By Ajay Adiseshann
Late payments have become a major problem for businesses operating in India, affecting both domestic and foreign customers. According to a recent report by Atradius collection, in 2017, the vast majority of respondents in India (93.7%) reported frequent late payments by their domestic and foreign customers. This year, the number was even higher – with an average of 94.7% of respondents reporting that India has one of the highest frequencies of late payment in the Asia Pacific.
The reason for the same is that the majority of Indian companies still reconcile all payments manually, making it a tedious task for the back office. A task such as tallying receivables, for instance, is a huge pain point among organizations’ back offices. After all, it’s not easy to keep track of orders, returns, various fees & taxes, penalties & cancellations, and also accommodate last-minute policy changes to calculate final payment due.
The back office is the backbone of any company, and while all departments play a pivotal role, the finance and accounting function is crucial, with payment processing being a fundamental part of any organization. However, due to its highly complex nature, optimal management is key to the organization’s success. After all, the impact of late payment is undeniable and does result in major loss of revenue. This is where streamlining and automation can help businesses create a more efficient work environment.
Why do we need back-office automation
In today’s connected world, the business landscape is ultra-competitive. Your competition doesn’t necessarily have to be local, it could be from anywhere across the country or the world. In order to remain competitive in this environment, businesses need to constantly innovate and automate. This includes automating back-office operations, where automation makes a significant difference in the overall improvement in the efficiency of business operations.
Automation helps in improving efficiency, reducing errors, cost containment amongst countless other benefits. According to a survey by Willis Towers Watson, companies in India expect the use of automation in the workplace to increase from the current 14% to 27% in three years, higher than the global and APAC average. As compared to the traditional perception, automation was to replace humans to help and minimise costs, the study noted that more than half the companies believe that automation will augment human performance and create new work, not replace it.
Fintech firms are already providing great benefits in workflow efficiency by eliminating manual processes in the back office and serving up more innovative solutions to age old cash flow and financial supply chain challenges. Integrated payment platforms, for instance, are helping large enterprises and SMEs transition from traditionally slow and costly forms of payments like cash and checks to real-time and efficient digital payments. This allows businesses to automate and seamlessly manage vendor payments, customer payments, invoicing, and cash flow.
Automation in finance and accounting
The finance and accounting sector represents a key area for deploying structural change to offset the high costs of business and gain profitability. Core activities, including accounting, transaction processing, financial information management, tax, cash management and financial controls, as well as mid-level functions, such as general management and control, and strategy and risk, can all be automated and optimized, reducing cots and strengthening controls that enable better utilization of assets and reduce the cost of compliance.
According to a report by Capgemini, embracing intelligent automation to increase revenue and reduce costs, by 2020, the financial sector alone, could add $512 billion to their global revenues, and see a 10-25% increase in cost savings. Driven by analytics and business intelligence, a variety of disruptive technologies have made their mark on the industry, especially in the Fintech sector. Fintech firms are providing unique solutions to improve workflow efficiency. They are improving back office efficiency by integrating existing and future workflows without large investments and streamlining human processes.
Fintech’s use of API-first technologies means there is no need for companies to rewrite or replace legacy systems and architecture. Instead, Fintechs provide interconnectivity between applications and interoperability of data reducing manual or double entry of data by connecting data across spreadsheets, databases and internal or third party systems. Given the substantial advantages innovative technologies offer in this regard, a wide variety of bank processes are subject to disruption or enhancement through the use of financial technology.
Automating back office processes offers organizations a host of benefits including reduced costs, quicker customer response, easier record keeping for compliance purpose, reduction of errors, and also help in overcoming communication challenges with offshore operations.
The way forward
As more and more customers interact with organisations digitally, customer interactions with front line staff are decreasing, bringing the back office to the forefront, forcing it to regulate its processes. Today, the back office represents the largest opportunity for significant improvements in customer experience and cost reduction. Therefore, the market leaders of tomorrow will depend on how they evolve their back office processes to become more intelligent and proactive today.
Ajay Adiseshann is the Founder and CEO of PayMate.