A CFO’s Guide to Automation

By: Chris Haiss

Financial management automation is no longer a want — it’s a need. Organizations across all industry sectors understand the value of adopting technology to increase accuracy, improve governance and shorten the month-end close process.

Companies that replace outdated systems with ones that provide more automation are cutting costs, reducing overhead, improving customer relationships and freeing up financial team members to focus on more strategic projects, including data analysis and financial planning.

Nearly 76% of companies still use processes that are either largely manual or that require considerable manual effort, according to a Deloitte survey of finance and accounting managers, directors, controllers and CFOs. Ready for a change, these finance leaders are implementing cloud-based accounting systems (36.2%), budgeting, forecasting, reporting tools (42.1%) and data analytics and visualization (39.7%).

Just as it can improve operations in the warehouse or customer service departments, automation in finance can reduce the need to fill empty positions while providing a path and an incentive for existing workers to gain new skills.

Breathing Room For CFOs

Finance leaders are adopting technology to increase automation and innovation in their companies. Some of the top motivations behind these investments include better financial performance, employee experiences and customer satisfaction levels.

When organizations replace their legacy systems and spreadsheets with an integrated solution, some key things happen — CFOs gain extremely high levels of visibility into the company’s operational, financial and performance data and finance team efficiency levels go up.

CFOs Want More Automation

According to a NetSuite survey, 90% of CFOs who responded will use automation, artificial intelligence and fintech by 2024. Finance teams, along with their technology leaders, are adopting technology for the team’s own use while also establishing companywide technology priorities. Despite the current economic uncertainty, organizations are optimistic about business growth and plan to invest in technology that supports that expansion.

Automation is of great interest for CFOs, with at least 80% surveyed saying they already have or will implement automation for functions such as accounting, sales, ecommerce, payroll and customer-facing functions, like self-checkout, within the next six months.

From these investments, CFOs are expecting higher levels of productivity, governance, efficiency and accuracy. As these technologies become the norm, companies that don’t adopt them risk falling behind their competitors, losing customers and missing out on new business opportunities.

Take forecasting, for example. In an era where even the best-laid plans can be completely upended by interest rate hikes or spikes in inflation, creating annual financial forecasts on spreadsheets through a manual process makes it nearly impossible to keep up with changes.

CFOs using spreadsheets or outdated Enterprise Resource Planning (ERP) systems can’t update plans and forecasts in real time — a necessity in this unpredictable business climate. Organizations are more price-sensitive in today’s environment and can’t afford to pay out of pocket for an error-prone system. When they put automation in place, functions like accounts payable (AP), accounts receivable (AR), cash management, budgeting and account reconciliation become easier to manage and more accurate.

With financial automation in their corner, CFOs can better navigate the current business environment and plan for the future.

Financial automation also helps companies get paid faster. For example, using optical character recognition (OCR), machine learning and a third-party payment processor, an ERP applies cash as soon as it’s received and removes those receivables from the system.

When payment doesn’t come in, it can be set up to send out collection letters. The same ERP will also give CFOs the sophisticated tools they need to automate projections and forecasts —both of which support better decision-making, including compliance-related decisions that help companies avoid costly fines, penalties or reputational damage.

For example, implementing a tax automation tool such as Avalara AvaTax that calculates rates for sales and use tax, value-added tax (VAT), goods and services tax (GST), and more has helped organizations with a reduction in audit fines and penalties by 75%, on average.

Taxing Matters

The ERP manages the hub of activity surrounding financial reporting and accounting, and it’s a primary focus of many finance automation efforts. Tax compliance automation is closely aligned with these efforts.

With constant changes and updates to tax regulations, it is a natural extension of the finance technology initiative. However, automating tax compliance is not always prioritized, as it gets lost in the many modules and functions that ERP systems provide.

Businesses too often still opt-in to manual tax calculations or use outdated tax systems that aren’t calculating taxes accurately for every location and jurisdiction. This challenge can cause major headaches as implementing financial management automation moves forward because of the complexity of ever-changing tax regulations.

New technology, including geolocation mapping, calculates sales tax down to each location with exact longitude and latitude for every transaction to ensure the right tax is collected. Advanced processing logic can manage complicated tax issues such as situs, nexus, tax tiers, tax holidays, exemption certificate management and product taxability rules.

Staying abreast of regulations like the U.S. Supreme Court’s decision in South Dakota v. Wayfair, Inc., which allows states to require companies to charge sales tax on out-of-state buyers, is best done using tax compliance software that also helps improve accuracy, reduce costs and avoid penalties.

When Avalara recently surveyed companies that manage their compliance activities manually, most were spending $1,740 per month identifying state sales tax obligations and filing requirements.

On top of that, the companies — all of which have between 20 to 499 employees — generally spend:

  • $3,493 per month on tax rates and calculations
  • $3,409 per month on exemption certificate management
  • $4,894 per month on tax returns

These figures don’t include time and/or money spent handling audits. In fact, 14% of the survey respondents have had a sales tax audit within the past five years.

Spreadsheets and Manual Systems Don’t Cut it For Taxes

As companies work to balance margins and profitability with revenue growth, CFOs will continue to pursue automation and technology that help them reduce or avoid costs. Cobbling information together across a basic ERP, a basic financial system and spreadsheets won’t cut it. What companies need are robust, cloud-based solutions that unify their data and make that information available to all financial team members.

taxability changes

Taxability changes

top prioroties for the finance department

Top priorities for the finance department

Key Takeaways

By combining a cloud-based ERP, like NetSuite, with tax compliance solutions, financial professionals can fully leverage the power of automation within their departments and across the entire organization. A key benefit of ERP and sales tax automation transformations is the ability to inform how sales tax trends will impact the business.

Detailed analysis of where the company is doing business and paying sales tax is essential in understanding how expanding to a new location or adding new products could impact the company’s tax liability, among other key decision drivers. By automating many of the otherwise manual financial management tasks — data entry, reconciliation, reporting and more — CFOs and their teams can focus on more strategic, value-added projects.

Need Help?

Our Technology Solutions Group includes a team of experienced solution experts who will work with you to understand and address the specific needs of your business. If you’d like to improve your organization's accounting and decision-making, contact us online or give us a call at 410.685.5512.

Published January 18, 2024

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