How Automation Reduces Month-End Close Headaches for the CFO

Closing the books at the end of every month is a familiar process for every business, but it’s one ripe for improvement — and doing so can create massive advantages for companies.

“Making this month-end process more automated, easier to handle, significantly enhances the business in whichever form or shape — whether it’s a small or medium or even enterprise,” Shobhan Agarwal, vice president of finance at Routable, told PYMNTS.

The month-end process has been complex and time-consuming because it includes two different processes. First, there’s receiving invoices, managing approvals and processing payments. Second, there’s reflecting that in that financial system or accounting software. And as companies grow, the process gets even more complicated, he said.

Reducing Time, Error and Cost

Automation can solve that complexity and deliver many advantages, Agarwal said.

For one thing, automation saves time. Capturing invoices digitally and paying them reduces the time to process. That efficiency is compounded if there is integration that reflects these actions in the financial system.

Another advantage of automation is that it reduces human error. Agarwal said there is 2% to 3% error in every human process. By automatically checking invoices against payments, an automated process can make sure that a payment that should be $200 is not mistakenly turned into $2,000.

A third benefit is cost savings. Agarwal said manually processing an invoice can cost $6 to $8, or even $40 to $60 if it’s a complex payable. Beyond that, if it takes too long to do something like a new vendor addition, a company may lose access to the best price.

“A delay of a week could be the difference between a higher shipping cost or having empty shelves on a key holiday season,” Agarwal said.

Delivering Benefits Beyond Those That Are Expected

Automation also helps in decision making. The month-end process is a time when executives in any company look at the current business and talk about the future.

“Time not spent in a manual month-end process can help to make sure that you actually are looking at optimizing cash flows or looking at cost savings,” Agarwal said.

Closing the books traditionally takes more than 10 days, he said. Improving the process can shorten that to about six days. Any improvement beyond that requires automation.

“I have yet to see a company that is doing a close below five days without taking significant advantage of automation,” Agarwal said.

Making the First Step in Continued Automation

Looking ahead, Agarwal said there are great opportunities for innovation in B2B transactions and among small- to medium-sized businesses (SMBs). Automating the month-end process is the first step.

Beyond that, B2B companies can digitize the way they are sending money internationally, and SMBs can adopt the sort of automation that has already been implemented by enterprises and can improve their cash flow management.

Accounts payable (AP) automation helps with the flexibility of a payment, speed of a payment and comfort of managing that process.

“There is so much of cash management that will also come through as we innovate in the B2B space,” Agarwal said. “B2B will be a very exciting space, I think, in the next 10 years because it will accelerate much faster than the B2C innovation.”