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The right tools for the finance job

Feb 12, 2020 / Consumer Banking

Faced with thinning margins, increasingly complex regulations and consumer demands for digital channels, today’s financial institutions find themselves under more pressure than ever to use their time and resources as efficiently as they can.

Behind the scenes, the finance department bears much of the responsibility for meeting evolving industry requirements: developing a strategic vision for revenue-generating products, speeding up the month-end close to meet regulatory and audit requirements, and reconciling the rising number of transactions across multiple payment channels.

Often, traditional finance processes don’t meet the new demands, leaving the finance team without the right tools to get the work done in an effective, efficient and timely manner.

It’s all in the spreadsheet (or is it?)

Even in this age of automation, many (or most) finance tasks are being done manually. In fact, back-office teams are overwhelmed with manual tasks. According to The State of Workflow Automation in 2018 report by Formstack, 55 percent of managers spend one full day per week on manual tasks and 62 percent identified three or more major inefficiencies in business processes that could be automated.

Manual work is slow and prone to errors and possible fraud. It lacks the visibility required by regulations and auditors — visibility that’s essential for effective strategic planning. Without understanding where you are, you can’t plan where you’re going and how to get there.

Let’s take a look at the benefits of using the right automated tools in three main areas of finance: accounting, reconciliation and budgeting.

1) Accounting

Manual accounting processes typically involve many people with different versions of spreadsheets that can be manipulated either intentionally or by accident. The result? An uncertain or nonexistent audit trail and data that is already outdated by the time it gets into the hands of those who need it most.

An automated accounting solution provides a single platform to help teams work more efficiently while improving timeliness and accuracy. Many monthly tasks such as general ledger transactions and accrual journal entries can be scheduled to run automatically at the same time. Automation reduces or eliminates the need to input and process transactions manually, which in turn minimizes the potential for fraud and abuse as well as errors or omissions. It streamlines processes for complicated general ledger accounts, especially those added through merger or acquisition.

Automated accounting provides the ability to examine the source documents associated with a transaction within the general ledger platform itself, so there’s no longer a need to embark on a time-consuming search through file cabinets for paper documents.

Case in point:

» A community bank implemented an automated accounting solution and cut a week off the time it previously took to generate reports to executives. It also was able to increase data accuracy since there was no rekeying, and better manage rising transaction volume without adding staff.

» A credit union was growing rapidly but still used a mostly manual, inefficient accounting process. An automated accounting solution reduced the month-end close from more than six days to three days and found errors in seconds rather than hours. It also produced new reports for management that could not be done previously. 

2) Reconciliation

Many of the benefits of automated accounting also apply to automated reconciliation, including increased productivity, reduced errors and greater data accuracy and visibility. With everyone working from a single, up-to-date source of information, month-end close can be completed more quickly and the numbers certified with greater confidence. Automated reconciliation helps financial institutions adhere to internal control regulations requiring management teams and auditors to understand and document every aspect of the financial process.

Case in point:

» A bank found itself trapped in a paperfilled and unproductive reconciliation process that took too much time and offered little visibility into the numbers. With automated reconciliation, the bank accelerated the reconciliation process by 60 to 75 percent, with full audit trails.

» When a large credit union implemented an automated reconciliation solution, it cut the time spent on reconciliations in half, eliminated “unknown” write-offs and reduced risk. Some reconciliations that once took two to three hours to complete now take less than 20 minutes. 

3) Budgeting

For many financial institutions, budgeting is still a once-per-year affair involving hundreds of spreadsheets, untold labor hours and incomplete data pieced together from disparate departments and branches. Projections and targets are issued from the top down, and those targets, rather than profit, often become the focus of management. Not only is this traditional workflow inefficient, but the inherent rigidity hampers efforts to react to an ever-changing financial environment.

Ultimately, financial institutions that aim to compete in the next decade will need to replace the traditional (but outdated) budgeting process with a more dispersed, data-driven and agile model — one that leverages up-to-date technologies and workflows to quickly respond to market events. The right tool can provide the ability to discern patterns across the enterprise and to see which departments, branches or lines of business have the greatest impact on overall profitability. It’ll also help uncover the reasons why.

Case in point:

» A large, independent bank needed a modern budgeting and planning system to go along with its accelerated growth. When it implemented a robust solution, its efficiency saved hours of time for accounting staff — a whopping 97 percent reduction in time spent.

» At a community bank, when department managers supply information on projected volume of loans and deposits, its robust budgeting solution can apply an institution’s rate forecast and transfer pricing assumptions to calculate a more accurate forecast, allowing resources to focus on new loans and forecasted interest rates. The solution reduced the budget process by a month.

Move forward or fall behind

There are clear benefits to solutions that simplify operations, automate the most routine tasks and prepare you for the future.

Danny Baker is the vice president of market strategy at Fiserv.