The impact of automation and digital transformation in the accounting and financing sector, triggered by disruptive technologies like artificial intelligence, machine learning, cloud computing, blockchain, and robotic process automation (RPA), is self-evident. The industry is increasingly turning to technology to perform complex and time-consuming accounting tasks efficiently, cut costs and eliminate inaccuracies.
Accounting departments were the first to extensively adopt IT and automation in the 1950s, with process mechanization involved the use of punched cards to store and retrieve transaction data. The advent of computers completely transformed the way accountants collect, store, process, and share data through various tools.
The introduction of enterprise resource planning systems (ERP) later opened up a new horizon of opportunities for organizations to gain centralized control over the systems through cross-functional integration, facilitating further efficiency improvements.
ERP systems still required links to other applications, which translated into the high complexity of the solution. Thus, achieving a higher accounting automation level was still hard until the introduction of robotic process automation (RPA).
RPA is a technology that allows end-users to configure a software robot to use existing applications to perform transactions, manipulate data, and communicate with other systems. These software robots are programmed and trained to perform repetitive, rules-based, high-volume operations by replicating human actions when accessing multiple systems, applications, and documents.
Typical office work operations that software robots can take over include:
- opening, reading, and sending emails about the completion of a task.
- searching, extracting, updating, validating, and entering data across multiple online and offline applications like ERP, CRM, Office, etc. in machine-readable formats (text files, spreadsheets, XML, HTML, scanned documents, PDFs, images) via application programming interfaces(API).
- data cleansing, processing, and formatting to provide standardized reports for better decision-making.
All accounting operations require high accuracy, consistency, and many of them involve the manual handling of repetitive transactions. An employee usually collects information from multiple and fragmented systems and then processes the data (verifies, submits for approval) before finally saving them into an accounting system. Manual data collection and manipulation consumes much time and is error-prone.
With RPA, the robots can operate in the user interface the same way people do, eliminating the need to modify applications (e.g., accounting, payroll, warehouse, ERP software) or the underlying information technology infrastructure. Each operation is tracked and logged to ensure data integrity and meet audit requirements. Audit logs of automated processes can include much higher detail levels than when done by manual handling. Robots can be quickly retrained (in a centralized way) to comply with the accounting regulations and standards, subject to frequent changes.
An alternative to traditional (integrated, full) automation that requires significant time, money, and efforts from programmers and software suppliers to develop dedicated software and to integrate it into existing systems, RPA can be deployed as a noninvasive technology solution without the undesired interference with existing infrastructure, offering cross-functional and multiple systems operations. It is particularly suited for business environments with numerous modern and legacy applications.
RPA offers an opportunity to improve the performance of processes in companies, where traditional automation is either impossible or too complex, and thus too expensive to deploy. Implementing RPA, integrated with AI, the cloud, or blockchain, is cost-effective and less time-consuming than traditional full automation.
The main advantage of RPA is not the technology itself but the release of human resources and the opportunity to focus on activities requiring judgment, making decisions, or interacting with employees or customers. The most frequently mentioned benefits of RPA include:
- cost reduction
- increased process speed
- improved process control and performance visibility
- higher quality data (accuracy, consistency, compliance)
- continuous operation (24 hours a day)
- improved process flexibility for easier scaling
- ease of implementation
The accounting processes and tasks that can benefit from RPA in terms of performance and accuracy include:
- Period-end closing – general ledger, sub-ledgers closing, validation of journal entries, low-risk accounts reconciliation, consolidation;
- Reporting – monthly, quarterly close, internal performance and management reporting (aggregating and analyzing financial and operational data), external statutory and regulatory reporting;
- Accounts receivable and accounts payable – maintaining (updating, vetting) customer/supplier data, creating/processing/delivering invoices, automating approvals, validating and posting payments, collections, billing, matching invoices against sales and purchase orders;
- Cash management, general ledger accounting, intercompany transactions, inventory accounting, travel, and expenses – reimbursement requests, audit and document expense reports, payroll, fixed asset accounting, tax accounting.
Capgemini’s survey revealed that RPA is the most popular technology to automate back-office and middle office functions. The payback period ranged from 7 to 12 months and ROI from 13% to 18%. Thirty-one percent of analyzed companies implemented automation in finance and accounting, where ROI averaged 12%, and the payback period was 11 months. Automation in finance and accounting recorded the highest cost savings (13% on average) compared to other back-office departments.
RPA offers considerable advantages over fully integrated automation, but it also involves some challenges and risks that affect the expected outcome of automation. According to estimates by EY, 30% to 50% of initial RPA implementation projects failed in 2016 due to reasons related to IT issues, process complexity, and unrealistic expectations. Experts believe that the valid process design and its detailed documentation are key success factors for RPA. RPA implementation also requires proper preparation of infrastructure, processes, and governance mechanisms. Mistakes or shortcuts taken at that stage can result in failures to meet the expected automation outcome.
Automation solutions have been present for a long time now, but it is only RPA that has made automation widely affordable and applicable at scale. Robots are bringing a paradigm shift in accounting, taking the burden of monotonous, repetitive, and predictable (mainly transactional accounting) tasks out of accountants’ shoulders, providing the opportunity to focus on more complex tasks. It entails creating new roles for accountants, empowering them to go beyond traditional bookkeeping and preparing financial reports, and making them capable of focusing on using their expertise to make professional judgments, interpret financial data, and put it in context across the whole value chain.