McKinsey recently released a global survey of CFOs that revealed that the biggest obstacles to deriving value from data and technology are organizational, not technical. The most significant obstacles were the finance team's heavy workload and the lack of related capabilities within the team. Technical issues such as inadequate IT infrastructure and poor data quality were cited less frequently.
Leslie Cotton, CFO and chairman of Labor Finders, a national industrial staffing firm based in Palm Beach Gardens, Florida, is a big believer in leveraging automation. “By automating certain processes, we've freed up our staff from a ton of data entry work and allowed them to focus on exception handling because the technology handles most of the work,” Cotton says. But getting finance staff to work smarter, not harder, can't be forced. Finance staff have to trust that software tools and automation will ultimately be on their side by freeing them up from time-consuming, low-value tasks, Cotton says.
In an interview with StrategicCFO360, Cotton detailed how Labor Finders has implemented powerful tools to cut costs — and done so while being mindful of people's natural resistance to change.
How has your team implemented automation to benefit?
Automating certain processes allows your staff to focus on managing exceptions while technology handles most of the work. This leads to significant cost savings as you can process large volumes of transactional data without increasing staff. Additionally, automation improves the efficiency and timeliness of accounting processes, leading to improved data accuracy and ultimately more reliable financial statements.
A great example of process automation is accounts payable. Invoices and expense reports are automatically routed to the appropriate approver based on vendor and amount. If that approver can only approve a certain amount, the invoice is automatically routed to the next level. Accounts payable teams can quickly identify if an invoice is waiting for approval in someone's queue and follow up efficiently, making it easier for them to get the job done. [problem] Paper invoices can get lost or end up buried on a desk.
What challenges have finance departments dealt with as they change processes and procedures to drive automation?
Many people don't like change, and finance staff are no exception. They're comfortable doing things the same way, so naturally they can resist new applications. Sometimes you need to encourage staff to embrace technology and explain how it will ultimately benefit them by streamlining responsibilities. To counter resistance, we try to implement these initiatives one at a time; otherwise, they can get out of hand.
Another challenge is system integration. You have a project to automate payment processing, but the application doesn’t integrate with your accounting software as seamlessly as you would expect. In situations like this, patience and persistence are required.
Finally, oversight must always be considered when implementing new automated processes like paper check signing. Many organizations are moving to payment processes where the bank issues the payments, eliminating the need for physical printing and signing of checks at the business premises. Those with bank signing authority within the organization need to review and approve those payments in a different way, ensuring transparency and accountability with a clear audit trail. This requires planning and collaboration.
The Financial Accounting Standards Board has issued several new standards and updates over the past few years. How has that impacted you and your team?
New accounting standards typically require additional processes and procedures, and someone needs to be responsible. In lean organizations, allocating resources can be a challenge. Depending on the complexity of the standard, training may be informal and quick, or it may require participation in seminars and webinars, taking time away from daily work.
These new accounting standards can also impact the scope and complexity of your external audit. Our auditors have had to spend additional time over the past two years to ensure we are compliant with the latest standards. Of course, increased labor costs will increase audit fees. However, we have found that by communicating with our auditors at the beginning of the year to ensure we are on the same page, we can reduce the amount of additional billable time.
What can help you understand the new accounting standards?
A proactive approach is essential to ensure you are prepared to manage new accounting standards. Understanding the impact of the standard early and communicating effectively with your team can help reduce anxiety.
I've always believed in surrounding yourself with experts. Finance leaders can't be expected to know the ins and outs of every accounting standard. We partner with our audit team, who are available to help as needed throughout the year. It's also in their best interest to ensure we're in agreement so there are no surprises in the end-of-year audit.
How has technology helped your team with compliance?
We've found that software can be a valuable ally. For example, we deployed software that was evaluated by auditors when the ASC 842 lease accounting standard took effect in 2022. Simply enter the lease specifications for each real estate or equipment lease. The software calculates the amortization and lease expense and automatically generates journal entries. Auditors can access the software to review the specifications entered and a PDF for each lease.
Without this software, we would have had to hire another employee to manage the new standards for our 100 real estate leases. With the software in place, we have ensured compliance with the new accounting standards and have significantly streamlined our lease management process, making it more efficient.
