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Why F&A is a potential area for RPA

Posted by: Deepali Kulkarni On July 04, 2018 04:08 PM facebook linked in twitter

Automation is not new to IT industry, however, in the recent times, there has been a shift of focus from Traditional task driven (scripts) to the knowledge driven mechanism (RPA and AI). RPA is emerging in the industry and is slowly replacing the manual intensive tasks with specialized software or BOT. Software BOT’s can be Developed to mimic human actions on interfaces, user interfaces and deal with the interfaces in the exact similar way like a human agent would be dealing with the interface.

Many enterprises are now looking for RPA as a solution to reduce the human intervention thereby reducing Opex & errors and increasing customer satisfaction. Primarily shared services setups offering HR, F&A and IT support are shifting their focus from traditional manual tasks to software BOT’s. F&A is an essential back office function for any organization which has the most repetitive tasks involved. In this article, I wish to deep dive into F&A particulars and how RPA techniques can be effectively used for all-round improvement of F&A services.

For the benefit of those who are relatively not familiar with F&A domain and coming from the technical background for implementation of RPA solutions. F&A deals with various critical activities like Accounts receivable (AR), Account payable (AP), Account and bank reconciliations and regulatory reporting. Following are the finance hotspots for automation

Procure to Pay

Order to Cash

Record to Report

Avg RPA Potential: 40-70%

Avg. RPA Potential: 50% - 70%

Avg. RPA Potential: 65%- 70%

Invoice Processing

  • Receipt/processing and electronic inputs
  • Verification and approval actions, escalations and monitoring
  • Account downloads from ledger to AP system for reconciliations
  • Invoice Match – Exceptions
  • Check preparation, handling activities

Discrepancy Resolution

  • Identification of discrepancies (i.e., price/quantity differences, short pay, missing or invalid PO nos.)
  • Follow-up aged discrepant items
  • Error corrections as received either from systems, audit or sites

Supplier Management

  • Supplier Master Management
  • Item Master / Content Management
  • Payment execution

Order Management

  • Quote Generation
  • Customer Profitability Analysis
  • Order Entry Errors
  • Customer Service Frequent Responses

Credit Management

  • Customer segmentation
  • Customer credit management
  • Payment Trend v. Credit Monitoring

Customer Billing

  • Unbilled management & Billing Triggers
  • Bill calculation and verification
  • Customized billings
  • Credit memo processing

Cash Applications

  • Cash posting
  • AR reconciliation
  • Unallocated and unapplied cash
  • Short payments

General Ledger Accounting

  • Automated GL transaction feeds
  • Manual journal entry processing
  • GL reconciliation and analysis
  • GL Reporting
  • Period End Close

Intercompany Accounting

  • Manual data entry activities
  • Reconciliations

Reporting

  • Download data/format in Excel/auto distribute
  • Record report receipt
  • Auto report follow ups

Tax

  • Sales and Use Tax Reconciliation
  • Sales and Use Tax Forms
  • Tax Master Data Annual Monitoring/Renewal Processing

Sheer volumes that are typically involved in AR & AP processes make these 2 processes ideal candidates for RPA. Based on different internal practices of the organizations almost 90% and above automation potential can be achieved in these processes. Many organizations have people rekeying data between finance systems and/or entering data into finance systems from digital images or paper. Traditionally there are agents would be performing this activity in same manner day in and day out. The biggest concern in manual agents performing these task is level of error and inaccuracy, especially for invoices. Every incorrect invoice ends up costing the organization more money on top of what was projected.

Apart from significant opex reduction, Benefits of implementing RPA eliminates the possibility of human error and it can take over the job of matching invoice sums to orders. It also avoids revenue leakage thereby benefitting the organization.

Other than the AR and AP process Transfer Pricing and GL reconciliations are the areas that can be automated as well. Transfer pricing refers to the rules and methods for pricing transactions between enterprises under common ownership or control. About 30-40% process in transfer pricing can be automated. The table shows the typical activities or sub activities involved in transfer pricing. The activities highlighted in green are the activities that can be automated.

Legal Entities

Transactions

Comparable Searches

Analyses

Method Evaluations

Reports

Create New

Import/Add Transactions

Data Sources

Select New Analysis

TNMM

Create Report

Description

Add Description Overview

Filter Criteria

Identify the correct Method (TNMM) Transactional Net Margin Method

Cost Plus

Add Description

Financials

Property and Economic Conditions

Manual Comps

Range Construction (Net Cost/Berry Ratio)

Profit Split

Select/Add Section

Documentation

Contractual Agreement

Bulk Rejections

Resale Price

Create Coverage

Corporate Overview

Service Validation Test

First Review

Select Executive Summary

Corporate History

Functional Analysis

Second Review

Export Report

Industry Analysis

Range Overview

Format Report


General Ledger Reconciliation is the process typically performed by agents to verify the correctness of account balances on the company’s general ledger of accounts. It involves comparing the general ledger account balances with other independent systems, statements, and reports, to verify that the balances are correct and accurate.

Automation in the General Ledger reconciliation process is automating all steps that typically an agent would be performing. The BOT imports data from all sources, including ERP and other General Ledger systems, bank files or statements, credit card statements.

It then compares account balances between these sources and can auto-certify accounts when data matches, and identify any discrepancies that need to be properly investigated by accountants.

Benefits of Automation in GL Reconciliation: The agent can focus on the discrepancies instead of spending time on verifying the correctness of data.

To conclude the organizations can definitely look at F&A processes like Accounts Receivable, Accounts Payable, GL reconciliations Transfer pricing etc and also look at the possibilities of simplifying or re-engineering the processes the to achieve higher automation benefits. It is also necessary for the System Integrators like Tech Mahindra to educate the organizations on the success stories of RPA on F&A and advise the best practices in the regard.

About Author

Deepali Kulkarni, Solution Designer RPA Pre-Sales & Solutions, Tech Mahindra

Deepali has 12+ years of experience in various domains banking and telecom expertise in solutioning, Product Support & Service Delivery, Her expertise include driving projects from initiation, to implementation and maintenance with deep understanding of customer needs. Currently working in RPA practice in Tech Mahindra leveraging leading RPA products of the market to design best of the breed and competitive techno-commercial solutions to wide spectrum of clients in NA region.

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