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Advice and Information for Finance Professionals

The Promise of Intelligent Process Automation in Finance

By Hari Sankar, Group Vice President, Product Management, Oracle

True automation finally is coming to finance. Just as robots are taking over repetitive, manual tasks on the factory floor, automation powered by pattern recognition, artificial intelligence, and machine learning promises to eliminate routine finance and accounting tasks in the office.

In a nod to their manufacturing counterparts, some refer to these new finance capabilities as robotic process automation (RPA)—but we think "intelligent process automation" (IPA) is the more appropriate term. The reason? IPA not only replicates existing processes, it makes them more efficient and effective by eliminating tasks, improving process flows, and squeezing out errors.

This new wave of software has the potential to transform how work gets done in all areas of the finance function. Chief among the changes: it will allow finance professionals to finally make the move from a transactional focus to a strategic focus.

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With routine tasks automated, finance professionals will spend less time running reports and conducting ad hoc analysis on corporate data. Instead, they will more easily and quickly harvest and analyze the data they need to better support the business.

This will free up valuable time to engage with operational lines of business, and spend more time providing the forward-looking guidance that management needs to capitalize on the next opportunity.

Let’s consider a few examples.

Account Reconciliations

Today, most companies’ accounting staff spend a fair bit of time performing reconciliations across systems. In very large corporations, it’s not uncommon for people to be reconciling thousands or tens of thousands of transactions—across ledger and bank, ledger and sub-ledger, and other transactions across different systems—some internal, some external.

Many of the mismatched reconciliations follow standard patterns—an entry was made twice, or with a negative sign instead of a positive. By using configurable and intelligent rules to recognize and handle these patterns, IPA will automate a large subset of these reconciliations; it will deduce what the issue is and fix it. In some cases, IPA could remove the task from your view so you do not have to address it. In other cases, IPA will prompt you to quickly review and sign off on its decision.

Estimates indicate that the accounting staff won’t need to touch 80% of these simple, automatable reconciliations. This will allow them to focus on the smaller percentage of reconciliations that are more complex and require human judgment.

Financial Close

At most corporations today, the financial close process resembles a particularly intense fire drill at the end of every month or quarter. Because it involves many systems, several finance teams, and many lines of business—along with subsidiary companies—many dependencies must be tracked and managed. For example, you can’t close a certain account until all the subsidiaries close all related sub-accounts.

IPA can automate much of this orchestration. For instance, the software can:

  • Automatically track the status of task completion across multiple systems
  • Automatically kick off close processes as soon as dependent tasks are completed
  • Update the close calendar so you can stay apprised of where you are in the financial close process

Put simply, IPA will take over much of the work that makes the financial close process so hectic.

Financial Planning and Analysis

Financial planning and analysis (FP&A)—creating and approving budgets, managing spend, analyzing spend, etc.—is another process that IPA can streamline.

For instance, with IPA, senior executives won’t need to sign off on routine budget requests that follow a familiar pattern. They will need to pay attention only to requests that look odd or different from what they’ve seen in the past.

Before sending a request to the executive for approval, IPA can review the pattern (the dollar value involved, similar requests made in the past, etc). If it “sees” that similar requests were approved 100% of the time, the software can make the approval without human interaction. If it detects something odd or different about a request, it will prompt the executive to review the request.

The finance executive will be involved only when the software detects an anomaly that requires human review and judgement.

Do You Trust Your Systems?

While you may feel uneasy at the thought of turning over so much power to automation, the software can be configured to your level of trust. There are two elements to consider: rules and intelligence.

Default rules, based on general accounting best practices, are set up in the system. These rules are configurable based on what you consider to be best practice, or according to the processes in use across your organization. Most automation today is rule-based; for example, “If the amount is below $X.XX, divert to subordinate.” The rules can be configured by organization, category of expense, approval authority, or any number of other factors.

In the vast majority of finance systems today, business rules must be changed by a human being. The “intelligence” in intelligent process automation is what sets it apart.

Once you embed intelligence into finance software, it becomes a learning system. Over time, the system can watch processes; analyze the data, the history and the background; and identify new patterns. Then it will create and recommend new rules, or suggest how existing rules can be reconfigured to make them more efficient.

Throughout, finance professionals using the system will have the ability to refine, accept, or reject new rules suggested by the system. As the system learns more and more patterns, it recommends better rules that remove the burden of manual intervention from human beings.

Who’s Using It Now?

Though still early, the adoption of IPA is underway. Companies are currently using Oracle Account Reconciliation Cloud to automate the preparation of high-volume, labor-intensive reconciliations through the use of transaction matching capabilities. Configurable process monitoring, integration, and orchestration capabilities in Oracle Financial Consolidation and Close Cloud are enabling the automation of the financial close.

Also, with Oracle Financials Cloud, companies are starting to conduct touchless processing of transactions. For example, the system can be configured so that a certain subset of payable transactions can be completely “hands-free,” processed by the system.

Getting Started

As you begin to adopt IPA, think big but start small. Deploy IPA capabilities in one area, make sure it works to your satisfaction, then roll it out in another area, and then another. Don’t think of automation in isolation; think of it as a part of an overall finance transformation and best practice adoption. Ideally, it should be a part of your transition to the cloud, which will speed deployment.

Ultimately, by implementing IPA, you will reduce risk and increase efficiency. You’ll spend less time on low-value tasks such as reconciliation, and more on high-value tasks such as data analysis—which in turn will improve your ability to deliver meaningful business insights.

Learn more about intelligent finance in this research from Wharton, courtesy of Oracle.

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