- June 6, 2020
- Posted by: Editorial Team
- Categories: Blogs, Finance & accounting
Cost Take-Out through Robotic Process Automation
PE firm considering cost take-out has a big opportunity in Robotic Process Automation (RPA). Executives are quite exposed to first generation automation of activities, more commonly referred to as Process Automation. While there may not be much left to take-out with the first generation automation, enterprise-wide robotic process automation open doors for huge costs savings.
Who is a candidate for RPA? Any repetitive task(s), routine that fill up a good portion of people’s activities directly qualify. RPA will do repetitive tasks accurately, efficiently than humans and can run monotonous for days without a break.
Process automation in accounts payable is quite standard these days. These tools have the ability to recognize text, templates and make intelligent routing. They can read scanned images, emails and documents and make routing decisions based on scanned information and availability of processing clerks. In the past decade process automation tools have been at the forefront of transformation Global Business Services aka Shared Services.
Advancements in these tools have helped companies move from IT centric solution to business friendly operations floor managers can run on-demand to suite the load demands. Learn-and-adopt abilities in process automations have also further helped the managers deal with the business logic rather can deal with underlying system or data simplification. Non-standard templates and content
Build knowledge in the system and let RPA work on the task. RPA and general process automation should never been considered as a short-term financial transformation tool, particularly labor cost savings.
Instead, think of transforming core processes first. Short-term mindset leads to replacing human being with technology and results will not stick for long.
Without compromising internal controls and KPIs, processes can be completely transformed, reconnected to get greater. For instance, when a new employee offer letter is accepted, process steps to tie his pay check, allocated office space, computer assets can directly come from a single process thread. Instead, companies often have separate process, manual handoffs between HR, Payroll, IT and reporting manager. When an employee gives his or her notice, last date of employment can propagate to IT for locking the computer, securing the assets, last paycheck and settlement. Here again, companies often have series of manual processes and paper trails.
RPA can help PE companies realize significant cost take-out through consolidating of business activities, and SG&A process improvements. Maintaining process benchmark across the portfolio and cross learning opportunities to reduce operating cost are desirable outcomes.
The real winners have been in regulated areas of business. In insurance, health-care, financial services rigid processes and procedures drive day-to-day business activities. A substantial portion of the workforce directly participates in data entry, scanning, reviewing completed forms, processing transactions. Automating these environments is inexpensive and often returns on investments are quite impressive.
PE companies intending to improve SG&A must consider RPA as a part of the overall transformation strategy. Work with the controllers to get monthly metrics – volume processed per month, core vendors, and invoice templates, processing rules, headcount and time to process every stage of Procure-to-Pay process. Identify cost take-out opportunities in workshop. Transforming core processes often come with surprises. Give room for capturing exceptions and deviations. Prototype revised processes with RPA tools to determine if cost take-out justifies the investment. Integrate Internal Controls and compliance requirements as a part of robotic processing. Automate in process groups (procure-to-pay, order-to-cash, hire-to-retire). As a final step agree on a continuous improvement plan to improve metrics on periodic basis (at a minimum monthly).
Process automation software and tools have been in existence in excess of decades. Non-human robotic process in transaction processing is also fairly mature. With the introduction of Artificial Intelligence embedded, companies will see monumental cost take-out opportunity.
Secrets of Greater ROI in Robotic Process Automation
More often than business wants your IT organizations is keen on broader enterprise-wide process automation. Yes, there are good reasons for this view. Business case in favor of enterprise-wide strategic purchase is driven by IT executive’s desire to shorten delivery at a lower cost – pooling of business requirements with a common theme, volume license, support contract and one-time implementation cost. Such business case makes IT look good. That’s where it stops.
Operationally, ROI on enterprise-wide efforts are much hard to demonstrate. Consistently CFOs, industry experts and even ERP vendors raised doubts on large scale technology implementation for this reason. Cost overruns are quite common in such projects. Specific to RPA projects, since some of the processes provide far less cost savings, broad process improvement efforts seldom deliver great financial value. Focusing on smaller projects where there is greatest reduction in complexities, time savings and more automation gives the best value for the business.
Side note: Many of the author’s peers in consulting world prefer longer-term, enterprise-wide process improvement efforts due to their predisposed thinking. Readers must not get influenced by the biased views. Insist on short-term results and progress towards longer-term value in RPA projects.
Where does one start to find the best RPA candidate? In practice congregation of people (virtual, remote or in open floor) and hub-and-spoke business activities are good candidates for Robot Process Automation. To substantiate the selected process as great candidate consumers of the process (typically someone outside of the process) must be given full opportunity to bring out the practical challenges faced due to process complexities. It is quite easy to get the internal customers passionate, but it takes experience to translate these frustrations to success qualifiers. It starts with asking the right question. For instance, “What does it mean if you were to finish your posting all the entries before 3pm instead of waiting till 6 pm and 7 pm for entries to come?” It is of great value to the process participants if they can finish work at a reasonable time and go home early to spend time with their family. The intangible benefits are important. Selling future state with personal benefits has a far greater chance of long-term success in delivering RPA results.
The combined value of tangible process centric improvements, intangible employee benefits and phased IT implementation is a good recipe for ROI success.
Lessons from Robotic Process Automation
“Excessive automation at Tesla was a mistake. To be precise, my mistake. Humans are underrated,” Elon Musk, Tesla CEO admitted in a recent interview.
In author’s extensive experience transforming companies, four themes have emerged when implementing automation. To address these issues author has explored wide variety of analysis tools before providing an optimal resolution balanced between risk and rewards.
Tools do not replace judgement
New owners are often eager to introduce automation after company takeover. Between planned layoffs and voluntary turnover, the loss of business judgement in daily activities is a leading cause of investment failure. Experienced transformation executes understand the importance of retaining tribal knowledge and will do everything to minimize voluntary turnover. Yet, it is common to see spiraling employee turnover the moment employees hear of automation. Contingency plan to bring in temporary workers, cannot replace decree and wisdom that comes with intuitively understanding the cause-and-effect of an irate customer, delay in vendor delivery or the details of 3-way match at the time of processing an invoice. Executives under pressure must take precaution and not be blindsided with the warning signs.
Internal Controls and Oversight is not a hindsight activity
Automating accounting activities with newer technologies such as ERP have inherent risks. Companies have a history of manual hand-off, shared roles and informal steps that are not in the procedure. For instance, current environment may not have exceptions for purchase limits, corridor discussion may turn into buying decisions or accounts payable may be processing services received by R&D without verifying receipt of delivery. A thorough evaluation of current internal controls and compliance prior to undertaking automation is hyper critical. Often auditors seek proof of board’s evaluation of automation investment, risks and involvement. Further proof of controls testing and formal sign-off by the senior executives are required to demonstrate financial oversight.
Freedom and Constriction must be balanced
Market is inundated with new automation bots and artificial intelligence tools. Vendors are ready to invest in your company to experiment. Temptation to join the bandwagon is quite compelling at the risk of jeopardizing a stable, predictable environment. Freedom to let vendors decide on the possibilities of automation must be curbed. Putting company’s priorities first, it is best executive stay conservative taming automation opportunities.
Rewards for disruption include faster and better results. Faster results lead to new issues and challenges. Foresee challenges and prepare ahead of automation. Automate only those than have a single entry and exit. Disney is handsomely rewarded for the innovation it creates to the patron’s experience from the moment you drive into the parking lot. There is only one entry and exit for the customers. Compare that to local trade fairs that have entrances on all four sides and individual ticketing system for the rides. Automation with business constriction will create wonders for the customers, employees and vendors.
Web integration is the next big opportunity toward total automation
Even in companies with the latest technology inbound sales orders are sometimes disconnected from main ERP or production system. Orders go as far as CRM system and from there a batch data movement or re-entry of order in ERP takes place. Direct web integration to process incoming orders, update customers on the status is a low hanging opportunity in both B2B and B2C space.
Sales teams still employ old school cold-calling mechanisms to set appointments, travel to the prospects location and engage in the selling process. Marketing and sales automation can eliminate a significant portion of the employee’s time. Online marketing has come a long way. Marketing campaigns are smart and has the ability to train itself get in front of the right prospect. Complex sales funnels based on prospects desires and pace are invaluable to business transformation with the ability to provide consistent stream of leads and give more time to close deals.