A great, great deal has been said about the weather, but very little has ever been done, said Mark Twain. A recent survey to determine the main benefits of technology within finance departments reaffirms that piece of wisdom.
The online survey polled 120 financial executives across the globe, and was conducted by the Economist Intelligence Unit on behalf of Accenture, an international provider of consulting and outsourcing services.
The main finding was that a large majority (78 per cent) of CEOs, CFOs and financial executives say improving operational efficiency is their top priority, but a significant number of their organizations continue to use manual and labour-intensive methods of transaction processing.
Only 15 per cent of respondents currently transact the majority of their accounts payable and receivable functions on a fully automated basis, according to the survey. 40 per cent cite lack of awareness within their organizations about what technology could actually do to improve transaction processing as the main barrier to adopting new technology.
Seventy-seven per cent say the integration of financial information to create a single version of their organization’s financial “truth” was the most important reason to adopt new technology.
Manual processing of accounts payables and receivables is still the norm for most organizations, says Anoop Sagoo, a London-based partner at Accenture Finance Solutions. Even companies with installed ERP financial packages have manual processes, for example, to input information from suppliers in order to match invoices against purchase orders, he says.
“The integration of the suppliers’ processes to customers’ processes is outside an ERP system, and requires investment and thinking about how to do it,” says Sagoo.
There are some promising technologies to address that, he says, adding that “the nirvana solution is paperless transactions.”
One is optical character recognition (OCR), which is starting to take off, he says. “You could argue that’s an intermediate technology before you start getting into complete paperless. It’s taking the paper and digitizing it as early as you can.”
Another crucial area is e-billing. Adoption has been low due to the “network effect” says Sagoo: an individual company would need to convince all its suppliers in order to do it successfully.
However, he contends that a natural marketplace will develop within Accenture’s business in the course of client work to integrate paperless processes.
“We have a better aggregation advantage then our customers in being able to have a number of suppliers that can integrate into that solution. After a period of time, our customers and suppliers are going to overlap.”
But an IT executive with a Canadian financial services organization who wishes to remain anonymous disagrees with these tactics.
“The OCR approach is stupid, because you’re starting with an automated process, then going to paper, then using OCR to take it back to automated. It just cuts the labour costs to rekey information, and doesn’t attack the fundamental problem, which is making the process electronic, end-to-end,” he says.
Most large companies have thousands of suppliers, he says, but typically only a small number make up a large proportion of their transactional volume. For these, it is feasible to develop agreements to do business electronically, and many Canadian companies in fact do. “But most are doing the nickel-and-dime stuff manually,” he says, adding there is no clear solution to that.
OCR, e-billing, outsourcing and the like are short-term tactics to cut costs, he says, not strategies for achieving the real goals of improving operational efficiency or getting a single version of the financial “truth.”
“The problem is that no one’s been able to figure out the implementation of integrated systems. The issue is control, especially when you move to electronic systems, which require that people rely on systems for controls. These are weak in the industry and compounded by trust issues,” he says.
Catherine Aczel Boivie, senior vice-president of IT at Pacific Blue Cross, echoes his sentiments. “E-billing fizzled with the dot bombs. There are all kinds of security and credibility issues with that,” she says.
Financial processes have to be examined before introducing technology, she says. “There are no miracles. A bad manual process is a bad technology process, so if all you’re doing is automating a bad manual process, then it’s not going to automate it the way you want.”
She believes OCR has come a long way, but the problem is the amount of time IT areas have to spend integrating it. “I can’t think of any financial package that has built-in scanning. The big issue right now with financial and other systems is that most vendors have point solutions that don’t integrate properly. These systems could be viewed as finely-crafted jigsaw puzzle pieces, but they don’t fit into any picture.”