The Impact of Financial Automation on the Finance Function in 2024-2025

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Impact of Financial Automation

Businesses have always been dependent on the financial side of their organization. The generally accepted way of managing finances started to shift with the advance of automation and digital technologies.

Artificial Intelligence (AI) data analysis and automation of transactions are not a trend but a necessity. Automation of those processes allows companies to focus their attention on other aspects of business and frees up employees’ time.

They can focus on delivering value instead of keeping track of invoices, expense reports, or regulatory norms.

In this post, you will learn the best practices for 2024-2025, pitfalls to avoid, and why financial automation is important in today’s business landscape.

The Current State of Financial Automation

The current state of financial automation is in the early stages of adoption. For example, Canada greatly exceeds Western countries in financial automation. About 35% of Canadian companies currently have more than half of their financial activities automated.

The share of companies adopting automation technologies is steadily climbing, according to a McKinsey Global Survey on the topic.

Most companies believe that they will be able to automate about one-quarter of manual financial work in five years. Every fifth company claims they’ve successfully implemented financial automation in various processes within their organization.

Financial services companies, such as the Nairobi Securities Exchange, have been leading the way in adopting financial automation solutions since 2006.

They first started using them to automate tasks, including reporting and analysis, pricing stocks, and risk management. 

As for Latin America, Brazil has seen strong growth with local vendors offering solutions that meet specific needs within their domestic markets, such as fund administration or overdraft management services, which require extensive customization due to regulations surrounding these activities.

Brazil has also successfully implemented the PIX system for instant payment systems.

Automation of Finance Operations

Automation of Finance Operations

Here are the trends that will dominate in the financial industry in the next few years:

  • AI & Smart contracts. Execution of contracts on a blockchain can take minutes or even seconds. Smart contracts enable you to automatically execute deals on predefined conditions. Today, you can enhance their capabilities even further with AI-powered decision-making and data analysis.
  • Robotic process automation (RPA) to cognitive process automation (CPA) switch. CPA goes beyond the automation of traditional repetitive tasks and brings cognitive abilities on top of things. By switching to CPA, you will be gaining insights that improve financial data interpretation, process optimization, error reduction, and decision-making.
  • Application Programming Interfaces (API) proliferation. APIs allow for seamless collaboration, data sharing, standardization, and service integration. They can streamline the financial process and provide personalized services to clients worldwide. You can think of them as connection bridges between apps.
  • Language learning models (LLMs) in analysis and forecasting. Those types of solutions are used in finance for the interpretation of complex sector-specific data and for generating recommendations. They can also transform raw data into comprehensive reports by verbalizing it in a predefined manner. 

You cannot automate all manual processes. However, it can shift some of the time spent on unnecessary manual labor into more productive activities, such as standardization and internal policy development.

A financial project management system can increase the speed of completing various tasks. For example, by developing a web portal, you can create a single source of truth for different financial tasks such as budgeting or forecasting.

With financial tools, you will be able to tell what needs improvement faster than it causes huge financial losses.

Automation of Finance Workforce

Automation of Finance Workforce

Automation will drastically change the way organizations distribute and manage their financial workforce. Here are several trends responsible for this change:

  • Customer-centric approach. You will make your business more customer-friendly with financial automation. For example, manual form filling is time-consuming and involves higher error risk. Automated financial form filling, on the other hand, is one of the most effective ways you can increase the efficiency of your system and, eventually, customer satisfaction.
  • AI and CPA process optimization. CPA and AI have the potential to reduce data waste in the financial industry. They can identify patterns in customer behavior and detect anomalies that can improve your decision-making. Over 80% of organizations are planning to invest more in AI by 2025.
  • Data-driven decision-making. Capturing and analyzing big data is important for financial organizations. Today, many resources, such as community networks and social media, can help you make a decision and improve customer service.
  • Regulatory compliance. There are many regulatory norms such as PSD2 that a business needs to stay within legal frames. For example, you no longer need third-party consultants or other specialists to understand tax regulations. By installing financial management software, you can ensure that your business stays compliant with tax regulations across various jurisdictions.

Organizations will still need human staff for programming, coordination, and new model development. Employees will have to learn new tech skills to keep up.

Automation of Business Models and Strategies

The first thing to do is to evaluate your current financial business model and related processes. Outline the areas of finance that need improvements and whether automation will help you solve your issues.

Choosing the right tools and software is also critical for successful automation. Look for solutions that fit your budget, can be customized and integrated, and provide analytics. 

After settling on tools, it’s important to set up your workflow and process. You might need to implement staff training for your new financial system. Get your system tested and reviewed for its efficiency. An automated financial system will:

  • Increase oversight of credit risk exposure;
  • Eliminate some of the manual work;
  • Improve risk management;
  • Support real-time financial management;
  • Create new revenue channels. 

Even the best financial models and systems need adjustments and updates. Don’t hesitate to contact experts in financial automation if you want to improve your business system.

By analyzing multiple data sources such as ERP, new financial models with automation can optimize your business, reducing costs and improving performance.

Final Note

Financial automation has become a crossroad for many organizations. With an increased number of businesses willing to automate their financial processes, you won’t be alone walking on that road.

The switching phase can be intimidating at first, but the benefits of financial automation are worth it in the long run. 

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