Wherever you look and in whatever industry sector you might be in, some back office functions still appear to be operating in the dark ages. That's a stark opening line, but the reality is that many organisations are still reliant on manual processes and spreadsheets to fulfil their financial and regulatory obligations.
In contrast, we do not think twice about booking flights on smartphones, using banking apps for our personal finances, or shopping online. So why are some firms not embracing technology as readily when it comes to data management, reconciliations and financial controls?
Habitual work practices, perceived project timelines and costs, resistance or fear of change, and inexperience are some reasons why firms continue to support labour intensive processes and procedures. The average tenure of a chief operating officer (COO) is typically three years, which tends to discourage medium and long term planning that is needed for transformational projects. ‘If it’s not broken don’t fix it’ also springs to mind, but arguably these reasons are far outweighed by the benefits that automation brings.
The reality is that economic and competitor demands, increase in data complexity and volumes, continued speed of regulatory change and enhanced scrutiny from external audits are key factors that demand the effective and efficient workings of back office functions.
Over reliance on spreadsheets
Regulators and auditors are becoming less tolerant of spreadsheets, and there are four very good reasons why:
Auditability – every data interaction should be date and time stamped against a user profile, which is impossible to do on a spreadsheet. The ability to go back to a point in time is a necessity – again challenging in particular if there are macros embedded in spreadsheets.
Automation – spreadsheets are wide open to manual intervention and user error. Macros can help to execute actions, but are typically poorly controlled and are only understood by the writer of the macro - in other words macros are key man dependent.
Volume – spreadsheets have volume limitations and do not perform well as volumes grow. Key controls on workbooks that have thousands of rows and multiple columns with complex, poorly understood macros are not sustainable, maintainable or readily auditable. They will break at some point.
Version control – despite the reliance on shared drives, spreadsheets are prone to suffer versioning and multi-access issues. Couple that with spreadsheets being poorly backed up and existing on local hard drives, then again the susceptibility to the lack of control is magnified.
Quality, speed and flexibility – these are words that are not synonymous with manual, error prone processes that often lead to the working of substantial backlogs.
It is however no secret that by embracing technology, employees can be redeployed to undertake more valuable work and they can learn new and increasingly important technical skills. This can mean much more efficient and effective work practices, leading to growth in performance and an overall reduction in operating costs.
From management of high volumes of data, reduction in fast close processes to mitigation of operational and regulatory risk, robust automated solutions enhance controls and deliver efficiencies.
Integrity and validation of data, powerful automated reconciliations, workflow and case management, and timely and meaningful management information (MI) are all ‘must haves’ for sustainable and scalable solutions. Configured correctly, MI can be such a powerful bi-product supporting strategic decision making and the allocation of resources.
If you are continually faced with the manual amalgamation and consolidation of data from disparate systems, think again, as what you really need is transparency of data, good governance and robust audit trails to meet challenging reporting requirements. It is not unheard of that a process that previously took a week to complete now takes little more than an hour from start to finish thanks to automation.
There are countless headlines and articles on innovation in respect of processing, managing and working with data. 2018 is proving to be the year of regtech, fintech, digitisation, artificial intelligence, machine learning and technological revamp. The return on investment on an automation project is much quicker these days and as a result COOs are starting to act. The ability to replace tactical solutions with long term strategic solutions, which take a more holistic approach to data management, stands firms in good stead and allows them to not only grow but to embrace the inevitable ongoing challenges of financial control and regulatory requirements.
It is therefore time for a back office revolution before it’s too late.