System of Automation: Risk Intelligent RPA

Hopefully by now as you have been reading our latest blog series on Trintech’s automation framework, you understand the key tenants of our vision include:

• Leveraging your existing natural system(s) of record which allows you to maximize your ROI on those investments by keeping those systems as the vehicle to create the permanent record of all business activity
• Provide a verifiable and permanent record of all your System of Controls, as defined by your compliance framework
• Utilize a framework for R2R Automation and Risk Intelligent RPA (RI RPA) that enables automation of these tasks using basic programming (Robotic Process Automation, RI RPA or AI)

I’m particularly focused here on the last bullet which is utilizing a framework. Now, for many of us reading that bullet, our eyes went straight to the words such as “Automation”, “RPA”, “Robotic” or even “AI”.  While all of those components are necessary, let’s first divert our attention to the phrase “Risk Intelligent”.

You see, we at Trintech operate under the firm belief that within the finance and accounting process, risk informs everything. Risk drives how much resources you apply to an event or issue. In the same way, risk should be central to how you automate and ensure behavior outcome. To put it simply and within the Record to Report context, use risk as a way to process automation through RI RPA and drive your teams to focus on areas that represent higher risk to the organization when it comes to creating confidence in your financial reports.

This might seem like a fairly basic concept, but you may be surprised at the opportunity that still exists within large global enterprises that approach the problem, called “lack of automation”, with a lens of “how do I get technology to do everything I normally do”.  There are two challenges with that mode of thinking:

1. Striving for 100% automation could translate into introducing risk to your financials you don’t already have if over simplified in approach and,
2. Not understanding that the opportunity RI RPA creates for automation is a chance to rethink what is actually required today and tomorrow versus yesterday to achieve that confidence we spoke of earlier.

How might you see this in action? How do I use RI RPA and attach the nature of risk in a close activity to the action I take (or don’t take) and aim for an enhanced close process?  First, let’s use an example of a reconciliation that is low risk – an account that bears no real impact on our prepared financials when correct (and not materially misstated for all you doubters out there!)

• If we believe the behavior of that account to be fairly static, low in balance as a % of the total balance sheet and generally not an account that bears risk (e.g., cash), then there is no real reason we should touch it
• If you used generalized automation, just RPA, then you would have to set a rule that essentially takes that account, based on conditions that the business had to assume would not materially change, and somehow move it forward either by ‘skipping’ or ‘certifying’
• If instead you said, use RI RPA, then you are first looking at the policy that was set (as noted above) but then dynamically looking at the current disposition of the account to ensure that the account matches the condition the rule was originally created. If it does, then the system can move the automation forward. If it doesn’t, however, then it is reason for someone to review as an exception and run it through its process. As an example, a low risk account which is not expecting to have any activity but the transaction count reveals activity was processed and now an investigation into potential fraud (e.g., kiting, collusion) can ensue.

The point is to utilize automation, namely RI RPA, as a way to focus the team where they should be focused – attaching efforts to quality on those efforts that will increase the integrity and ultimately the confidence in our financials as a reporting organization. One client of ours that took these steps, flipped the process on its head after realizing 93% of the balance sheet accounts, which only accounted for 6% of the balance sheet, was where they tended to spend most of their effort. So, they refocused from applying effort everywhere to actually focusing on the 7% of balance sheet accounts.

The same approach is seen in other key processes within the R2R cycle. Automating the journal approval decision process using RI RPA to identify the organization’s responsibility as the risk of a journal entry increases is core to our capability. We just released additional RI RPA capabilities in Cadency 6.0 where recurring journal entries can now be solely handled in Cadency Journal Entry so you can stop hosting that Excel journal file on your desktop and uploading every month…or dealing with the nuances of ERP recurring entry functions. What about non-sense journals? Those are the journals where we are trying to “clean” the balance or address residual balances like rounding errors…or if we were honest, sometimes just messes due to journal entries processed backwards or wrong (not your shop, right??)  In a non-automated world, they still go through the same process of approval.  We now have an automated control through RI RPA that looks at the journals created in Cadency and says “no” to the journal workflow. We have a client that shut down over 100,000 journals processed monthly that were under $1. Nothing like holding up the close process for a penny journal (you know who you are)! These are the career and game changing stories you expect to hear when bringing automation into the finance and accounting process.

There is also the aspect of creating visibility throughout the close process of the underlying activities. Rather than get visibility by updating spreadsheets, meetings, phone calls, etc., let’s have the system tell the story and automatically update for critical and non-critical activities when the data is already there (or not there). This keeps your humans focused on the value-added activities they really should be driving and our close process more successful.

Again, risk. It needs to be core to the concept of how you bring in automation to your organization. Without it, we can potentially find ourselves with more problems than when we started. Leverage Cadency’s RI RPA to drive your automation, but let risk guide you on how you do that.

Let’s now take a look at Trintech’s Record to Report Automation Framework Pillar 6 – Artificial Intelligence.

Written by: Syril Mathai, VP – Global Partner Engagement at Trintech

Explore the Full 8-Part Series on Trintech’s Record to Report Automation Framework

Part 1 – How a System of Controls Can Move Your Financial Reporting from Flipping a Coin to a Sure Investment
Part 2 – How to Improve Controls, Reduce Risk and Lower Costs with a System of Accounting Intelligence
Part 3 – System of Integration: ERP Connectors
Part 4 – System of Integration: APIs
Part 5 – System of Automation: ERP Bots
Part 7 – Financial Controls AI: Artificial Intelligence

Additional Resources:

• Human Errors Plague Financial Reporting
• Closing Time: Preparing for the Next Virtual Financial Close