have been digitized or automated while the adoption of new tools was generally rather low.

The advantages of automation for finance teams

Automation and AI are transforming the finance function. One of the key elements for any tech-savvy CFO who wants to successfully enter this new era of productivity and performance is to have the knowledge about what to automate. For those who have just started the digitalization journey, the temptation is high to just retrofit any digitalization and automation project into their existing processes. Furthermore, financial managers often believe that automation processes belong to the responsibility of the tech team, and not the finance department. Consequently, finance ends up with a mix of tech stack that only captures the first few percentages of automation’s potential impact.

To grasp the whole potential a new approach, with the CFO in the lead, is needed. Improving a process doesn’t just mean to automate it. While automation is a good way to make a process faster, more stable and cheaper, the quality of the output should not be ignored. A good example of this is the automation of the expense management process in a company. Automating the tasks from reading out a receipt all the way to correctly booking it in the accounting tool and reimburse it to the employee, certainly improves the quantity of the process but not necessarily the quality.

Don’t forget fraud protection on your automation journey

Taking expense management as an example, one big risk that should be considered is fraud. This means that automating the expense management process should always include a fraud prevention mechanism. Fraud in this case is not only the submission of an expense that is in breach with the company’s expense policy but can also be a receipt that was already handed in (duplicate) or an expense that didn’t benefit the company. As it is difficult for an automation tool to handle such potential fraudulent activities, this is the time when manual intervention comes in. In short, all expenses that are within company policy and have a low likelihood to be fraudulent should be automated, while managers, budget owners and the Finance team should only have to manually check expenses that cannot be fully automated (exceptions and outliers). At Yokoy this is exactly the approach we are using. Yokoy uses modern technology and Artificial Intelligence to fully automate the expense- and company credit card process starting with a receipt/transaction all the way to the correct accounting booking, archiving and reimbursement. 

So, what should the CFO do?

In summary, CFO’s should redefine their processes to efficiently leverage today’s automation and AI capabilities with the goal of making the Finance function more efficient, faster and competitive in the market. This, however, doesn’t always mean that all tasks should be fully automated. In cases when fraud is a considerable risk in a process, manual intervention for exceptions and outliers can be a good way of getting a balance between efficiency and security.

This article first appeared on the InTech blog. 

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