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Automation of financial processes requires fundamental rethink

Business leaders once looked to centralisation and outsourcing to improve efficiency in a company's financial processes but automation now offers even greater potential for achieving efficiency. So just how big an impact will automation have on corporate treasury? The authors of this McKinsey article consider how far it's possible to go in automating the financial function and what financial executives need to think about if they decide to go down the road of using more technology. For a start, they cite research on how many financial processes it's currently possible to hand over to automation: McKinsey Global Institute’s research on automation found that currently proven technologies can fully automate 42 per cent of finance activities and mostly automate a further 19 per cent – making a total of 61 per cent of financial processes fully or partially suitable for automation.

Benefits of automation can be 'elusive'

This sounds positive but the three McKinsey authors – Frank Plaschke, Ishaan Seth and Rob Whiteman – note that automating the finance function “may be enticing conceptually, but benefits can be elusive. CFOs will need a clearer understanding of what kinds of activities can be automated.” They also note that some of the technologies that enable the automation of basic tasks have existed for some time – but they are now better, faster and cheaper than in the past.

Although 61 per cent of financial processes are fully or partially suitable for automation, the McKinsey authors recommend that companies should take a conservative approach to robotic process automation (RPA). They write: “Today, we estimate that it makes sense from a cost/benefit perspective to automate about half of the work that can be technically automated using RPA and related task-automation technologies.” The remainder of the opportunity requires advanced cognitive-automation technologies, such as machine-learning algorithms and natural-language tools, say the authors.

Rethinking finance

Unlocking the full potential of automation technologies requires a fundamental rethink of financial processes and the McKinsey authors write that managers “must be willing to reengineer their processes completely” and a transformation process requires leadership and vision from the CFO.

They also suggest the following approaches to managing an automation project – which will inevitably involve disruption in terms of financial processes and the roles and tasks required of employees, as well as disruption to the human resources needs of the company:

  • Start with the more mundane, transactional tasks, which inherently have higher turnover.
  • Create a human-resources and placement capability that works in lockstep with the CFO and the finance function.
  • Adapt the recruiting and retention profile to get the finance professionals you need.

This item appears in the following sections:
Operations
Best Practices & Benchmarking in Operations
Outsourcing Cash & Treasury Management Operations
Shared Service Centre Operations
Treasury Management Systems
General Treasury Systems

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