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Everywhere you turn people are talking about automation and AI.
One minute you see someone saying they’re automating bank reconciliations with AI (they’re just outsourcing the work) and the next you’re seeing a 43 point list of things to automate with AI (the list is generated by AI), but whenever you try to use AI it’s hallucinating more than the pit at a Phish show.
There is a delicate balance between getting people excited about automation and AI, and lying about what you can actually do to generate hype. Accountants have some of the best bullsh*t radars out there — and automation influencers need to respect that.
The truth is, there is no silver bullet with automation, but there are meaningful opportunities out there for you to tackle.
Ready to cut through the hype around automation in finance and accounting? This is the first post in a three-part series designed to help you do just that. We'll explore practical ways to evaluate automation opportunities, starting with the fundamental question: what is a good candidate for automation? By understanding the core principles, you can identify processes ripe for automation and ditch the fantasy of a magic bullet. Let's get started.
Suitability is simply "should I even think about this more?"
There are five key elements when considering the suitability of an automation candidate.
Your use case should fit all five criteria before you move on to measuring value and complexity.
Data should be well-organized, consistent, and in a format that's easily readable by automated systems.
This can mean different things depending on the format of the data. For a PDF, you'd want to consider the location of key information, standardization of the wording used to label key areas, and how you might "describe" to a robot where to look.
Generally speaking, PDFs are always going to be a worse input for automation compared to spreadsheets, but a scanned piece of paper is going to be even worse than a pure PDF.
Spreadsheets are an idea format to work with, but even with spreadsheets you'll want to consider column headers, cell contents (e.g. do you need to split separate data points from the same cell?), and how you can easily match data between systems. You can always add mappings and other logic to the automation you create, but automating data that is structured identically in the source and destination will be the most robust.
Example: Consider the accounts payable process. If your invoices are received in a standardized electronic format (like EDI or XML) with consistent fields for invoice number, amount, date, and vendor details, they are highly suitable for automation. On the other hand, if you're dealing with handwritten invoices or PDFs with varying layouts, automation becomes more challenging and may require additional steps like Optical Character Recognition (OCR) technology.
Processes that follow clear, consistent rules are prime candidates for automation. The more straightforward and unambiguous the rules, the easier it is to translate them into automated workflows.
Very simply, can you define the "if this, then that" logic that goes into your decision making process? Even if there are multiple branches off of the same decision tree, that will fit this criteria. You just want to avoid processes where judgement is regularly applied, or the rules are regularly changed.
Example: Consider the process of applying customer payments to outstanding invoices, a.k.a cash application or "cash app." This process typically follows a set of clear rules:
How often does something go through the process and need special treatment or deviate from the rules-based logic defined?
The frequency of exceptions in a process can significantly impact its suitability for automation. Processes with a low exception rate are generally more suitable, as they require less human intervention.
This is an area where many accountants get stuck. They'll get hung up on the fact that there is one exception to the process and use that as the reason why a process must stay manual. If your data is perfectly structured, and rules-based logic setup can handle the majority of the transactions, you may be comfortable dealing with the exceptions in a manual way.
Exception rate is worth revisiting as you think about the value and complexity of the automation use case, which will be covered in separate blogs.
Example: Let's consider the process of processing employee expense reports. In a company with clear expense policies, most reports might follow standard rules (e.g., meal expenses under $50, standard mileage rates for travel). If 95% of expense reports fall within these standard rules, this process would have a low exception rate and be suitable for automation. The 5% that fall outside these rules could be flagged for manual review.
Processes that remain relatively stable over time are more suitable for automation. Frequent changes in the process can necessitate constant updates to the automation system, reducing its efficiency and cost-effectiveness. This doesn't just mean changing the steps in the process, but can also mean changing the data structure or rules-based logic of the process. If stakeholders are constantly changing their minds about the way things are done, you need to secure commitment that they will stay as is.
Example: The monthly financial close process is typically stable. The steps involved – reconciling accounts, recording accruals, preparing financial statements – generally remain consistent month after month. This stability makes it a good candidate for automation. Conversely, a process like tax compliance might be less suitable if tax laws change frequently, requiring constant updates to the automation logic.
The stability of the underlying technology used in the process is another crucial factor. Processes that rely on stable, well-established technologies are more suitable for automation. While changing apps is a clear sign of technological instability, you should also consider changes to the existing apps, especially when using RPA.
Imagine using a bot to navigate a website for you. What happens when (name redacted) changes their layout, despite no one asking for it, and makes it much worse and clunkier. How will your robot now know where to look? Are the buttons moved? Is the click order the same?
You will want to use technology that doesn't change, or at least try to access the data from that piece of technology in ways that are less prone to changes (e.g. use an extract, transform, load ("ETF") approach via the API rather than using RPA to navigate a user interface).
Example: Consider the process of generating and sending customer invoices. If your company is billing through QuickBooks today, but is planning to shift to Stripe, you should prioritize setting up the new system first, and then automating around it. However, don’t fall into the trap of perpetually kicking the automation can down the road for a system change that might not ever happen.
Later on we’ll cover value and complexity, which will be key in considering this part of the suitability scale.
Processes that are regular, repetitive, and involve tedious manual work are best suited for automation. Think of simple, predictable tasks, especially ones that happen frequently. A good rule of thumb is that if a task happens at least monthly, it’s worth considering for automation. Daily or weekly tasks are even better candidates. The more often a task occurs, the more potential there is to save time and reduce errors through automation.
For example, if you reconcile bank transactions daily, this is a prime candidate for automation. Software like Accruer can automate this process, freeing up your team to focus on higher-value activities. Conversely, a task performed only annually, like year-end reporting, might not be the best fit for automation unless it involves many repetitive sub-tasks.
Time is money. If a process eats up a significant chunk of your team’s time each month (think more than a couple of hours), it's a strong contender for automation. Consider tasks that involve multiple steps, data entry across different systems, or a high risk of manual errors. These are often the most time-consuming and frustrating aspects of a job, and they’re precisely where automation can shine. Even if a task doesn't take a huge amount of time individually, if it's performed frequently, the cumulative time savings from automation can be substantial.
Let’s say you spend two hours every week manually entering invoice data. That’s over 100 hours a year! Automating this process could free up that time for more strategic work, like financial analysis or client communication. When evaluating the time investment, remember to consider not just the direct time spent on the task itself, but also the time spent correcting errors, searching for information, and managing related paperwork.
Not all tasks are created equal. Some are mission-critical, while others are less essential. When considering automation, prioritize tasks that have a significant impact on your business operations or financial performance. These high-value tasks often involve complex calculations, sensitive data, or tight deadlines. Automating them can reduce the risk of errors, improve accuracy, and ensure compliance. While it might be tempting to automate everything, focus on the tasks that will deliver the biggest return on investment in terms of time saved, improved accuracy, and reduced risk.
For instance, automating your revenue recognition process is likely more important than automating the sorting of office mail. While both tasks might be time-consuming, the former has a direct impact on your financial reporting and compliance, while the latter is less critical. If you're unsure which tasks to prioritize, consider the potential consequences of errors or delays. Tasks with high consequences are prime candidates for automation, as they offer the greatest potential for risk mitigation.
If it isn’t clearly suitable for automation, stop there.
Pursuing the wrong process is a sure fire way waste time and money trying to automate something that isn’t suitable.
However, just because something isn’t suitable today doesn’t mean it can’t become more suitable for automation. Consider tweaking the people and process before adding on technology.
Once you’ve got suitable automation ideas, it’s time to forecast their value and complexity.
Stay tuned for that.
Starting small and simple is key when automating complex processes. Prioritize processes that will have the biggest positive impact and are easiest to automate first. This allows you to gain experience, build confidence, and demonstrate the value of automation before tackling more complex projects. Think of it like learning to ride a bike—you wouldn’t start on a mountain bike trail. You’d start with training wheels on a flat surface. Automating your accounting processes is similar. Begin with a straightforward process, master it, and then gradually increase the complexity.
For example, instead of trying to automate your entire financial close process at once, start with something smaller, like automating the reconciliation of a specific bank account. Once you’ve successfully automated that, you can move on to other accounts and eventually automate the entire reconciliation process. This incremental approach minimizes disruption and allows you to adapt your automation strategy as you learn.
Look for the low-hanging fruit. Processes that follow clear, consistent rules are prime candidates for automation. The more straightforward and unambiguous the rules, the easier it is to translate them into automated workflows. These “quick wins” can deliver immediate benefits and demonstrate the value of automation to stakeholders, encouraging further investment and adoption. A quick win could be something as simple as automating the process of sending out payment reminders. This simple automation can save time, improve cash flow, and reduce the risk of late payments.
Another factor to consider is the frequency of exceptions. Processes with a low exception rate are generally more suitable for automation, as they require less human intervention. If a process has a high exception rate, it might be more efficient to focus on standardizing the process first before attempting to automate it. This ensures that the automation is effective and doesn’t create more work than it saves. For more insights on preparing your team for automation, check out this blog post from FinOptimal.
If a process isn’t clearly suitable for automation, stop there. Pursuing the wrong process is a surefire way to waste time and money trying to automate something that isn’t suitable. It’s important to carefully evaluate the suitability of a process before investing in automation. FinOptimal emphasizes the importance of making informed decisions about automation. We believe that automation should be a strategic investment, not a hasty decision.
Our team of experts can help you assess your current processes and identify the best opportunities for automation. For more complex automation needs, consider exploring our software and service offerings:
When considering automation, the stability of the process is crucial. Processes that remain relatively stable over time are more suitable for automation. Frequent changes in the process can necessitate constant updates to the automation system, reducing its efficiency and cost-effectiveness. This is where Accruer comes in. Accruer is designed to handle the complexities of revenue recognition, a process that often involves intricate calculations and evolving accounting standards. By automating this process, Accruer ensures accuracy and compliance while freeing up your team to focus on more strategic tasks.
The stability of the underlying technology used in the process is another important factor. Processes that rely on stable, well-established technologies are more suitable for automation. FinOptimal’s Managed Accounting Services leverage cutting-edge technology and best practices to streamline your accounting processes. We focus on building sustainable automation solutions that can adapt to your evolving needs. Our team stays up-to-date on the latest advancements in accounting technology, ensuring that your processes are always optimized for efficiency and accuracy. If you'd like to explore how FinOptimal can help you achieve your automation goals, contact us today.
You shouldn't. Well, you shouldn't only listen to me. Talk to lots of people.
Just whatever you do, don't fall for some trickster showing tech in a completely staged environment where they display "miraculous AI features." It's highly likely the demo is designed only to work in a demo environment and the entire engineering team is throwing up behind the scenes because they know it doesn't actually work yet (and isn't even that close).
I've seen a lot of good automation. I've also seen tons of bad automation. I started building RPA bots seven years ago for accounting processes. Some were pretty good. Then I had a boss tell me that we needed "ten bots by the end of the year for our client". That was the ask. Ten bots. What the heck does that even mean?
That was my first experience of realizing that many very smart people have almost no clue on how to scope automation projects, which is arguably just as important as understanding how to build them, because what engineer doesn't want to accept an impossible challenge, blow through timeline and budget, just to prove they can do it?
I'm rarely serious on the internet, but this is one thing I'm serious about: use these criteria to evaluate automation opportunities and you will avoid wasting time and money in the wrong places.
Figuring out where to start with automation can be tricky. It's easy to get caught up in the hype, but then struggle to apply it practically to your own finance processes. That's where FinOptimal comes in. We specialize in helping businesses like yours identify the right automation opportunities—the ones that genuinely streamline operations and improve your bottom line. We’re not just about implementing shiny new tech; we’re about making sure that technology serves *your* specific needs.
Our approach is grounded in a thorough assessment of your current financial landscape. We analyze everything from your data structure and the rules governing your processes to the frequency of exceptions and the stability of your systems. This comprehensive evaluation allows us to pinpoint areas ripe for automation and develop tailored solutions that maximize efficiency and minimize disruption.
For example, we've helped numerous clients automate their accounts payable process, freeing up valuable time for their teams to focus on higher-value tasks. By implementing automated workflows, we've helped them reduce manual data entry, minimize errors, and accelerate invoice processing. And because we understand that every business is unique, we tailor our solutions to fit your specific requirements, ensuring a seamless integration with your existing systems.
We also recognize that automation isn’t a one-size-fits-all solution. That’s why we emphasize the importance of considering factors like exception rates and process stability. If a process is highly variable or requires frequent human intervention, it might not be the best candidate for automation. Our goal is to help you make informed decisions about where to invest your automation efforts, ensuring you get the most value from your investment.
If you're ready to explore how automation can transform your finance operations, contact us. We'd love to discuss your specific needs and how we can help you achieve your automation goals. If you're interested in learning more about finance automation, check out our managed accounting services to see how we can help you optimize your financial processes.
How do I know if a process is truly suitable for automation, not just something that could be automated? Look for stability and consistency. The process, the data feeding the process, and the technology supporting it should all be relatively consistent. Also, the process should be rules-based, meaning you can clearly define the steps involved, and have a low exception rate, meaning it doesn't require a lot of human intervention for special cases. Finally, consider how frequently the task is performed and how much time it consumes. Frequent, time-consuming tasks are better candidates than infrequent ones.
What if my processes aren't perfectly standardized? Can I still automate them? Absolutely. While perfectly standardized processes are ideal, some level of variation can often be accommodated. The key is to find a balance. If your data is mostly structured and the rules-based logic can handle the majority of transactions, you might be comfortable handling the exceptions manually. If exceptions are very frequent, focus on standardizing the process before automating.
What's the biggest mistake people make when considering automation? Trying to automate too much too soon, or picking the wrong processes. Start small, with a process that's clearly suitable and offers a quick win. This allows you to gain experience and demonstrate value before tackling more complex projects. Choosing a process that's not a good fit for automation can lead to wasted time, money, and frustration.
What if my company is planning a technology upgrade soon? Should I wait to automate? Ideally, automate after the upgrade, so you're not building automations you'll have to rework. However, don't let the possibility of future changes perpetually delay automation. If the upgrade is still far off, automating existing processes now can still provide significant benefits in the meantime. Just be prepared to adjust your automations once the new technology is in place.
Where can I get help identifying and implementing automation opportunities for my finance team? FinOptimal specializes in helping businesses implement effective automation strategies. We offer a range of resources, including software like Accruer and managed accounting services, to help you assess your processes, identify automation opportunities, and implement solutions tailored to your specific needs. Reach out to us to discuss how we can help you achieve your automation goals.
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