Deep Dive: The Power of Robotic Process Automation for Finance & Accounting

RPA is often seen as a silver bullet for improving operational efficiency and cutting costs. In today's digital world, leveraging automation and analytics to streamline end-to-end financial processes is a strategic advantage.

Although there are several digital tools that can be leveraged to automate finance and accounting processes (for example, data science, traditional automation using programming languages and scripting, better-leveraging native automation solutions within the enterprise resource planning system, AI, and so on), RPA is currently recognized as one of few emerging technologies most capable of automating a significant amount of finance and accounting end-to-end processes.

That being said, according to Gartner, “Around 80% of finance leaders have implemented or are planning to implement RPA.”

Let’s delve deeper into why.

Meet Robotic Process Automation

RPA uses software and custom, business defined rules to deploy robots (or “bots”), which perform step by step actions in completing a task. With RPA, many of the repeatable tasks that your team does manually can be automated and performed by a computer, saving company time and money, and resulting in those two words every executive loves: speed and productivity.

Additionally, with financial regulations and security standards becoming increasingly complex, RPA provides a more unified system for delivering sensitive information within finance and accounting departments, allowing your organization to determine exactly what information is delivered to which parties.
While the tools can automate tedious, high-volume and repetitive tasks, RPA integration is most successful when:

• There is the potential to save time and/or money
• The processes to be automated are rule-based and have little or no subjectivity
• The quality of operations is of a high standard.

The fields of finance and accounting tick all three of those boxes. One doesn’t have to work in an accounting department to appreciate the sector is renowned for repetitive, time-consuming tasks like data entry, reporting and record-keeping. Such functions are ideal for RPA, with their structured and rule-based nature meaning there is little to no need for human decision-making.

Robotic Process Automation (RPA) and Accounting

The integration of RPA in financial services enables accountants to focus on acquiring knowledge rather than preparing documents. Financial companies can reduce costs by investing in RPA robots.

Before approaching RPA, firms should choose whether to separate RPA and Artificial Intelligence (AI) from enterprise resource planning (ERP). RPA involves a complex legislative and operational change in institutions. Compared with the cost of hiring accounting professionals for small tasks, the long-term investment is negligible (Gotthardt et al., 2020).

RPA helps firms address financial and accounting automation gaps by managing customer onboarding, invoicing inventory turnover, and invoice processing. Finance and accounting companies must adopt RPA to improve operational efficiency, increase scalability, save costs and infrastructure, and use legacy data to maintain business growth.

Why Accounting & Finance Firms are Using RPA

Firms are in their infancy stages in implementing RPA systems. Only fifteen percent across the world are maturely applying RPA. As these companies remain far from using automation's comprehensive resources and advantages, capabilities continue to rise with technology's quickly increasing pace (Gotthardt et al., 2020).

Automation is shifting from a process-oriented to a data-oriented process. Notably, RPA is extremely procedure-driven, which automates standardized and rule-based activities in scripts. There is an existing misperception in the business world that RPA is an old technology being replaced by AI.

Accounting and Finance companies are increasingly using RPA and AI to convert a large amount of data into actionable information, achieving complete automation of the entire process. Inherently, these firms increase scalability across different domains. However, these firms also maintain their businesses using legacy data in RPA. Intelligent automation investments are pretty expensive.

Therefore, it is crucial to consider which combination of RPA and AI suits a specific firm and needs the understanding of accounting experts in the business and available technologies. Before auditing and accounting firms can deal with RPA, fundamental concerns address issues such as separating RPA and AI or classifying them into sub-groups (Gotthardt et al., 2020).

From the perspective of financial management auditing, management accounting, bookkeeping, personnel management, wages, and taxation, it is evident that several interfaces link data collection. It means changes in the legislation and operation of institutions and its application in firms.

Accounting & Finance use of RPA Processes

Processes such as performance, accuracy, period-end-closing, cash management, and maintaining accounts receivable benefit from automation. Performance and accuracy, period-end-closing, reporting, cash management, and maintaining accounts receivable and accounts payable (Jędrzejka, 2019).

RPA implementation follows a basic approach: running the robotic software robot on a worker's desktop. RPA enables end-users to configure virtual assistants (robots) by applying applications to conduct transactions, use data, and interact. Furthermore, software robots are trained or programmed to perform regulation-based high-volume commands. They copy human action when assessing multiple systems, applications, and data.

In accounting and finance, RPA takes over typical office work operations. Among the processes include engaging emails. RPA enables robots to open, read, and send emails. RPA is also involved in searching, extracting, interacting, and entering data across several applications (Jędrzejka, 2019). Through RPA, firms can access different programs, search for specific data, and update records based on existing data. Data includes machine-readable formats and character and image recognition data. Other processes in RPA include data processing and formatting. Robots can also clean and erase data. They can also make calculations to formulate standardized financial reports. Consequently, RPA involves decision-making, where robots follow stipulated guidelines and decision paths to alter behavior to variable conditions.

Four Use Cases of RPA in Accounting

Automation can eliminate up to 40% of the losses caused by accounting errors in your business. However, you need to know which accounting processes can be effectively automated and which ones cannot. While every business is unique, certain accounting processes are especially suitable for automation. We have identified four of them for you, although there are many more. Each of these processes contains heavily repetitive and mundane tasks that don't require much cognitive thinking to execute.

Accounting comprises many functions, all of which can greatly benefit from Robotic Process Automation technology. Here are a few examples of how RPA is transforming accounting.

1. Accounts Payable and Invoice Processing

With RPA, we can set up workflows to manage different vendor payments automatically. All we have to do is enter the data and let the application prepare and process the payment.

The software validates each invoice against the defined data fields to extract the information and store it in a financial database. We can also configure it to separate invoices based on vendor, client, location, etc. Additionally, separate workflows can also be created to approve the account’s payables and process bulk payments. When processing approvals, the application forwards the received invoice to the appropriate authority as defined in the workflow.

If more than one person needs to sign off, then the application automatically progresses from one person to the next until the approval process is complete. This drastically cuts down on process lag that often occurs when having to wait for the invoice to pass from one authority to the next.

2. Tax Management

RPA applications can extract data from physical tax forms and populate the information into digital tax forms. RPA can be configured to carry out many rule-based tasks such as:

• Data extraction and information gathering
• Data validation
• Running reports
• Calculating taxes based on compliance norms
• Calculating transfer pricing or international exchange rates
• Managing workflows
• Calculation of adjustments
• Information population into work papers or tax software
• 3. Regulatory Compliance and Reporting

Regulatory compliance and reporting involve multiple departments, systems, and applications, RPA technology is designed to ensure timely and insightful reporting that can add significant value to your business.

The RPA software automates tax-related tasks such as capturing and manipulating data to auto-generate regulatory reports, closing out sub-ledgers, delivering financial filings to jurisdiction-specific regulatory authorities, optimizing the end-to-end tax management process, reducing risk, and cutting down on costs. Using an RPA for reporting also helps you maintain a detailed audit trail.

4. Payroll

In terms of payroll, bots help to avoid payment delays and inaccuracies, taking on data entry, timesheet validation, and deduction calculations. They can even extract data from paper sick lists that are still in use in some countries.
These are the use cases RPA can help you with:

• Employee data extraction
• Data verification across information systems (sick days, business trips, timesheets)
• Generating and approving timesheets

All these tasks are tedious to execute manually, and mistakes are easy to make. One of the most efficient ways to automate payroll management is by using RPA. Robots can execute most of the payroll management tasks like calculating bonuses and holiday pay, complying with tax requirements and calculating the appropriate deductions for each employee.

Time Management Benefits of RPA

Among the compelling reasons companies consider RPA is its ease of implementation, leading to lower expenses and competence than traditional automation. These factors enhance time management leading to faster returns. RPA is the most common technology to computerize back-offices and middle offices office functions. ROI for most companies using RPA ranges from thirteen to eighteen percent (Jędrzejka, 2019). The average payback period for thirty-one percent of analyzed companies is eleven months.

Finance and accounting automation is responsible for high-cost savings of up to thirteen percent on average compared to several back-office functions. RPA implies that the entire accounting process, including recording manipulation and interpreting transactional data, is automated (Asatiani et al., 2020).

As a result, RPA minimizes reliance on manual transactional entries, which are relatively slow. Time management is essential for accounting and financing firms as it presents numerous ways to enhance revenues. Ultimately, these firms must consider all ways to maximize their organizations.

Key Insight: How RPA helps with Accounting Audits

RPA provides opportunities and responsibilities for internal audits. It can help organizations understand and control risks and identify opportunities for RPA adoption. Automation has several benefits across all industries. Therefore, these companies can position themselves as trusted advisors.

Approximately 45% of office tasks are automated in accounting. It is estimated that this kind of automation can save about US$2 trillion in labor costs worldwide. The software robot is easy to configure and does not require expensive IT functions. As organizations adopt RPA to automate manual tasks performed by humans, they implement RPA bots.

RPA can programmatically calculate the differences in expenses and capacities between transactional invoices, trades orders, and delivery documents. Additionally, RPA can produce alerts for sales trades that comprise price and quantity differences (Kaya et al., 2019). By automating these procedures, more practical activities are addressed to improve the audit quality.

RPA helps auditors verify key audit evidence in revenue audits. RPA can log into the customer's secure File Transfer Protocol (FTP) site to view any information, including the current and prior year sales list and the previous year's sales list. RPA can also calculate the total sales for each list and compare it to the sum of sales for each spreadsheet. Assuming the same amount, RPA can estimate a significant difference between the revenue listed in the current year and the previous year. Furthermore, it warns when the difference exceeds the significance threshold (Kaya et al., 2019). As a result, the auditor understands the client's business operations and, more accurately, assesses the threat of material misstatement.

If several audit processes can apply to RPA, the inspection processes that profit the most from RPA have time-consuming and repetitive audit tasks. Such tasks have no audit judgment. Accounting firms can determine the auditing process. RPA also adds value by assessing professional knowledge, such as understanding the person in charge of the revenue audit and evaluating the time spent considering the audit responsibilities. In addition, the leading factor that justifies mechanization is the instances a company should perform a particular function and mainly depends on the number of comparable audits performed.

When a company concludes that a procedure is a decent applicant for RPA implementation, the following step involves understanding the process by dividing the audit task into minor audit modules interpreted by software programs (Kaya et al., 2019). For instance, the duty of introducing or distributing data is instinctive for human users. Still, for software programs, tasks are divisible into processes such as importing files, saving imported files, and defining the directories for exporting and importing these files.

The Growth of RPA (and Reasons it is Crucial to Start Using this Technology Now)

The growth and possibility of RPA and AI in accounting are currently being applied by several firms quickly. Compound and cognitively challenging tasks require judgment, creativity, and exceptionality to seize with RPA systems.

It is essential to automate a good deal of the manual work requiring significant personnel. RPA lowers the threshold to improve efficiency and presents a necessary potential for time and capital investments (Chukwuani & Egiyi, 2020). In addition, as cyber-attacks become more powerful and fraudulent activities increase, employees must renew their administration.

RPA has grown in the past twenty years by assisting in almost all business administration tasks. However, technical capabilities limit conventional RPA processes. As RPA continues to grow, it is evident that robots cannot handle unstructured data, which protects employees by maintaining low-value tasks (Chukwuani & Egiyi, 2020). RPA can exist with AI as both tools can boost value for each other. Together, AI and RPA can turn large amounts of data into unlawful visions leading to complete mechanization of processes.

In finance and accounting firms, ERP introduces a novel kind of idea to digital alteration and integration. Notably, it is hard to attain high automation rates in accounting. Additionally, RPA provides opportunities and responsibilities with accounting audits. Accounting automation addresses the entire accounting lifecycle from recording, manipulating, and interpreting transactional data. RPA denotes software tools that enhance systemic human activities, which are repetitive, manual, and rule-based. Financing and accounting firms must adopt this technology to increase operational efficiency, improve scalability, save on costs and infrastructure, and maintain business growth with legacy data.

Conclusion

Although RPA in accounting is a relatively new niche, it is one that holds great potential. Globally, we are seeing CPA firms, banks, and other finance bodies adopt RPA to bring in cost efficiencies, process optimization, and deliver accurate results. From being deployed to handle simple, repeatable tasks, RPA technology today has evolved enough to bring intangible change and improvement in accounting.

About Solugenix

At Solugenix, we integrate RPA with artificial intelligence and machine learning to make a significant impact on your processes and procedures. If you have a repeatable task that you’d like to take off your team’s plates and automate, we can help you build the solution.
Our approach emphasizes the right balance between people, process, technology, and facilities, ensuring all our clients have a successful implementation.

To learn how Solugenix can help you plan and implement automation that eliminates the risk of errors and high manual process costs, visit rpa.solugenix.com today.

References

Asatiani, A., Penttinen, E., Ruissalo, J., & Salovaara, A. (2020). Knowledge workers' reactions to a planned introduction of robotic process automation—Empirical evidence from an accounting firm. Springer, Cham. In Information Systems Outsourcing (pp. 413-452).
Chukwuani, V. N., & Egiyi, M. A. (2020). Automation of Accounting Processes: Impact of Artificial Intelligence.
Gotthardt, M., Koivulaakso, D., Paksoy, O., Saramo, C., Martikainen, M., & Lehner, O. (2020). Current state and challenges in the implementation of smart robotic process automation in accounting and auditing. ACRN Journal of Finance and Risk Perspectives.
Jędrzejka, D. (2019). Robotic process automation and its impact on accounting. Zeszyty Teoretyczne Rachunkowości, 161(105), 137-166.
Kaya, C. T., Türkyılmaz, M., & Birol, B. (2019). Impact of RPA technologies on accounting systems. Muhasebe ve Finansman Dergisi, (82).