How to use automation and AI to cut costs, not corners

Automation is a huge need in accounting and finance, especially for growing companies. Companies that automate their back-office processes and systems are reducing overhead, cutting costs, and freeing up finance teams to tackle more strategic projects such as data analysis or financial planning. And, bonus: employees are happier and want to stay on board!

According to a Deloitte survey¹, nearly 76% of companies are still relying on processes that are mostly manual or require large amounts of manual effort. Once the foundational systems (i.e. cloud-based accounting systems, budgeting, forecasting, reporting tools, and data analytics/visualization) are implemented, they can begin to automate data entry, invoicing, tax compliance, check printing, expense management, and other tasks that are integral to a finance department’s daily operations. Automation in these areas can reduce the need to fill extra positions while providing an opportunity for existing employees to gain new skills.

Automation Gives Breathing Room for CFOs

While automation greatly improves the workflow of daily finance operations, it also enhances digital skills and improves customer satisfaction. Some top incentives behind these investments include:

• Better financial performance
• Employee experiences
• Customer satisfaction

Once legacy systems and spreadsheets are replaced with integrated systems, CFO’s gain high levels of visibility into their companies finance and operational performance helping team efficiency increase.

Figure 1: Gartner, Top Objectives Driving Finance Software Investments, By Garrett Astler, Published 10 February 2023.

CFOs Want More Automation

According to a NetSuite survey² 90% of CFOs noted that they plan to implement automation, AI, and fintech in 2024. In the same survey, 80% of CFOs noted they already have implemented, or will implement within the next six months, automation functions for processes involving accounting, sales, ecommerce, payroll, and customer-facing functions. As automation technologies become more ubiquitous, companies who are reluctant to adapt risk falling behind their competitors. And that’s not good.

A good example of automation’s utility is in the forecasting process. Annual forecast plans were (and still are) often constructed via manual spreadsheets – and these are often derailed by things like interest rate hikes or spikes in inflation. Most CFOs use spreadsheets or outdated accounting systems; unfortunately, these processes cannot update this important data in real time. Compounding this dilemma is that many companies cannot afford to cover the resultant costs of error-prone systems.

Most CFOs use spreadsheets or outdated accounting systems; unfortunately these processes cannot update this important data in real time. Compounding this dilemma is that many companies cannot afford to cover the resultant costs of error-prone systems.

Functions such as accounts payable (AP), accounts receivable (AR), cash management, budgeting, and account reconciliation become easier to manage and avoid mishaps with automation.

Financial automation can expedite suppliers and other entities getting paid. For example, by coupling optical character recognition (OCR) and machine learning with a third-party payment processor, the ERP system can be made to apply cash once received and remove receivables from the system. If payment doesn’t come in, the system can be set up to send collection letters. The same ERP can also automate projections and forecasts which facilitates better decision making, avoiding fines, penalties, and reputational damage. For example, tools like Avalara AvaTax, which calculates rates for sales and use tax, value-added tax (VAT), and goods and services tax (GST), has shown a reduction in audit fines and penalties by an average of 75%.³

Tax Matters

Many companies still opt for manual tax calculations due to constant changes and updates to tax regulations. However, these outdated methods aren’t calculating taxes accurately for every location and jurisdiction. With recent progress in geolocation mapping, technology can now calculate sales tax based on each individual longitude and latitude. According to tax compliance automation company Avalara, advanced processing logic can tackle complication tax calculations such as situs, nexus, tax tiers, tax holidays, exemption certificate management, and product taxability rules.

Due to the U.S. Supreme Court’s ruling in South Dakota vs. Wayfair. Inc., states are requiring companies to charge sales tax on out of state patrons. With the possibility of 50 states – and even many cities – charging state and local taxes (SALT), things can get really complicated really quickly.

In my opinion the best way to address the SALT complexity is with tax compliance software. Good software will ensure accuracy and avoid penalties.

According to an Avalara survey, companies that opt to manage their out-of-state taxes manually are spending and average of $1740 per month identifying state sales tax obligations and filing requirements.⁴ In addition, the companies were found to generally spend:

• $3493 per month on tax rates and calculations
• $3409 per month on exemption certificate management
• $4894 per month on tax returns

Note that these figures don’t include time and money spent on audits.⁴ This money – and time – could obviously be better spent elsewhere.

Spreadsheets and Manual Systems Don’t Cut It for Taxes – or Most Back-office Processes

I once worked with a very successful serial entrepreneur who said, brilliantly and simply, “Companies that run their business on spreadsheets go out of business.”

Now, I love Excel. But it has its limits. That’s why there’s specialized software and automation tools that are designed to optimize your accounting and finance processes. Using outdated ERP and financial systems are not effective. Companies are looking for cloud-based solutions to consolidate their data and make it easily accessible for all team members.

I am huge fan of NetSuite for medium-sized companies. And, when combined with Avalara’s automation capabilities, I’ve seen it help CFOs improve performance by simplifying tax compliance. Avalara’s suite of tax compliance solutions complements NetSuite’s leading cloud ERP by driving automation and cost avoidance while minimizing the risk of non-compliance.

A major benefit of this software combination is the ability to predict how sales trends will impact the business. Analyzing and automating where the company is doing business and paying sales tax is essential in understanding how – or whether – to expand to a new geography. Or how adding a new product could impact the company’s tax liability.

Automating what would otherwise be manual financial tasks allows CFOs and their teams to focus on more strategic, value-adding projects. And avoid penalties and interest for non-compliance.

Thank you for reading. Please let me know if I can provide more insight on automating accounting or on anything about finance; please reach out to me on LinkedIn or at kimberly@finopsadvisory.com and let’s chat.

All my best,

Kim

The FinOps Advisor

1 The Future of Automation in Finance Balancing Technology and the Human Touch
2 NetSuite The Future of Finance
3 Hidden Roi – Fines, Audits, Manual Processes, International Compliance
4 Avalara Tax Changes 2023: Key issues facing businesses today