Guest contribution by David Brightman, Director of Product Marketing at BlackLine
The last few months have transformed the way finance teams work. The disruption caused by the coronavirus pandemic has forced businesses to adopt technological solutions at an accelerated rate, while many businesses operate from their homes, tackling a list of new and ongoing issues remotely. This new way of working has changed the way organisations collaborate internally and interact with their clients, but most noticeably, how businesses approach the adoption of new technology that can transform finance and accounting processes. In this article, I round up the most notable trends that I expect will shape finance and cash management within organisations this year.
Digitisation - It's no longer a question of when
In 2021, it is no longer a question of if Accounting should digitise—but how best to do it. Remote work has become the new normal - so all departments (even those which have been traditionally office-based, such as Accounts Receivable) will be looking for ways to monitor the success of remote workers. The year will see the Controllership invest in technology to turbocharge their digital transformation journeys and move to a modern accounting model that unifies all of a company's systems and data into a single source, automating manual, repetitive activities that drain time and energy, and providing real-time information and analysis to inform business decisions.
Demand for AI and purpose-built automation “solutions” over RPA “tools” in a wide range of Finance functions will grow as vendors and users evidence the success of AI to pivot and adapt during COVID, delivering better outcomes despite the rapidly changing business environment. Traditional RPA tools are often UI-dependent, highly customised, and task-orientated. Purpose-built automation brings a much broader range of capabilities that are often event-driven, API-enabled, quick to deploy, scalable, and supported by the business (and not IT). A cloud-first, continuous accounting approach means automation works around and supports human expertise, rather than replacing them. For financial and accounting teams, purpose-built automation will be used to accelerate accounting in a unified, business-owned environment so the month-end is more effective, efficient, and predictable.
Renewed focus on cash management
Global financial uncertainty means cash will continue to be king - new business efforts could stall/slow down so businesses will need to focus on collecting cash from overdue invoices. Companies are now shifting their focus from the income statement to the balance sheet to unlock working capital potential. In 2021, automated cash application will be vital for continuous cash forecasting, increased collections, optimised credit, and reduced time-to-cash. The addition of Intelligent Automation means that when conditions change, or when there are non-standard tasks to be done, Intelligent Automation learns and adapts to control the change.
Enhanced application of AI to collection analytics
The increase in remote work means employers can afford to be more flexible with staff working patterns - the 'working day' will become an outdated concept, as the increase in AI technology means cash collection efforts can still be carried out even during downtime. AI will become more and more intelligent, as AI vendors will now be able to use the lessons learned from the COVID crisis to model/predict future outcomes for accounts receivable teams in times of economic challenge - payment behavioural analytics can now be more refined. With cash collection being pushed to the forefront of revenue generation efforts, customer-facing roles have the potential to be redefined in order to create a cash culture. Compensation for sales and other roles will pivot from revenue to cash-focused goals and specific tools that drive collaboration and embed cash generation across the organization will be a priority for all enterprises.
Modern, mobile-optimised accounting solutions to enhance the user experience in out-of-office environments. Mobile-ready accounting platforms will minimise the time it takes to approve critical items like journals and resolve business exceptions continuously throughout the accounting period. Everyone from staff accountants to controllers can work smarter and be more productive, in the office, at home—from anywhere.
Financial Close as a dependent and continuous feed to FP&A solutions
Modern, continuous close technologies will be the hot topic in 2021 to flow clean, reliable, and timely financial data more readily into downstream tools like Financial Planning tools, as the CFO demands financial information and scenario planning in hours, and no longer at the month-end.
Modern intercompany automation & governance
COVID has significantly affected the global marketplace with intensified scrutiny and closer controls over transfer pricing—the charges incurred in the sales of goods and services across internal legal entities. As a result, the ability to comply with documentation and country-by-country reporting requirements can be extremely time-consuming. It can lead to tax adjustments, penalties, interest charges, and even negative publicity. Multinational companies will start to more widely adopt a centralised intercompany model, to automate the initiation, reconciliation, and settlement of all internal transactions and supporting details.
It is still an unproven technology in finance and accounting and very unlikely to change in the next 12 months. Early adopters are still working through various operational and compliance issues and according to Gartner, most enterprise projects are stuck in "experimentation mode lacking clear goals and measurements". Still, we often hear about blockchain's relevance for intercompany transactions, which encompass various operational controls, financial & legal regulations, technology, and processes spanning multiple teams like finance, tax, and treasury. Modern intercompany accounting governs the full lifecycle of all different types of transactions that flow across a group’s value chain and leading companies centralise these in a secure cloud environment and unified governance model without blockchain's use and limitations. An intercompany "hub" enables trust through transparency, continuous accounting, transfer pricing compliance, and overall risk reduction. A secure and shared intercompany sub-ledger is visible only to participating entities, with user-restricted access to data. This blends the benefits of blockchain from a security perspective, with purpose-built technology for automating the end-to-end process.
The last year has been a defining moment for disruptive technologies, especially those that can make a real difference in overcoming the challenges caused by the coronavirus pandemic. While the pandemic has exposed gaps in the policies and processes that F&A rely on day-to-day, it has proved that innovation is key to not only staying ahead of the competition, but also adapting to unforeseen circumstances. Based on these predictions, it is safe to say that this will also be the case for the upcoming year, so if you haven’t already looked at how you can utilise technology to safeguard and grow your business, now is the time to do so.
Download research: Finance and Accounting in a post Covid world