Over the past 10 years, departments across the organization have leveraged automation to reduce manual workflows and improve efficiencies. At a time when companies utilize the powers of automation in everything from the IT helpdesk to sales tracking to HR, why has accounting been left in the dark?
Too often, accounting solutions are thought of as expense savings, but they have not been a top priority due to bigger expense savings available in other departments. We have found that this is causing a massive amount of working capital not being put to use today.
And that's because the sharing of accounting data between companies is incredibly inefficient—people still are using manual tasks to extract, format, and distribute vital accounting data that is at the heart of all business. And when you slow down access to accounting data, you slow down access to working capital.
What CFOs need to think about is that unlocking accounting data unlocks growth levers by increasing access to working capital. And, when you think about access to working capital there are several levers you can pull, including:
- Billing and collecting faster
- Factoring your invoices
- Getting a business loan
- Securing an asset-based loan (ABL)
- Seeking outside investment
Even though there are all of these ways to gain access to working capital, from accelerating payments from your customers to working with banks and lenders, mid-size businesses often don't have the resources to gather and present the accounting data required to get a business loan. Likewise sending statements and invoice reminders to customers often is a time-consuming process.
All these accounting processes rely on this notion of being able to share accounting data back and forth, not only with trading partners, but with financial institutions, investors, factors, and others. But today’s accounting software is designed to capture the books of a single company, not share the books.
That's the crux of the problem, and today’s accounting systems are not designed to solve this.
Accounting teams manage and report the data that drives decision-making across the business. You must have accurate data and allow for an easy flow of communication with all stakeholders to involved with managing working capital. Examples include:
- Reporting financial statements to a bank to maintain covenants.
- Reporting financial statements to investors for board meetings
- Reporting AR ledger to a factor
- Reporting account balance to a trading partner
Accounting teams need automation to unlock growth levers. They need a solution that can integrate email to accounting software to distribute statements and reports automatically (just like marketing automation). Accounting teams need an online portal that organizes and shares accounting data with trading partners, investors, bankers, and factors.
In addition, accounting teams need their accounting software to use the power of APIs and the Internet to transact with other systems by automatically updating financial information.
Of course, the automation creates efficiency in finance. It even improves employee satisfaction by eliminating menial work. However, the real benefit is increased access to working capital because the barrier caused by isolated accounting data is removed. Because of automation, access to working capital becomes easier.
And that's what makes it strategic.
Matthew Shanahan is co-founder and Chief Strategy Officer at award-winning Lockstep. The pioneer in Connected Accounting, Lockstep develops tools and platforms for fintech developers and accounting teams to automate workflows between the accounting systems that are at the heart of all businesses.
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