Three fintech trends to watch in 2020
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2020 fintech trends that can help you optimize your AP processes
Financial technology, or fintech, has become more than a buzzword in today’s economy. Fintech seeks to enhance and automate the delivery and use of financial services. With rapid growth over the last decade, fintech now includes many different sectors and industries, such as retail banking, nonprofits, education, and investment management. Fintech is also providing increased opportunities to improve processes and increase efficiency in the world of accounting, namely through accounts payable automation.
Here’s a look at three fintech trends that AP departments should keep their eye on in 2020, and beyond.
1. Robotic process automation meets intelligent automation
Robotic process automation, or RPA, provides document intelligence to digital systems, enabling all kinds of services to talk to each other in automated workflows. Essentially, RPA technologies can handle repetitive, rule-based tasks, such as risk assessments, security checks, data analysis and reporting, and compliance processes, as well as most other repetitive administrative activities.
While RPA isn’t a standalone solution for accounts payable automation, it can have transformational impacts on how companies typically handle their finances. When RPA gets paired with artificial intelligence (AI) disciplines, such as natural language processing or computer vision, the possibilities for efficient automation grows considerably.
Intelligence automation is one AI term that will become much more common in the coming years. Simply put, intelligence automation is an AI algorithm that acts as a “digital worker”, a software bot that functions as a human employee. When RPA and AI converge, businesses are able to automate complex, end-to-end processes.
For example, software platforms that use the RPA tool optical character recognition (OCR) can gather unstructured data that AI algorithms transform into a structured format. Then, additional RPA tools begin using the captured data to automate work tasks.
So, how does this benefit an AP department? A few of the benefits include:
Automated reconciliation of matching errors: Error reconciliation can be a huge burden for AP staff. Discrepancies in purchase amounts, mismatching vendor information, or invoices and purchase order errors take exorbitant amounts of time to correct when handled manually. By using AI and RPA tools, AP automation software platforms can robotize manual matching and significantly reduce the amount of oversight and exception handling required by employees. In turn, employees can focus on more critical tasks like budgeting and planning.
High scalability: Scaling your robotic workforce is an important component of supporting changes in your company’s AP activity. Automated AP workflows designed with RPA can be replicated or reused across different business departments and locations, easily allowing for scalability with little-to-no additional cost.
Faster month-end account closure: Closing the books monthly, quarterly, and annually is often a time-consuming process for AP departments. RPA software can be used to automate data input and reconciliation, significantly reducing invoice errors and duplicate payments. This means teams will no longer need to rebalance the books when last-minute errors are found during a month-end close.
2. End-to-end process automation
When it comes to automating AP processes, you’ll find that solutions fall into two major categories: end-to-end solutions and point solutions. A manual accounts payable process at most companies goes something like this:
- Enter invoice data by hand into your accounting system
- Gather signatures from approvers who can verify the invoice
- Print and collate paper checks
- Wait on CFOs to sign the checks
- Stuff checks into envelopes and mailing payments
- File paper copies of the receipts as a reference database
A point solution can automate parts of this process, but often leaves most of the manual steps that come before, after, and in between. A few examples of point systems include:
- Data imaging solutions utilize OCR technology to pull data from digital invoices and automatically populate the corresponding data fields in their accounting system. Without intelligent automation, however, this solution is extremely limited.
- Workflow management solutions can automate the process of approving and storing invoices. Accounts payable managers benefit from one centralized location where the status of each invoice is readily available and easy to track. However, invoice capture, data entry, payments, and reporting are still handled manually.
- Payment solutions eliminate the need for your team members to manually sign, cut, collate, and mail your payments out. Businesses can also transition to electronic payment methods that are safer. However, this solution doesn’t address the more time-consuming and error-prone steps that come before and after payment.
End-to-end AP automation solutions create one centralized process that moves an invoice automatically through your entire workflow, from invoice intake to approval to payment to data entry.
Businesses can use end-to-end AP automation software to optimize all their processes, including:
- Invoice collection, sorting, categorizing, and data input upon arrival
- Extracting and storing purchase order matching information and supporting documents, as well as capturing and digitizing invoice data so information such as GL codes, line item information, terms, and amounts can be automatically verified according to your predetermined workflow rules
- Extracting digital and handwritten data automatically and free from errors, while syncing it across your accounting department and organization
- Automatically sending invoices for validation and payment approval to approvers along with notifications that ensure the invoice doesn’t get missed
- Scheduling approved payments before their deadline, which reduces late payments and ensures companies can take advantage of opportunities for savings and volume rebates
- Advanced reporting and analytics, which can improve cash flow analysis and future planning and identify bottlenecks or trends in your AP processes and streamline the department’s reconciliation process
3. Big data and ESG
While end-to-end AP automation solutions can streamline entire workflows, companies can take the process a step further by utilizing advanced reporting and analytics functionality to gather big data. Large volumes of data can be analyzed computationally to reveal patterns, trends, and associations. The importance of big data doesn’t revolve around how much data you have, but what you do with it. You can analyze data from multiple sources to find answers that enable reductions in time or cost requirements, new product development or optimized offerings, and smarter, strategic decision making.
Data-driven approaches are becoming standard throughout many industries in today’s global workforce. Having the right set of analytics tools helps companies gauge their performance, compare their metrics against industry standards, and set appropriate improvement goals and objectives.
Fully automated data capture and analytics allow you to forecast a more accurate picture of costs and better control P&L, giving you confidence in your financial predictions and reporting and providing more sophisticated insights. Cloud-based AP solutions also simplify mandatory reporting and data gathering for regulatory compliance and the creation of environmental, social, governance (ESG) reports.
ESG investment and reporting is not only a rapidly growing trend; it’s an important way for companies and asset managers to connect with stakeholders and showcase commitment to core values. ESG refers to the three central factors in measuring the sustainability and ethical impact of an investment in a company or business. These criteria help to better determine the future financial performance of companies (return and risk).
While many companies continue to adopt new technology, enhance operations, and improve customer service, these fintech trends provide exciting avenues for innovation. Businesses are realizing they must learn how to use these trends to their competitive advantage. Technology is here to stay, and automation can play a critical role in helping businesses strategically grow and operate more efficiently.
Overall, teams that follow fintech trends and implement the use of AP automation data can expect the direct, positive benefits of time and money saved along with reduced busywork and a workplace culture that is transparent, collaborative, efficient, and forward-thinking.