How Delaying Financial Automation Impacts CFOs

Blog post

Financial automation has been well understood and adopted amongst many global mid-market organizations. In fact, our Global Financial Close Benchmark Report found that as many as 78% of mid-market organizations have implemented at least basic or developing financial automation, meaning a majority of their financial close processes were carried out with manual methods and legacy tools. This acceleration of automation has prompted CFOs to rethink their existing manual processes and augment them with financial close software.

“78% of companies reported only having Basic Automation (defined as exporting spreadsheets from the ERP) or Developing Automation (defined as using advanced Excel Macros on top and some RPA) for their financial close process — and for this group it was a tough year of cobbling together work-arounds and asking Herculean efforts from their teams to complete the close.” – 2021 Global Benchmark Report

While CFOs are typically aware of the benefits of automation, what are the costs of delaying the implementation of financial close automation?

Costs of Delaying Financial Automation

Falling Behind Competitors

Implementing financial close automation has switched from a “nice-to-have” to a “must-have,” giving organizations and CFOs a competitive edge. When delaying the adoption of automation, CFOs lose out on the potential to add more value to the entire organization and effectively strategize for the future.

“The most effective CFOs, versus their less effective peers, spend 6% less time on finance function activities. They reallocate that time to analyzing and communicating how the company creates value. Effective CFOs also more fully embrace their role as ‘head of the finance function,’ meaning they challenge finance to meet an aggressive mission and long-term vision, then guide the team to execute against both.” – Gartner

Not only does financial automation differentiate CFOs and organizations from their competitors but implementing digital technologies to automate repetitive, status quo processes enables F&A teams to effectively scale for growth and realize long-term business goals. Missing out on this opportunity for growth further restricts the finance function, as F&A teams are solely focused on closing the books through legacy tools and manual processes rather than giving business-critical insights through harnessing data analytics and financial automation.

Data-driven insights are crucial to C-suite executives, with 38% of them stating that providing analysis to gain business-critical insights was the biggest challenge concerning the financial close in the past twelve months. The power of data analysis not only enables CFOs to shift from a reactive to a strategic mindset, but also empowers the Office of Finance to contribute more to the long-term vision of the business.

Increased Risk in Financial Data

Risk is always at the forefront of CFOs’ minds. Presenting timely financial statements while trusting reported numbers is a high priority for the Office of Finance, but achieving accurate financials is much more difficult when utilizing error-prone, manual routines.

How Delaying Financial Automation Impacts CFOs | Increased Risk of Financial Data | Four illustrated individuals around computer monitor with large exclamation point indicating an error

Utilizing spreadsheets is deemed the status quo, with 88% of Forrester survey respondents stating they use more than 100 spreadsheets to support their business decisions. While a necessary tool in some instances, spreadsheets are extremely prone to risk, especially when used to support mid-market organizations. The lack of inherent controls and risk of errors from human intervention makes the reliance on spreadsheets a huge risk factor for CFOs.

Rather than doing what’s been done in the past, CFOs must embrace the acceleration of financial automation and standardize and automate their existing processes in parallel to not only effectively reduce financial risk but also gain more confidence in reported numbers. Financial automation software highlights exceptions, enabling accountants to focus on the errors and improve the quality of financial data. The costs of material misstatements or even using inaccurate numbers to drive business decisions have far-reaching consequences on the reputation of the organization.

Workflow Inefficiencies and Bottlenecks

Many aspects of accounting and finance are rather repetitive in nature but absolutely critical to assessing and analyzing an organization’s financial health. Transaction matching, reconciliations, and auditing each require multiple personnel to prepare and approve, making the entire financial close susceptible to bottlenecks and inefficiencies. Utilizing manual methods and legacy tools such as spreadsheets often further jeopardizes the timeline of completing the close, as F&A teams are relying on outdated methods instead of taking advantage of automating those repetitive processes.

As a CFO focused on the timely delivery of accurate financials to stakeholders, bottlenecks can result in missed deadlines, further extending the completion of the financial close period. Effectively identifying bottlenecks and delegating tasks through close management software enables CFOs to speed up the financial close and meet delivery deadlines.

Losing Top Talent

The accounting profession is known for a work-life imbalance, with many accountants sacrificing their holidays, evenings, and weekends to meet the deadlines of each financial close period. This is especially true for organizations that continue to utilize manual processes and legacy tools, as these methods often increase the hours needed per full-time employee to close the books. Over time, this constant dedication to time-consuming tasks leads to burnout, contributing to turnover within the organization.

“The time savings isn’t just during the close process, we also see it from a day-to-day perspective. We are no longer spending time manually matching accounts because we now let Adra do the matching automatically so we can spend our valuable time focused on the exceptions.” – Sr. Treasury Analyst, Torchy’s Tacos

By embracing the acceleration to automation and effectively implementing financial close automation, leading organizations and CFOs can effectively reduce the hours needed per FTE to complete closing tasks, while simultaneously creating a more balanced workload. “If you do not adopt technology, you are going to get left behind,” warns Darren Heffernan, President of Mid-Market at Trintech. Implementing technology and upskilling your F&A team is crucial to not only retain top talent but also to further develop their data and analytics skillset.

Moving From Reactive to Strategic

As organizations continue to respond to the past year’s challenges surrounding the close, the difference between effective CFOs of leading organizations and CFOs of organizations that will fall behind in the market is dependent on the implementation of financial automation technology. Organizations with established or even advanced automation in place have proven to have an additional competitive edge, from risk management to gaining business-critical insights, in comparison to those with basic or developing automation.

How Delaying Financial Automation Impacts CFOs | Moving from Reactive to Strategic | Two illustrated individuals gather near computer monitor screen with graphs and lines for financial close analytics

With the changing business landscape, it is up to the CFO to stay up to date with financial technologies and understand that the costs of not implementing financial automation can turn into long-term consequences for the organization. Leveraging financial close automation is more than an addition to your tech stack, it’s a pivotal software that enables your team to effectively strategize for the future while drastically improving existing workflows and processes.

Written by: Alex Clem