Is your finance department logging extra hours just to manage all the financial paperwork this tax season?
We know it is. And that’s why we highly recommend shifting to robotic process automation (RPA) to cut the clutter.
As an emerging technology, RPA competes with intelligent/cognitive technologies such as artificial intelligence (AI) and machine learning. But unlike most emerging tech, RPA is one of the most affordable options because it’s based on a cost-effective software platform. That’s why small-business finance managers should consider adopting it.
We understand that a key challenge for adopting any new technology is a lack of proof of concepts and use case stories that makes it hard to convince small-business owners and leaders to adopt RPA.
However, small-business finance managers who adopt RPA in accounting improve the accuracy of managing financial data by about 95 percent. This helps them process tax filing 3 to 4 times faster, with 70 percent more cost savings in the accounting process.
These benefits can help you improve your operations drastically. This article will look at three RPA use cases in accounting for small-business finance managers.
Why RPA suits small-business accounting and finance
According to Gartner, global business spending on RPA totaled $680 million in 2018 and is expected to reach $2.4 billion by 2022. Here’s what Cathy Tornbohm, vice president at Gartner, said about RPA adoptions trends:
“The growth in adoption will be driven by average RPA prices decreasing by approximately 10 percent to 15 percent by 2019 but also because organizations expect to achieve better business outcomes with the technology, such as reduced costs, increased accuracy, and improved compliance.”
So far, the key adopters of RPA have been financial institutions (banks and insurance companies), which primarily seek to eliminate manual and repetitive tasks. But small and midsize accounting firms or finance departments have more to gain from adding RPA in their accounting function because of the cost effectiveness.
That’s because the cost of implementing RPA in a use case is lower than that of implementing AI and machine learning (ML) tools. RPA doesn’t require additional investments in software or hardware. Once they’re trained, your accountants or finance professionals will be able to automate tasks on their own.
In contrast, AI and ML tools require developers and coders to apply the technology to a use case, which means additional hiring costs.
Let’s look at how you can apply RPA in the three critical priorities for small-business accounting: invoicing, expense management, and tax management.
Overview of 3 RPA use cases
Ensure zero transposition errors in your invoices
Key challenges: Dealing with a large volume of invoices from multiple vendors and suppliers can be taxing for your accounts payable function. Not only do you have a stack of invoices to process in your ERP or accounting software, but they’re also in different formats including PDF, Excel, and Word.
In addition, when you’re manually entering information (such as items and purchase amounts), there’s the risk of keying in the wrong information. This can result in transposition errors, by which putting a decimal point in the incorrect place compromises your financial audit and leads to compliance issues.
Now, let’s look at a use case of RPA in this accounting function.
Who should use this RPA use case? Small supply-chain businesses that deal with high volumes of order management and generate thousands of invoices per day. RPA helps them increase the speed of extracting data from paper-based orders and transferring it to an accounts payable database.
Improve expense management to boost cash flow and ensure compliance
Key challenges: The expense management function tracks internal payments that employees incur for travel, entertainment, hotel stays, etc. Employees usually email or submit the receipts on accounting or ERP software for the finance department’s approval.
However, this approval process increases the workload of finance teams. If your small business lacks a finance department, it’ll be tougher and time-consuming for you to match and process each expense claim.
Though you can automate the process by deploying an accounting or ERP tool, you will still have to manually approve each claim. The alternative is to set a minimum claim limit for each expense, so that the ERP tool automatically approves it.
Despite this, there’s still a chance that some claims may not be authorized and will need a human to cross-check the data to avoid compliance issues. Let’s review the following use case to see how you can prevent issues.
Who should use this RPA use case? A small business that has more than 100 employees and a very small accounting department. RPA will automatically validate expense claims to comply with your policies.
Automate data entries in your tax filings
Key challenges: Tax season usually means heaps of tax forms to get tax breaks. But your accounting staff has to spend a lot of time manually sorting tax paperwork and checking bank reconciliation data to ensure accuracy in your tax returns.
Not only is manually filling the tax forms cumbersome, but inaccurate tax reporting can mean that you underreport your income or expenses. This results in erroneous tax computation, which in turn leads to underreporting your tax deductions.
If your accounts payable data (from invoices, bills, and expenses) is inconsistent with your financial reporting, chances are that you will underreport your deduction when filing taxes. This leads to a flawed balance sheet that has audit and compliance issues.
Before you implement any of the RPA use cases discussed here, here are some of our recommendations:
- Identify areas of manual data entry or tasks that involve processing a high volume of financial documents.
- Read more case studies or success stories of the ROI gained after implementing RPA tools. These case stories could be from large enterprises, as long as you leverage the key data points that apply to your small business.
- Test a trial version of any RPA software before purchasing and implementing one in your small business.
The key to implementing any RPA use case for accounting is to first understand the challenges that your small business faces. When you can effectively target these challenges, RPA software will provide significant ROI to your accounting function.
To help you boost accounting further, here are some resources on other beneficial—and affordable—technologies: