And that's where Robotic Process Automation (RPA) can be impactful, providing touchless business process automation to back-office jobs, reducing manual effort, cost, and human error while offering high ROI to businesses.
A significant part of an entire business process goes into back-office jobs related to financial accounting and invoice processing. Businesses have to keep track of all pending and ongoing financial transactions between their suppliers and their clients alike.
This often involves people to carefully go through each of the invoices (usually in PDF format) generated by the suppliers, entering them into their database, and approving payments accordingly. This is a tedious and time-consuming process. According to research from Aberdeen, it can take anywhere between 4 to 16 days for companies to process an invoice, from receipt to payment approval.
Methods of invoice processing and other back-office automation
Even though back-office tasks are tedious and time-consuming, they are often repetitive. But thanks to AI-driven automation, these tasks can be automated easily with RPA.
RPA can generally be applied to any task or process that is:
- Rule-based, allowing decision flows to alter dynamically
- Consistent, where the same step is performed repeatedly
- Template driven, with data entered into specific fields in a repetitive manner
Organisations that wish to automate invoice processing and accounts payable (AP) processes can usually implement an RPA software to automate these tasks. The software can be connected to the organisation's ERP system and other potential business applications.
Business process automation will be different depending on the type of supplier invoices being handled. For indirect spending & expense invoices, the accounts payable automation solution would involve data capture, coding (modification), and distribution of the invoice to the suitable approving authority within the organisation.
For direct expenses, the automation software would automatically match the invoice data to the purchase order, and if everything matches, the invoice will directly be sent to accounting for payment without any human intervention. Hence, the term 'touchless invoice automation' is the end goal of AP automation.
What will RPA in Invoice Processing exactly do?
In general, the RPA software looks to automate the following tasks:
Monitoring for New Invoices: The software looks for new invoices (which are typically PDFs or image files) in a particular directory within the company's SharePoint site. As soon as new files are detected, they are flagged as invoices and forwarded for data extraction.
Invoice Capture: The software extracts relevant data (e.g., bank account, order details, price, etc.). If it fails to capture the data effectively, or has less confidence in the data extraction, it is sent to human employees for manual verification.
Invoice Evaluation: The invoice is evaluated against order records and other criteria to ensure if it's a valid one. Evaluations include -
- Cross-checking the invoice against purchase orders
- Cross-checking for duplicate records
- Using working capital optimisation policies to decide the time of payment
- Using rules and limits to determine whether manual intervention is required
The software will automatically forward the invoice for manual processing if it detects potential abnormalities.
Record Information: After the invoice has been processed, the software will automatically log the relevant information in the company's database for record-keeping. This step is essential, as it is useful for future reference in case of any potential discrepancy or dispute with the supplier.
Make Payments: Finally, the RPA software will initiate payments to the supplier if no discrepancies are found during invoice processing.
RPA in finance and accounting: A workflow
Let’s say Alice works in Accounts Payable and is responsible for validating supplier invoices and processing their payments appropriately. By deploying RPA for invoice processing, she can drastically reduce her manual effort involved in such invoice validations, while also possibly eliminating human errors involved in the task. The entirety of the above process can be performed automatically with the help of RPA software without a single click!
Here's how Alice's workflow is simplified effectively:
Supplier invoices are automatically saved in a specific network folder.
RPA robots regularly monitor the dedicated folder where invoices are saved.
As soon as a new file is found, the RPA robot picks it up for data extraction.
Using intelligent Optical Character Recognition (OCR) and Natural Language Processing (NLP) capabilities, software robots read and extract information available in the invoice.
These robots then use their access to the company's database to update the extracted information.
Once the invoice information is successfully updated in the database, the bots send an appropriate email notification to the concerned employees.
Further, the bots can optimally schedule the payment for processed invoices based on multiple known factors.
Finally, the RPA software can trigger an email to the supplier or vendor to confirm if the payment was processed successfully.
The RPA workflow enables organisations to avoid duplication of resources by integrating streamlined automation in specific finance tasks like accounts payable or expense management.
RPA implementation in Finance & Accounting
RPA technology can be laid over existing systems and integrated with existing data, minimising the disruption of existing IT infrastructure. It can begin with simple rule-based tasks and scale to more sophisticated algorithms and machine-learning functions as the organisation matures.
Step 1: Identify opportunities to automate
It is essential to identify a manageable scope for processes that would benefit from automation. Start small, then scope it out. Thinking big before doing a suitable pilot could lead to more rework and increased development costs.
Step 2: Validate the identified opportunities
Most financial processes typically comprise both transaction and decision parts. Automation can help a lot in the transactional part, which also happens to include time-consuming and repetitive tasks.
Step 3: Determine the baseline cost of operations.
An initial baselining of operating costs for accounting processes in scope for RPA will help determine the financial benefits of the implementation. Usually, the cost benefits of RPA are visible within a year, but without a proper baseline, it may be hard to convince the company's shareholders to greenlight the implementation itself.
Step 4: Standardise accounting workflow and procedures.
For efficient implementation of robotics in finance and accounting, it is vital to analyse and standardise manual processes. Without standardisation, robotic automation would not be efficient. Project managers with Lean and Six Sigma experience are essential for streamlining and standardising business processes at scale.
Step 5: Implement and actualise
For the implementation phase, a suitable RPA tool may be chosen and tested out to understand how it works. Companies can also train their employees to set up and work with such software.
Optionally, you may even call in the experts and hire an RPA vendor to help you with the implementation. As we move into 2020, there are several business process automation companies that you can rely on and choose from.
Benefits of RPA in Finance & Accounting
Higher Accuracy and Increased Productivity: RPA provides accurate results, with precision in repetitive tasks like copy-pasting data, moving files and folders, filling out forms, etc. Human workers can be redeployed to higher-value business functions, which in turn would increase the company's overall productivity.
Cost Savings: RPA can provide cost savings ranging from 20 per cent - 60 per cent of baseline FTE costs. It also cuts the time spent in invoice processing and speeds up repetitive back-office functions.
Compliance and Audit Trails: RPA can be programmed to meet all compliance standards. It enables the availability of fully maintained logs, and every step undertaken in a specific process is recorded for historical auditability.
Reliability & Enhanced Customer Experience: RPA removes the need to account for sick days, making services available 365 days a year. By implementing RPA in Banking or Finance & Accounting processes, businesses can deliver enhanced customer service, achieve a competitive advantage in the industry, and actively scale their operations at a low cost.
Return on Investment (ROI): RPA deployment and robotic development may take anywhere from 6 to 12 weeks, generally followed by a 60-to 90-day "nesting period" where vendors tweak the robots, add efficiencies, and tighten the rules and governance. After that, companies can expect to see the full ROI realisation.
What kind of ROI can businesses expect from RPA implementation?
Here are four ROI metrics which should improve with RPA implementation:
Speed of back-office processes
This can vary depending on the process being automated. In most cases, businesses can expect anywhere between 20 per cent to 110 per cent improvement in process speed after RPA deployment.
Manual effort in back-office tasks
How much of the manual effort is taken over by RPA bots? On average, about 70 per cent of the manual work can be reduced through a successful RPA deployment. In some cases, depending on the implementation, productivity savings of up to 1000 per cent have been achieved by certain companies.
Accuracy of Output
Based on the accuracy of inputs, RPA should enable 100 per cent output accuracy among automated processes. If business rules, governance, and decisions are programmed correctly, human error is eliminated.
Robots can be programmed for compliance issues and will alert employees of the compliance issues every time so that decisions can be made safely. In other words, robots can help ensure that the laws, rules, and regulations governing specific processes are always being followed.
RPA offers attractive benefits and ROI for the financial services industry, particularly in automating back-office operations, such as AP automation and invoice processing. The key is focusing on innovation within the company to cut costs and improve results.
Mitul Makadia, Founder, Maruti Techlabs