The pace of digital transformation is today so rapid that even the most forward-thinking of businesses are likely to be struggling to keep up.
It’s not just the organisation’s ability to keep up with the fast pace of new technology trends, or the cost of it that’s preventing some business functions from embracing digital transformation as readily as others. The process can often take much longer than anticipated due to the culture of the business and a reluctance by some to change ‘the way things have always’ been done.
To try and find out how UK businesses are responding to digital transformation, we surveyed over 100 IT professionals and 200 finance managers. The results are illuminating and the showed that it’s the finance team that seems to be lagging when it comes to embracing new technology. Four out of five finance professionals feel their department has been left behind when it comes to digital transformation, and many are struggling with related issues of low productivity, high process costs and inefficiency.
However, while some finance departments may feel a little neglected, the IT department, who will typically lead digital transformation projects reveal that finance may only have themselves to blame. Almost half (45 per cent) of the IT professionals we spoke to said the finance team is most resistant to change, while 39 per cent believe that an over reliance on manual processes is holding them back from going digital. In spite of this reluctance to embrace digital processes, IT professionals claim finance is the team that probably needs it the most.
Eighty per cent of the finance professionals we surveyed fully admit that they struggle to keep up with the business’ digital goals, with 66 per cent saying they are more paper reliant than any other business functions. Also, 58 per cent of respondents said they are unlikely to make decisions or manage approvals electronically.
On average, while two thirds of every financial process is automated or managed electronically, one third of the task still requires manual intervention. The manual work required for some processes can be up to 50 per cent. Expenses, budgeting and debtor management are among the financial processes with the lowest levels of automation.
But it is actually invoice management that is proving to be both the most problematic function and the one which is most in need of modernisation, with 66 per cent of supplier invoice data needing to be manually rekeyed and processed. A surprising 9 per cent of invoices are still delivered by fax, while 19 per cent come though the post, 15 per cent are hand delivered, and just 23 per cent arrive via email. In contrast, only 11 per cent of invoices arrive through e-invoicing portals, while 20 per cent come via direct integration between suppliers’ billing systems and customers’ financial systems.
The processing of supplier invoices was pinpointed as being the biggest bugbear for the finance team with incorrect financial amounts, the wrong PO numbers, and non-matching line items all causing processing frustrations on a daily basis. And, it is heavily manual processes like this that are holding up finance’s ability to go digital.
According to Gartner the typical cost of manually processing an invoice is typically between £4 and £25 per invoice, and in some cases is as high as £50. Organisations without automated invoicing processes in place are therefore losing money compared to their more digitally enabled competitors who can make these processes far more efficient. Although this is just one aspect of financial digital transformation the direct cost benefits of making improvements are significant.
Accounts payable and accounts receivable processes, which our survey said were both conducted manually one third of the time – were also the two financial processes considered by IT to be in greatest need of digital transformation. Invoice processing is also in the top two financial activities that businesses say need to go digital to help improve productivity, remove paper from the department and to identify cost savings.
The sheer weight invoice processing puts on people in the finance team, added to the challenges finance faces in enacting digital transformation is quite widely felt. Most finance teams are today facing an evolving invoice management challenge. In the midst of a technology-enabled world with digital transformation happening apace, the way invoices are issued, processed and paid has stood relatively still. This leads to huge and increasing complexities in the types of invoice organisations need to accept and deal with, putting greater strain on their ability to pay them on time and in a process-efficient manner.
True cost of manual processes
Finance teams need to find a way of dealing with these invoicing complexities and internal process burdens as they may be paying a potentially heavier price in terms of process and time inefficiencies than they may realise. For example, their people may struggle to stay motivated by the repetitive tasks involved which limits their availability to take on more meaningful and value added roles in the department. Although it may not be immediately apparent, supplier relationships can also be hard hit by the delays commonplace with manual invoice management. Finally the situation is exacerbated by the fact that businesses are dealing with a broader range of invoice types coming from a wider variety of channels than ever.
The bottom line is that these complex manual processes may well be costing money that organisations just don’t need to spend. They’re also potentially stifling the opportunity to extract greater value from other cost centres – predominately the people tangled up with the heavy day to day burden of repetitive invoice processes.
Going digital and employing an e-invoicing platform enables organisations to easily create purchase orders against every purchase requisition, manage the approval and ordering process, and all importantly, allows suppliers to create electronic invoices with one mouse click, directly in the systems. This massively reduces the likelihood of processing and other errors, and also saves your suppliers a lot of time in invoice creation and payment chasing.
Finance has everything to gain from joining in the race to go digital and leaving its laborious, manual processes behind. It’s time for finance to get on board!
Daniel Ball is a director at Wax Digital
Image source: Shutterstock/wrangler