Finance Avoids RPA for Financial Reporting

Finance departments are reluctant to remove humans from the financial reporting progress, but Gartner says that misses opportunities for efficiencies.
David McCannOctober 2, 2019
Finance Avoids RPA for Financial Reporting

Fewer than a third of finance departments that have deployed robotic process automation have utilized the technology in conjunction with financial reporting, according to Gartner.

Gartner studied the use of RPA in finance departments through interviews with more than 150 corporate controllers, chief accounting officers (CAOs), and other accounting leaders to determine the main benefits of implementing RPA within the financial reporting process.

“While 88% of corporate controllers expect to implement RPA by next year, we routinely encounter hesitancies when it comes to applying RPA to financial reporting processes,” said Dennis Gannon, research vice president in Gartner’s finance practice.

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“When viewed from a narrow ROI perspective, financial reporting appears to be a low priority compared with other business initiatives,” Gannon said. “The departments that have experimented with RPA in their reporting processes, however, report a series of additional benefits, from less staff time fixing mistakes to more time allocated to higher-value work. The result is typically higher employee engagement and less turnover.”

Gartner’s analysis revealed three roadblocks finance leaders experience when considering whether to implement RPA: hesitancy to remove human judgment from the process; a perception of low ROI; and process standardization delays before implementation.

RPA is best applied to manual, repetitive actions that a human would otherwise complete with a computer. Relying on staff to perform steps still deemed to benefit from human judgment limits the upside of RPA’s benefits while still introducing human error and the need for rework, according to Gartner.

“CAOs and controllers we’ve seen overcome this roadblock have created tandem systems set for a limited period of time,” said Gannon. “This allows accounting leaders to test the performance of a fully automated process against the traditional manual approach and provides proof of the efficiency and accuracy of RPA.”

With respect to ROI, most CAOs and corporate controllers are forced to prioritize RPA activities based on a lack of resources and their role in managing a cost center, where they are consistently asked to do more with less. Using a typical cost-centric ROI formula focused on full-time employee time savings tends to deprioritize RPA opportunities within financial reporting for other business opportunities.

“Accounting leaders who fully embrace RPA go beyond simplistic metrics and view the technology as a boost to their employee value proposition,” said Gannon. “Most employees will welcome the opportunity to avoid tedious rework in favor of the more strategic activities that only a human can do.”

Gartner research has found that the average amount of avoidable rework in accounting departments can take up to 30% of a full-time employee’s overall time. This equates to savings of 25,000 hours per year at a cost of $878,000 for an organization with 40 full-time accounting staff.

The third roadblock in full-scale RPA implementation for financial reporting is a belief by accounting leaders that the process must be standardized before it is implemented. Interviews with CAOs and controllers revealed a common belief that without standardized processes, the failure rate due to exceptions was much more likely.

Such potential failures were viewed as riskier compared with other automation opportunities due to the risk of financial misstatements or missed reporting deadlines. However, RPA can be deployed to handle individual steps within a process; the whole process does not need to be standardized before deriving benefit from bots.

“By implementing RPA on the processes that can be automated from day one, accounting teams can immediately free up capacity with a minimum of disruption that typically occurs when new process standards are introduced,” said Gannon.

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