Evaluate Your Cloud Game
A confluence of factors is expediting the transition of traditional, or “ground level,” workflows to the Cloud. The result of office closures, and the steady advance of offerings from third-party specialty vendors, are combining to bring a new wave of conversion for typical finance and accounting processes from offices to web-based or “Cloud” service providers. These providers take advantage of ERP integration to execute a replacement for otherwise manual accounts payable invoice entry, vendor payment, budgeting, reporting, customer invoicing, and collections. While these add-on offerings have been part of our enterprise solution set for years, we thought to review them in light of businesses pressing need to create virtual operations, and cut costs. Let’s start by reviewing both short and long-term trends forcing a late majority adoption of these services.
Trends Driving the Virtualization of Office Workflows
Most immediately, businesses are reacting to the need of creating space in the wake of the Coronavirus. Gallup reports that 62% of Americans have worked from home during the crisis (polling found here), and for finance and accounting (F&A) the remote work trend means get it out of the office; move it from your desk, print station, reception area, processing center, internal network, and conference room. Translated into actual or ground level objects the directive becomes move vendor payments, server-based budgets, board presentations, customer and vendor invoices, and customer payments offsite, or into the hands of Cloud-based service providers. Said differently, “virtualize” the organization, or move office workflows to the Cloud. Vendors providing options for these virtual service offerings are riding the coattails of a massive shift from on-premise to Cloud-based ERP, including our offering from Sage Intacct. Leading Cloud ERP vendors, like Intacct, have enforced standards of interoperability built around XML-based messaging, which have encouraged a broadening of marketplace participants due to stable standards in system interface. The need for cost cutting is also driving interest in Cloud services as companies seek to preserve working capital by eliminating manual processes, headcount, and IT infrastructure. While companies seek to address short-term budget gaps, their efforts may lead to long-term changes in staffing, service procurement, and physical officing.
Long-term trends are likely to reinforce the virtualization of F&A operations for a number of reasons. First, companies will be looking to capitalize on recent investments in social distancing, and ensure the least possible touches necessary for the execution of their role. Consider a future where important customer, management, and peer meetings occur face-to-face, but less essential encounters fade. Or, that office space provides little comparative value for F&A’s routine back office work, and for this purpose, is abandoned as the center of business activity. Such operational changes were evident even pre-crisis when considering the decrease in check payments as a percent of total noncash payments (-9% for the period 2012 to 2018 per Federal Reserve Payment Study seen here). Post-crisis, the trend toward other payment types like ACH is likely to accelerate, or for companies that continue to pay by check, will be done through third-party service execution integrated with their ERP system. The flip-side to changes in vendor payments is a like decrease in the receipt of paper-based customer payments; in both instances, exchange is fast becoming electronic, facilitated through ERP, with organizations no longer willing to either make, or receive, payment by check. The process of vendor and customer invoicing is also moving out of our offices, through either electronic capture (Optical Character Recognition, or OCR), or exchange protocols like Electronic Data Interchange (EDI). Simply put, the dispatch and receipt of physical invoices has a limited future, with an automated ERP-based replacement showing clear advantages (see EY’s 2018 “Worldwide Electronic Invoicing Survey” here). Finally, the future of our server-based budgets and board presentations –even those we tout as stored in the Cloud— have become more difficult to manipulate, compare and present when access is separate, and offsite. They’ve become more isolated reference points and subject to control considerations unless integrated, and sourced from a common ERP system.
Value Proposition of Moving Workflows to the Cloud
Given the high likelihood for “move it out of the office” we’ve summarized the replacement of six common office-based workflows to their Cloud service counterparts. For the movement of each “ground level object,” including vendor payment, server-based budget, board presentation, vendor and customer invoice, and customer payment, our considerations is efficiency, or can it be executed through an ERP platform? Also, how is the transaction captured, or confirmation of its execution returned to the ERP? Finally, what value beyond just relief from office-based execution can an organization realize? An analysis of Cloud workflow replacement must also take into consideration that not all integrations are created equal. That F&A departments will accept some inefficiencies in the integration between their ERP system and these service providers, but this won’t be the case forever. For example, while some ERP systems sponsor “preintegrated” options for ACH payment (visualize an option directly accessed, and executed, from the ERP’s own desktop), other Cloud workflow replacements are managed indirectly through external authorizations, and potentially require the administration of multiple sign-ons. Both provide value, but the former is one step closer to the high efficiency realized in Apple’s iOS experience.
Future of Finance and Accounting Back Office
As businesses seek to cut costs, and plan for the new normal of at-home or remote management, the “virtualization of office workflows” is accelerating. A recent review of management trends in the wake of the Coronavirus, and subsequent lockdown, suggest such seismic changes “The problem is that business, as we knew it, cannot be recovered. It will need to be reinvented.” (Sam Walker, WSJ, April 25 2020). While not new to our line-up of enterprise software solutions, we see high conversion and rising service value in these offerings, and look forward to working with you to reinvent finance and accounting for the new era.
Make your business more efficient, and drive performance and growth without adding hardware, software, or staff. Please contact us for further information regarding Cloud ERP/business management software from Sage Intacct. Seth Pomeroy / Seth.Pomeroy@claconnect.com / 630-954-8163.
Improving corporate performance, enabling growth, and meeting overall business strategy using leadership and expertise in financial accounting, reporting, systems, project management, performance metrics, and sales. A 27-year vested interest in customer success.