For over five decades technological innovation has frisked an important role in driving transformation across multiple industries and everyone is accepting the transformation across the globe. For finance functions digitization has become a realistic goal because of the varied technological developments. Emerging technologies and their ability to change the business finance function with improved preparation, decision making, efficient procedures, and improved cost administration, are perilous to meeting today’s business challenges. To accomplish the highest value, the finance function must develop a digital strategy that aligns with the company’s digital framework.
CFOs are likely to provide guidance to their teams and give updates to their business units on the latest approach. Their primary concern is to ensure that the company’s Financial Compliance falls in place and they control the cash inflow and outflow. Doing this will improve the overall performance of the company and keep away from any kind of financial risk. They are financially prepared for the future. They can incorporate emerging technologies, make realistic decisions on the ideal time to invest, and regulate the skills and talent they will require once every bit of it is analyzed by the technical team.
Facts “Despite the delay in the digitization of the finance processes, trends say that 42% of finance activities can be fully automated while 17% say it can be mostly automated.“
Scope of Finance Functions
The scope of the finance function is wide as it affects almost all the aspects of the firm’s operation. Without finance, the firm wouldn’t survive. The finance function comprises of judgments on whether the investment in fixed assets should be done or not. Based on these decisions the future cash flow or the fund’s flow is affected.
Functions of Financial Management
Financial Management is decisive to any company, be it big or small. It is supposed to be the salvation of the business. And financial management must be performed in every organization. It is the process of preparing, establishing, monitoring and regulating the financial resources of the company. This is done in order to achieve the goal in a specified time period. It is a practice followed in every business, where the company finances are managed properly avoiding any kind of wastage.
What are the Objectives of Finance Functions?
This is where the Finance Managers decide where to invest the company funds. These decisions could include the management of working capital, budgeting decision, mergers management, buying or renting assets. The main objective behind investment decision is that it should be able to generate revenue and profits and helps save costs.
The company decides where to raise funds. The two main sources to be considered are equity and borrowed. Finance manager takes a decision from the two based on the appropriate mix of short-term & long-term financing.
Here the decisions are made as to how much, how often and in what way the cash must be returned to the owners. There has to a balance between the profits reserved and the money paid out as a dividend.
Liquidity means the firm has enough funds to pay off its bills when they need to be paid off and have enough money reserved for unpredicted emergencies. This also includes the decision of the existing assets so don’t go broke at the last moment.
Technologies that will help to transform the Finance Function
New technology comes with new rules. Companies have already started applying digital technologies to their current processes that will enhance their efficiencies, understandings, and value in the long-term.
1.Finance Process Automation in Taxation
Finance process automation is the process of using software or integrate one into your system that automates the vital finance-related tasks like accounts, making journal entries and generating financial statements with very less human need. This allows the finance department to streamline their process ensuring everything is running seamlessly. This is very helpful for GST return filing too where it auto-populates the data and reconciles the current data reducing your work and giving you more accuracy. It does the maximum heavy lifting for you. All your mundane tasks like data transfer can be done easily with automated software. Major benefits of financial process automation are that you get data integrity, improved efficiency, speedy approvals, and 360-Degree visibility.
From the Experts: David Reilly, CTO at Bank of America, believes that finance automation will “change how we ensure the property, loan money, invest money, deliver technology, write research reports, and what professionals in financial services do every day.”
The CEO of online lender MoneyLion predicts that “what was once a sit-down conversation between a client and their personal private banker might now be accessible through a mobile app to broad audiences, 24/7.”
2. Robotic Process Automation (RPA) in Taxation
Robotic Process Automation is the use of software to enable automation in high volume and repetitive tasks. RPA in taxation means using ERP systems or software to create automation which has already been shaped to perform repetitive processes, such as GST. RPA is suitable for processes that are high in volumes, consume a lot of your time, auto-populates the data, reconciles it, has lower error rates, is well-documented and has a decision-making process that can be collated by the rules. RAP helps to save cost & time and is easily scalable. RPA endures discovering the position of technology in empowering Tax Function processes.
From the Experts: Frank Casale, Founder of the Institute of RPA said: “And as we look to history to help us predict the future, we cannot deny that automation, in particular, robotic process automation, is today’s version of outsourcing – unstoppable.”
3. Artificial Intelligence (AI) in Taxation
AI is capable of feeding information and instructions, learning through the interactions with human beings and responding to situations or question in a human-like manner. AI balances technologies like RPA, as it comprises a system that not just follows the rules but can identify patterns, learn & familiarize to new situations. To be able to manage the fluctuating tax landscape, with the use of analytics, tax authorities and advisors have started to discover the options for organizing sophisticated data analytics and Artificial Intelligence in Tax to simplify compliances and help professionals. AI can be trained to feed tax regulations that are relevant to the business. AI is reinventing the world of Taxation.
From the Experts: Vanessa Just, MD wtsAI, says: “Particularly in tax areas where large amounts of data are highly repetitive tax processes can be automated by intelligent systems. This enables companies to achieve quality advantages and reduce costs and significantly higher tax compliance.”
AI happens to suit the finance function to deliver customized insights about their customers and their tax preparation process which cannot be achieved through a human interface. Corporates are investing heavily in AI tax solutions for reviewing their financial documents, automating tax compliance procedures and filing. AI and ML together are re-shaping the way we are paying our taxes.
4. Data Analytics in Taxation
Tax & finance departments can deliver value with the help of data analytics to manage risks, control costs and initiate business decisions effectively. With the increase in revenue pressures and dwindling headcounts tax authorities are gradually trusting on digital methods to extract taxpayer’s data and manage their tax systems. Companies have also been asked to submit client/vendor invoices, SOA, & Bank records in the specified government format, all this can be done easily in few clicks through the automated solution.
Takeaway: AI, RPA, DA, & FPA Transform Finance Function for the Businesses
Digital transformation and automation have already shaped the future of Finance Functions and taking the opportunity to boost your company’s performance will fuel the trend. Nevertheless, before making huge investments and diving into these technologies its important to build your understanding of the process and automation in the world of finance & taxation. To grow and protect the company, CFO or Finance Managers need to understand and embrace the digital business model and incorporate digitization in their Finance Functions.
If you are looking for more information on how digitization can help, then Cygnet GSP is the best for you.