Is automation a risk to financial sector jobs?
Blog //11-05-2022

Is automation a risk to financial sector jobs?

by Daniel Docherty, Director of Strategy

There has long been an element of inevitability associated with automation, with workers across many industries fearing that it will eventually replace them. But what if the outlook isn’t as gloomy as first thought. Perhaps automation can bring about untold benefits for employees in the finance sector.   

In this article, we explain what automation means in relation to finance, when it will come into full effect, and which specific finance jobs will be automated. We also discuss common challenges that may be faced along the way and provide some tips on how to successfully implement automation (to achieve positive results for both employers and workers).         

What is automation in finance?

There are many examples of automation today, such as self-driving cars, self-checkout machines at the supermarket, and manufacturing robots on the assembly line. An output is generated from an input with no need for human intervention in-between. The more complex the in-between process is, the more sophisticated the technology must be.

Someone will set the initial parameters so that the technology in question knows how to recognise the input (and how to react to it). A computer programme, for example, is something that has been pre-programmed to perform specific tasks when it encounters the appropriate scenarios. Artificial Intelligence (or machine learning), on the other hand, is expected to be the future of automation. This is when a machine can learn independently and figure out how it should behave without the initial programming.

Automation has existed in the finance world for a long time. When the electronic calculator was invented, it allowed people to get instant answers to complex calculations, with no need for the manual working out. Spreadsheets provided a more secure space for finance teams to store their books, with capabilities for even more sophisticated equations too. And dedicated accounting software continues to automate a growing number of financial tasks. Even our personal lives have been improved by financial innovation, with the likes of contactless cards, mobile banking, direct debits, and more.                     

When will automation replace finance jobs?

The automation revolution has already started within the finance sector. Some worry that this will lead to widespread job losses. However, the journey towards true AI is a slow one, so there is plenty of time to figure out where people fit in.

In the meantime, finance workers can enjoy fewer repetitive tasks in their daily routine, and get involved with more fulfilling work around strategy and innovation. It is also likely that new (and previously unimagined) roles will be created due to the technologies that are emerging. This will give employees an opportunity to learn/adapt, which assists with their ongoing development and career prospects.   

Financial automation is likely to occur in two phases. The first phase is happening right now and consists of administrative/data-entry roles being completed by computers. This stage will probably continue through to the end of this decade, saving businesses time, money, and energy. The second phase will likely begin next decade, which is when we’ll be much closer to true AI that can fulfil creative and analytical tasks.      

Which finance roles will be automated?

  • Bank reconciliation

There are many finance tasks that have already been touched by automation, including bank reconciliation. This is when businesses must check their bank statement to ensure it matches the numbers seen in their own books. Doing this can root out any erroneous data and any flaws in their bookkeeping process. It can be a time-consuming job to do manually. However, there are already digital solutions that can display real-time balances from a general ledger and reconcile this with the appropriate bank account.  

  • Expense management

The process of expense management has many moving parts, making it particularly vulnerable to error. Traditionally, employees would log an expense claim by keeping hold of a physical receipt (which was prone to being lost or damaged), and then handing this to the most suitable colleague when they were next in the office. Today’s Cloud-based systems remove many of these steps, allowing workers to digitally submit their claims immediately. These are automatically sent to the appropriate approver, with non-compliant claims being rejected by the technology before ever getting through.    

  • Sales invoicing

When a customer makes a purchase, they are often given an invoice detailing the exact terms of the transaction (so they know what they owe and when they must pay). Invoices can contain mistakes when they’re generated manually, resulting in lower income for the business. Technology can create a seamless link between the sales and finance functions, removing some of the unnecessary steps involved in cash receival.  

  • Credit management

Credit is a crucial aspect to manage effectively as it can dictate the health of cash flow. Forthcoming credit can be made up of expected payments from lenders and sales from repeat customers. Businesses will often allow customers to defer payments to finalise a deal and to earn more from interest. Digital systems can assess a customer’s credit history to recommend whether a deal is sensible and can also send out automatic notifications when payments are due.  

  • Payroll

There are many variables that impact payroll, such as individual salaries, deductions, tax considerations, bonuses, overtime, and more. This means there is a lot that can go wrong when payroll is managed manually. Software can remove much of the stress for finance teams, by considering all the data related to a specific employee, paying them appropriately, generating a payslip, and incorporating this expenditure into the wider financial picture.  

  • Budgeting/forecasting

Forecasting is conducted by considering performance-related data from the past, and projecting this into the future. More data gathered means a more accurate forecast that can be used in impactful ways. Accounting software can process far more data than the typical person, in a much faster timespan too. Budgeting is linked to this activity, as it’s easier to determine a sensible budget once the team are more confident of future outcomes.   

Building financial reports by hand is not as feasible as it once was, as businesses risk losing too much time and falling behind competitors. When completed manually, finance workers must extract numerical figures from a range of places and then compile them in a way that is comprehensible to others. Accounting software has made it possible to build reports instantly, with all data stored in a single place, and templates that cover a range of needs and metrics.    

What are the challenges of financial automation?

  • Over-automating

When finance leaders decide to embrace automation, there’s a risk they may get carried away and attempt to automate absolutely everything (including the most miniscule activities). A nuanced approach will likely garner more favourable results. There are some tasks that will still benefit from having a human touch, at least until the technology can do them better. And it may complicate matters to add in an extra process that isn’t needed.        

  • Siloed automation

While it may not be necessary to automate everything, it’s important that automated processes are interconnected in some way. This can be achieved by using systems that integrate with one another, or a single system that is multifaceted. Siloed processes can be damaging to the accuracy of data and overall performance. If manual work is needed to link these separate functions, it defeats the whole purpose of automation.          

  • Lack of employee expertise

Technology can serve as a powerful tool, but only if employees have knowledge around how to use it and how to understand the results it produces. Without this know-how, there’s a good chance this investment will never reach its full potential. Businesses must provide adequate training to reap the rewards, and ensure they have the resources to manage/maintain such systems.        

  • Zero buy-in

If key stakeholders aren’t buying into the idea of automation, any technology adopted may be doomed to fail. When those at the top (such as key decision makers and investors) aren’t on board, it will likely not be implemented in the first place. And if employees are fearful of being replaced, they may not be motivated to embrace it or use it effectively. It’s important to get widespread acceptance at the earliest possible opportunity.        

  • Using the wrong systems

Viewing any form of automation as good can be the wrong approach to take. As is the case with any group of products, there will be a range of systems available on the market (both in terms of the quality and the suitability to a business’s specific needs). By finding a suitable match and investing appropriately, there’s a much better chance of a significant return on investment.      

How to harness the power of automation in finance

  • Upskill employees

The most important action that can be taken to prepare finance workers for a new system (and to protect their long-term career prospects) is to upskill and retrain them at every appropriate moment. This means that as the finance sector evolves (and industry trends change) they will continue to be relevant and valued. By providing an educational environment in which to work, businesses will be better positioned to retain and attract talent.    

  • Communicate with stakeholders

The best way to get buy-in from stakeholders is to communicate the benefits of automation effectively. This should include solid stats that demonstrate how business performance will be improved. It should also involve allaying fears, by spreading a positive message about the ways employees’ working lives will be improved. If the finance team are involved with selecting and implementing new systems, they will be far more invested in a successful outcome.     

  • Assess what needs automating

Finance managers should conduct a detailed analysis to determine any current pain points that the team are facing, any aspects that are bogging them down, and any weaknesses within existing processes. This serves as a good starting point, as they know which type of solution to look for and which functionality to prioritise. It’s then just a matter of choosing a system within a predetermined price range.      

  • Predict potential outcomes

Businesses should carry out a risk assessment too. By predicting the impact of automation, they can more easily grasp the related threats/opportunities. Not only this, but if they understand what will change going forward, they can amend structures, hierarchies, and processes accordingly so that turbulence is kept to a minimum for employees.    

  • Choose the right technology partner

Any prospective software provider could potentially become a business partner for many years. This is why it’s important to get this decision right. They will be tasked with taking you on a technological journey and keeping you ahead of the times as automation evolves. Online research can shed light on the respect they have in the worlds of technology and finance, and whether they pride themselves on innovation and customer outcomes. It’s also ideal to confirm that their systems are Cloud-based and scalable, and that they have a good reputation in relation to cybersecurity.     

Automate your financial processes with Advanced

At Advanced, we provide an accounting solution called Advanced Financials. Due to many years of working with and supporting finance teams, our system was made specifically for the needs of finance workers. The software is intentionally simple to use, and scalable too, meaning it will grow with businesses as their ambitions expand. It is updated regularly with new features, keeping users up to date with industry trends and legislative changes.  

Advanced Financials helps finance teams to streamline their processes through increased efficiency. This Cloud-based accounting software automates many of the tasks related to accounts payable/receivable, sales invoicing, credit management, bank reconciliation, purchase management, expense management, asset management, and much more. With built-in dashboards, finance managers can instantly grasp financial health. And with over a thousand customisable reports, CFOs can quickly gain insights that dictate strategic decisions.

 

If you’re looking to embrace the power of automation, and want to equip your finance team to achieve more, be sure to take a closer look at our Cloud-based accounting software.      

Blog Financial Management Advanced Financials
Daniel Docherty

Daniel Docherty

PUBLISHED BY

Director of Strategy

Daniel joined Advanced in May 2019 to lead our Software as a Service portfolio, moving on to lead the overall Finance Management, Spend Management and People Management strategy. He brings over 18 years of experience in core business and finance solutions, working with customers from a wide background of industries and scale.

Read published articles