A Complete Guide on Shift to Autonomous Finance for Businesses

Introduction

In the fast-paced business world, efficiency and quick decision-making are key to the smooth functioning and steady growth of an organization. To achieve this, businesses are increasingly adopting technologies, such as artificial intelligence (AI), machine learning (ML), and robotic process automation (RPA). 

Much like any other industry today, these technologies are driving the transformation of the finance industry as well. In just a decade, we have witnessed the rise of finance automation followed by the move towards financial autonomy. The results of this rapid technological advancement have been revolutionary, to say the least. 

In this blog, we are going to understand the transition from automation to autonomous finance, its benefits and key components. 

What Does Autonomous Finance Mean?

Autonomous finance leverages technologies such as artificial intelligence (AI), machine learning (ML), natural language processing (NLP), and RPA to streamline and automate finance tasks. These technologies enable decision-making while automating tasks like account reconciliations, journal entry management, and budgeting.

By incorporating AI technologies into their business plans, organizations can effectively streamline their finance and accounting functions. A major advantage of using autonomous finance technology is substantial reduction in human intervention in a lot of financial processes, freeing up employees to focus on more time-sensitive and important tasks. 

Shift From Automated Finance to Autonomous Finance

The emergence and integration of autonomous technologies in financial processes, of course, didn’t happen overnight. The process started with the introduction of technologies that automated some tasks, reducing some amount of manual labor for companies. 

As technological advancement continued, the application of automating tasks evolved from merely replacing and reducing manual efforts to streamlining processes in a way that required minimal human intervention. Today, autonomous finance systems can make all the necessary decisions independently and will only seek for human assistance when absolutely required. 

Let us understand the stages of this shift from automation to autonomy., 

1. Level 0: 100% Manual Finance Operations

Companies under this category don’t employ technology to achieve finance automation. This level is often the starting point for most businesses. They typically rely on the following:

1. Manual and paper-intensive processes
2. Error-prone tools such as spreadsheets

This phase leaves no room for reevaluating workflows and fine-tuning processes, making technological investments necessary for scalability.

2. Level 1: Introduction to automation

The level marks the start of a company’s financial process automation. This phase focuses on specific tasks that are repetitive and manual. Organizations leverage technologies at this stage to automate these tasks and effectively manage them on a daily or weekly basis. These involve tasks such as three-way matching, journal entry, invoice creation, and sending customer payment reminders. 

At this stage financial processes still require a lot of human efforts and intervention to boost process efficiency. For instance, a lack of data standardization leads to inconsistencies in financial procedures. 

3. Level 2: 80% Automation of a process

At this stage, the company uses accounting software, such as Enterprise Resource Planning (ERP), to automate individual processes, such as account reconciliation, ‘cash application‘ or ‘e-Invoicing.’ This phase helps refocus the attention of analysts on higher-value strategic tasks. 

Automation at this level is entirely workflow-based and governed by a set of rules. Some advanced systems may provide real-time data and reporting dashboards,enabling leaders to monitor results closely and react proactively. 

However, finance teams need to continuously track these operations to ensure they are always accurate and valid. 

4. Level 3: Introduction to autonomy

This level leverages AI and machine learning to seamlessly collaborate and exchange data across individual, operational, and specialized financial functions, such as (Order-to-Cash (O2C), Record-to-Report (R2R), and Treasury. 

For example, with HighRadius’ autonomous R2R solution, CFOs can use AI transaction matching rules to automate and streamline the reconciliation process. The feature is capable of automatically extracting general ledger data from ERPs. Leaders can further optimize workflows by assigning tasks to relevant employees and monitoring the progress of those tasks using Reconciliation Progress Dashboards. 

As businesses expand, it demands adaptable end-to-end finance software with enterprise-level autonomy so that finance teams can evolve from problem solvers to revenue generators globally.To further enable scalability, CFOs need a holistic view of the business to ensure it operates as efficiently as possible. At this level, CFOs can leverage technologies to

1. Forecast critical triggers even amid uncertainty
2. Project workflow costs and avenues to reduce OpEx
3. Keep tabs on customer aging analysis
4. Implement a rolling forecast methodology
5. Take immediate steps to maximize cash on hand

5. Level 4: 80% Autonomy of end-to-end finance

At this level, autonomy aims to transform the entire finance process, which can only be achieved through the implementation of AI across all operations. At this stage, your finance software can act as the single source of truth, connecting multiple data sources to create a complete view of all your operations. This level of autonomy uses real-time analysis and forecasting across all locations to respond to changing customer patterns and suggest intelligent actions to maximize cash flow.

How Can CFOs Drive the Adoption of Autonomous Finance 

Despite their revolutionary nature, the adoption of advanced technologies doesn’t just happen. In the corporate setting especially, the process of adopting new technologies such as autonomous finance involves a lot of stakeholders, which can slow down the entire process. However, CFOs at organizations are in a position to speed up the process when it comes to the adoption of autonomous finance. 

1. Experiment more

Finance teams are responsible for budgeting and overall financial strategy for an organization. This may cause them to shy away from experimenting a lot with tools and software, narrowing the scope of incorporating technologically advanced solutions for the finance function. 

But to achieve end-to-end finance autonomy, organizations need to broaden their scope of experimenting with autonomous technologies. This will allow businesses to realize the ultimate cost effectiveness of investing in autonomous solutions and to become the torch bearers for technological advancements. 

2. Trust technology

While businesses are fully automating their financial processes and workflows with AI/ML-based technologies, they are not utilizing advanced solutions for decision-making efforts. Autonomous solutions are specifically designed to constantly learn and evolve and hence can assist organizations with strategic decision-making tasks as well. 

By realizing the full potential of autonomy in finance, organizations stand a chance to minimize human intervention to a great extent, leaving employees to focus on more critical tasks. 

3. Lead by example

Often, when it comes to technology implementation, CFOs are not using the solutions themselves. For example, the CFO of a company might not actually be using an autonomous account reconciliation software; the users would be the accounting team. This ends up limiting CFOs knowledge regarding the applications of the technology. However, CFOs especially need to be forerunners and display their technical knowledge regarding autonomous finance to inspire employees so that they can embrace technological advancements. 

What are the Benefits of Autonomous Finance?

Now that we’ve understood what autonomous finance is, let’s see how the technology drives value for finance and accounting teams. 

Here’s are the major benefits of autonomous finance:

1. Improved customer and vendor experience: Autonomous finance solutions like accounts receivable (AR) and treasury take customer and vendor behavior into consideration and tailor services accordingly. AR and treasury’s features like dispute management and accurate cash inflow and outflow forecasting impact both customers and vendors positively. The system based on AI/ML technologies is constantly learning and improving services to cater to specific needs of end users. 

2. Enhanced efficiency: Probably one of the major improvements with the implementation of autonomous technologies is increased efficiency. Take anomaly management for example, with features like anomaly detection, the system can easily identify anomalies in general ledger (GL) and help automate about 70% of the anomaly close process. The end result of such processes is enhanced efficiency and quick month end close process. 

3. Accurate Cash Forecasting: Autonomous finance software can provide accurate cash forecasting and risk management capabilities; helping CFOs and treasurers to optimize cash positions and reduce 90% forecasting errors.

4. Increased productivity: Autonomous finance solutions automate workflows, processes, and decision-making for a lot of accounting functions, resulting in enhanced productivity. For example, autonomous account reconciliation software provides features that can help organizations achieve 50% improved reconciliation productivity. 

5. Improved Compliance and Auditability: Autonomous Finance software ensures compliance with accounting standards and regulations, reducing the risk of errors and penalties. For instance, autonomous financial close management software offers solutions like maker checker flows and close checklists that allow organizations to segregate responsibilities and have audit trails to always be audit ready and enhance financial transparency. 

6. Better resource allocation: Since organizations can automate the majority of the processes and workflows using autonomous finance solutions, they can allocate human resources towards tasks that are more critical and require attention. 

Key Components of Autonomous Finance

The value that autonomous finance provides in the accounting and finance industry certainly cannot be underestimated. The technology actually is made up of a number of components that allow it to be transformative for businesses. 

Let’s understand the key components of autonomous finance: 

1. Data and analytics

Data and analytics are basically the backbone of strategic decision-making, predictive analysis, and process automation in the finance industry. 

Traditionally, the finance and accounting industry has been known to struggle with large data volumes, making financial strategizing even more difficult. Moreover, data and analytics technology use has existed in silos for different teams, which means that finance teams don’t get a holistic view of all the data that is being consolidated. 

Autonomous technology, however, has the ability to deal with these problems. Financial autonomy allows businesses to manage workflows seamlessly and offers a holistic view of every input, thereby enabling them to make better decisions. 

2. Blockchain

Blockchain is essentially the next step for CFOs to achieve end-to-end financial autonomy. The technology has immense potential to enhance transparency, streamline processes by removing intermediaries, and increase security when it comes to financial transactions and data. 

With the implementation of blockchain technology, companies can further improve financial reporting as the technology provides a single source of truth for all the financial data. A key element of this technology is a ‘disrupted ledger’, which allows for more transparency and immutability when it comes to recording transactions. 

The unprecedented nature of the business industry especially makes the use of blockchain technology all the more important. Businesses can assess their financial position and dynamically make decisions as their current and future needs change. 

3. Artificial intelligence

AI is one of the key fundamentals driving the growth of autonomous finance. We’re already seeing AI penetration in processes like R2R and O2C, where AI is being used to automate workflows, improve productivity, and increase efficiency. 

The next step in terms of utilizing AI’s full potential is for CFOs to increase trust and reliance on the technology for decision-making as well. AI as a technology is continuously growing and adapting to the needs of the users and has the ability to drive strategic decision-making with minimal human intervention. 

4. Cloud

The scope of cloud technology in the finance and accounting industry is immense. It can help companies stop relying on legacy systems by offering a scalable and flexible infrastructure to store and process large volumes of financial data. 

While the adoption of cloud computing has increased over the years, the finance sector is still not embracing the technology as much as it should. Companies are reluctant to get rid of on-premise systems and equipment due to their sunk cost.

The move to complete cloud infrastructure can be easily preceded by a combination of on-cloud and on-premise solutions to ease the transition. Doing so will let companies take a step forward towards an autonomous financial model. 

5. Digital talent

With the incorporation of technologically advanced solutions, organizations also need the right talent that is able to effectively implement the solutions. 

As these technologies are still constantly evolving, it’s difficult to find the right digital talent. However, CFOs can take a few steps so that people and technology are able to work side by side and complement each other. 

One solution is to introduce programs to train finance team members on how to get the best out of autonomous finance solutions. Leaders can further redefine employee evaluation programs to incorporate incentives that could drive employees to embrace financial autonomy. 

How HighRadius Can Help You Achieve Financial Autonomy

HighRadius is a recognized leader when it comes to offering autonomous finance solutions for the office of CFO. We have helped organizations achieve a 30% boost in productivity, 20% working capital optimization, and $100K+ savings in hard costs. Our solutions are designed to cater to the customers’ needs and provide innovative solutions to drive financial autonomy. 

1. Order-to-Cash: HighRadius’ O2C suite offers AI analysis and recommendations for data-driven decisions, integrated workflows for unifying AR teams, and automation of routine tasks to focus on high-value activities. With solutions like cash application management, companies get the ability to handle objections 40% faster. 
2. Treasury and risk: With this solution you can view, manage, analyze, report, forecast, and get complete control over your cash without the guesswork, hassle, and complexity. The suite offers you features like cash forecasting software that enables organizations to achieve 95% forecast accuracy. 
3. Record-to-Report: The autonomous accounting provides you with granular visibility into your accounting process to take full control all the way from transaction recording to financial reporting. With its advanced features like account reconciliation and financial close management, companies can achieve 95% journal entry automation and reduce days to close by 30%.
4. B2B Payment: HighRadius’ B2B payments solution helps you minimize payment processing costs via Interchange Fee Optimizer and Surcharge Management and reduce buyer friction & maximize sales by accepting multiple payment methods across different currencies & geographies. With these features, users can reduce 20% interchange fee, improve working capital, and achieve 100% global PCI compliance.
5. Accounts Payable: HighRadius’s AP solution offers you AI-based invoice processing platform with automated invoice validations, matching, approvals & ERP posting. It allows you to easily optimize invoice processing cost, improve statutory compliance, control fraud and achieve DPO targets.

FAQs

1. What is financial autonomy in business?

Financial autonomy in business refers to the use of technologically advanced solutions like AI, ML, blockchain, cloud, etc., to automate financial tasks. The incorporation of these technologies in financial processes further drives predictive analytics and strategic decision-making. 

2. What technologies for autonomous finance will transform the function?

There are a lot of technologies driving the transformation of the finance function, including blockchain, artificial intelligence, cloud computing, and data analytics. These technologies are not only driving the automation of financial tasks but also reducing human intervention in decision-making. 

3. How is autonomous different from automated?

While automation and autonomous are used interchangeably, they differ greatly in their meaning. Automation allows users to automate repetitive tasks. In addition to automating tasks, autonomous solutions drive decision-making and constant evolution as new information comes into light. 

4. How can an autonomous finance function help with economic disruptions?

Autonomous solutions use technologies like AI/ML for predictive analysis, real-time monitoring, budgeting, risk management, and operational efficiency. By employing autonomous technologies for such applications, companies can get a holistic view of how and what they need to change to maintain financial stability.