Financial Process Automation: A Must-Have Not a Nice to Have

Eric Aboaf, Vice Chairman and Chief Financial Officer at State Street

In my last article, ‘Using Data-Driven Insight to Drive Business Strategy and Spur Growth,’ I described how the world of financial services has become all about data—managing, analyzing, and standardizing it—in this article, I'd like to drill down into the how and why process automation has become a job requirement for any self-respecting finance team and the very real benefits such automation brings to large, matrixed organizations.

Regardless of industry, most large companies are seeking to maximize the benefits of financial process automation that come from improving three broad categories: moving ledgers and sub-ledgers to the cloud to maximize functionality and lower costs, automating and improving data flows from upstream product systems to improve accuracy and reliability; and developing analytic tools and workstations for major processes to sunset legacy processes and improve speed and simplicity. Looking at each of these advances in turn:

● Moving Ledgers and Sub-ledgers to the Cloud: Large corporations typically ran ledgers on mainframes in their own data centers and did so with many disparate ledgers from various vendors across their businesses and countries. Today, the impetus is to align processes with feeding into a company's General Ledger and sub-ledgers to improve accuracy and efficiency and boost individual business line self-serve abilities. The crucial takeaway regarding moving to the cloud is that the more a business is able to integrate its holistic finance environment, the more each person across the business has one readily accessible source of truth—with consistent data that can feed into financial reporting, reconciliation, and regulatory reporting. The strategy of bringing the ledger into the could make multinational corporations much nimbler in terms of ‘templatizing’ sub-ledgers for new markets rather than inventing them from whole cloth each time and brings cost benefits in terms of standardization vs. customization (i.e., regular software updates make changes and upgrades to the ledger much less taxing). Finally, moving the ledger to the cloud brings significant resiliency benefits.

‘The finance team plays an important role in educating the company about the importance of data, and we sit on the front lines with regulators as the work we do must be accurate.’

● Automating and Improving Data Flows from Upstream Product Systems: In important ways, the finance department can be considered a central hub for information gathering around a company—helping large, multi-faceted businesses identify and determine crucial information, including client volumes, product and services pricing, revenue, and P&L. Data flows are crucially important to do this work well, as is stakeholder engagement across a company, and holding those stakeholders accountable for providing timely and accurate information. In this regard, the finance team plays an important role in educating the company about the importance of data, and we sit on the front lines with regulators as the work we do must be accurate. (As part of this natural evolution, finance has also been standing at the gates of data governance.) Straight-through processing, which limits the number of ‘stop and hops’ data, has to be made prior to becoming usable and securing ‘upstream data’—that single, golden source of truth—is vital to doing this work. And, given the coming arms race around access to good, clean data, there is a vital strategic aspect to automating data flow.

● Data Standardization and Aggregation to Sunset Legacy Processes: Again, a bit of context is necessary to understand the problem-solving framework. Many financial institutions are large or global. As they grew, they inadvertently created siloed processes. Today, efficiency means connecting dots between teams, eliminating unnecessary touch points, and standardizing data (i.e., it is finance’s job to create a single source of truth, not wrestle with eight different versions of truth across various business lines). Especially given how many financial services firms are the result of M&A, our data-rich environment requires the reengineering and sunsetting of legacy (and sometimes competing) processes in order to systematize data. Rest assured, sound data can exist on different platforms. The most important thing is to apply the proper taxonomy or relatability of data.

Implicit in any discussion about finance team innovations is an acknowledgment of the special role that finance plays at the intersection of large businesses. In technical terms, we collect a ton of information from everywhere: doing so in a timely and standardized fashion so we can run reports as efficiently as possible and serve as a kind of single source of truth is one of the most vital functions we serve. Doing so successfully in our data-rich environment increasingly demands the kinds of financial process automation described here. Doing this well means we equip each key business with the intelligence they need to outperform expectations and compete at a high level in the marketplace.

Indeed, when I work with our CEO and executive leadership team each year to define our objectives and key results (OKRs), it is with a keen understanding that what we are trying to achieve as a finance team well reflects what we are trying to accomplish across the firm more widely. Make no mistake: financial process automation is not an easy undertaking or one that happens overnight. Generally speaking, large organizations that undertake such an endeavor might feel that it moves slowly, but they will experience step-size improvements over time. This effort, however, can reap benefits in terms of accuracy, simplicity, and cost savings, increasing employee focus toward higher-value activities and a greater, more holistic understanding across a business as to how data lives, breathes and moves.

Financial

Process Automation