The rise of workflow automation in finance & accounting
As we’re looking back at 2020, Cardi B is not the only one that went viral with WAP. A quick overview of what this paper covers:
- workflow automation products (also WAP) tapped into underserved areas by traditional ERP (collaboration, visibility, and connectivity) for SME
- they penetrate the segment with strategies that address its characteristics
- these solutions are part of an ecosystem led by reporting tools, leaving vendors to leverage advantages (team, community, integration) to win over
Introduction
Workflow Automation Products (WAP) are cloud-based solutions that aim at automating manual and low-value tasks. Despite the revolution of ERP systems during the 90s to integrate business processes into Finance & Accounting (F&A), automation still falls short of modern-day businesses’ expectations.
(“OK, I made that WAP acronym up, RPA or Robotic Process Automation is the keyword you should be looking at” — Hung 🙂)
Accountants spend quite a lot of their time with paperwork, emails, phone calls, and spreadsheets to gathering things up and making things right before entering into the system. F&A remains a highly fragmented process.
According to Gartner, 89% of general accounting operations is automatable.
So if you haven’t reached that stage, you need to try harder, I guess. The worldwide market for automation is expected to worth $12 billion in 2023. Of course, the report did not foresee the pandemic so things may move quickly.
The point is there is an accelerated need for a mechanism that bridge different touchpoints as process-owners switch between Excel, Outlook, and ERP and this is where WAP step in, by prioritize solving these pain points, opening up new opportunities for collaboration internally and externally, while still playing nice with the accounting & controlling process.
Part I — Use case solutions mapping
Here is some example of automation solutions to core F&A processes.
The value propositions by these solutions are to:
- Reduce costs: man-hour costs on doing repetitive, low-value tasks and potential financial loss on human-made errors.
- Enable remote working and external collaboration: give employees a tool to work and stay connected with teams remotely and provide a portal to external parties (candidates, suppliers, customers,…) to collaborate. Data is visible in real-time for insights and analysis.
- Create a scalable workflow: that is sharable and doesn’t require extensive training (especially when onboarding is also being remote).
Part II — Market penetration
A lot of these modern solutions were designed with SME support in mind. These enterprises have limited resources for infrastructure investments and head-counts. Automating processes with an easier to use and lightweight stack of solutions makes a lot of sense than a full-fledge ERP. Also, SME’s simple business structure make this segment more flexible to implement new products and services (as well as switch to the new one).
For a larger enterprise market, it requires certain distribution resources to crack into, as pointed out by the case of Microsoft Teams vs Slack, as well as compatibility requirements for legacy systems that many of these solutions may not be capable of at the moment.
And these WAPs have a few tricks up their sleeves to serve SME customers.
Forget about selling a tool, sell a workflow
My emphasis on using “workflow” throughout this paper highlights the fact that information and documents are passed from one participant to another throughout the F&A process.
Successful automation solutions deliver values to more than one stakeholder.
Take Airbase for example. At its core, Airbase provides corporate cards with a similar experience that you could find in Revolut or N26 for consumers, but brands itself as a spending management solution. Imagine if Airbase is just a credit card issuing company, what could stop different teams from owning different cards? However, building a layer of workflow that involved finance, employees, and managers on top of that makes them more attractive to decision-makers.
Allowing customization of workflows also helps to retain users within your solution. Tasks such as tagging transactions, labeling customers; creating templates; … increase switching costs.
Build a community
When there are several similar products out there, having a community is a great way to attract future users. Businesses count on recommendations and referrals to make software purchase decisions. Having an active & high-profile community helps to validate & reassure the quality of your solution.
The community also addresses user retention, which can be interpreted as making it hard for people to churn (😈) or finding ways to engage them with your product (😇). Building a community tackles the latter.
Come for the solution, stay for the community
Targeted members of the community are professionals, those who would likely aim for development & accomplishment. Finance employees are no exception. And although there may be different personas within the finance team, in general, having access to relevant content (blogs, podcast, newsletter) or peer empowerment (webcast, private Slack group) boost their senses of those professional goals and increase satisfaction, hence improve the relationship with these solutions.
Scale vertically — Yes, please
Even with a new breed of automation solutions, I stand by the conclusion that F&A is still very fragmented. At the end of the day, your solution may end up as a secondary source feeding to reporting & controlling tool made by someone else. Therefore, it’s important to provide additional value for your products beyond its core workflow solution.
Two is always better than one
Besides integrating with accounting tools (which is fundamental), the F&A process usually ends with a cash settlement. So building a cash & bank (payment) and/or treasury (financing) function seems like an obvious next step. And fintech platforms are here to make that easier as well as expand the total addressable market by the original solution. A few examples:
- Upflow is a solution that automates the payment collection process and also offers debtors a quick interface to pay for invoices (payment).
- Stripe recently launched its Treasury platform, by analyzing your transaction could provide you a loan and a repayment schedule adjusted to your business situation, a real-time credit rating system and adaptable lending scheme that bank would only dream of (financing).
Scale horizontally? — Not so much
There is limited opportunity to scale from one process to another in F&A workflow. One interesting example is probably between Accounts Receivable and Accounts Payable solution from bill.com. Business partnership flows both ways, a company is a customer to some and a supplier to others. Network effect kicks in when a customer using bill.com’s Accounts Receivable solution incentivize its supplier to use Account Payable solution to bring in values of having both participants on the platform (such as reducing the time of profile and payment validation from the other party).
Part III — Outlook
As enterprises are now doubling down on automated workplaces, it’s exciting to see how these solutions are helping finance professionals and businesses build the future of work. However, as mentioned, no single vendor really owns FP&A, these solutions are tackling specific processes. But it doesn’t have to end up the way traditional ERP approaches businesses. These solutions can be part of an ecosystem or build one on their own.
No one really owns F&A like traditional ERP. And that’s OK.
Cloud-based reporting solutions such as xero or quickbook serve as a discovery channel for automation solutions by launching marketplaces, making it easier for users to discover compatible products.
Despite that, I noticed there is no partnership program with xero or quickbook to promote (favor) specific vendors meaning that they leave it up for customers to decide which one to add. Automation solutions, therefore, need to leverage its community and value propositions on team collaboration and vertical and horizontal processes to win over.
While admitting that there is probably no better position to start an ecosystem than a reporting solution, looking at business process-wide, there is still an opportunity for solutions like Finch to build universal access for (HR and payroll) key operating information from different existing products in the market (and there are a lot of them by the way) through a single API so other services (FP&A for example) can tap into and leverage that data. The idea could open up the possibility for a single “source of truth” across F&A workflow hence address the fragmentation issue.
