Finance & Accounting Giants Still Face Challenges Despite High Impact of Automation
Due to its administrative and data-driven nature, finance and accounting (F&A) services are already gaining a lot from the advent of automation. Like with many verticals, new innovations are reducing cost, headcount, and effort, while improving information accuracy, compliance, and forecasting capabilities.
Three of the region’s biggest players in F&A services – Genpact, Accenture, and IBM – are leveraging these new innovations alongside the scalability and skills of Latin American workers to generate more business. But, despite these regional and technological benefits, there are still some difficult challenges to overcome, even right at the top of the food chain.
We spoke to the “big three” to get an overview of the sector’s importance in the region, the impact of automation, and the challenges that providers still face at the high end of F&A services.
For all three companies, F&A services are vital, both for the global business and for individual regions. For Genpact, F&A work in Latin America represents approximately 60% of the total workforce; Accenture is the leader in the Latin American F&A market in terms of sheer size and scale, amassing a revenue of over $1 billion dollars in 2015; and for IBM’s BPO arm, F&A is the most important vertical today, both from a revenue standpoint and the size of the business in the region.
The main challenge for Accenture in Latin America, according to Hugo Gomez, Managing Director of Accenture in Mexico City, has been to convince clients of the company’s ability to provide added value services. “Cost is not a problem anymore because of the constant devaluation of Latin American currencies,” he said. “The financial environment is actually helping us to be more competitive for the Unites States.”
IBM concurs: “We see a lot of potential for F&A in the Latin American market because of the poor economies in some countries,” said Thais Marca, IBM Latin America Business Process Services Vice President. “For example, the economic situations in Mexico, Argentina, Peru, and Brazil have provided us ample opportunities to decrease cost and improve processes across all of our BPO offerings in the coming years. Essentially, if we can improve processes and reduce cost more than our competitors, then clients will buy from us.”
Even at this high level of the F&A service industry, there are still hurdles to overcome. IBM has found that convincing banks of the company’s F&A ability comes easier with paper-based areas of the industry, such as mortgages or accounts payable, as the potential to automate these processes is higher. Even so, there are still regional difficulties, particularly concerning the complexity of banking.
“For the banking vertical, there are clear restrictions on regulatory issues,” said Fernando Ramos, IBM Brazil Application Development and Innovation Executive. “Sometimes, client data can’t be held outside the country, or there are issues with accounting procedures. Banks are increasingly being pressured to measure their operational, corrective, and market risks. This balance between finance and risk makes it quite a challenge to do business with them.”
For Genpact, security, complexity, and client demands each come with their own sets of challenges. “From a security standpoint, there is a clear segregation of duties based on roles and responsibilities,” said Cesar Lozano, Vice President – Manufacturing and Services; Hi-Tech and ITMS, Re-Engineering LatAm Vertical Leader at Genpact. “Fraud prevention and error detection are the main reasons for this segregation. The level of complexity can vary base on the scope and activity of the client process. For Latin American processes, the nuances vary by country and depend on the aggressiveness of the goals that we assign senior resources in the accounts. Furthermore, client demands vary and are based on their Key Performance Indicators (KPIs) and Service Level Agreements (SLAs), so we offer subject matter experts to analyse, design, run and transform their business.”
Shift in Client Expectations
Ten years ago, clients that adopted external F&A services just wanted an increase in productivity and a reduction in costs, but today, like many industries, they are searching for businesses partners that can provide deep expertise and added value to generate specific business outcomes.
“In today’s world, customers are expecting double-digit upfront productivity, global business standardization, process improvements, retention knowledge, and a shortening of closing periods,” said Lozano. “Client dependency requires more reduction of complexity, process standardization, automatic and digital solutions, an increase of efficiency, and a strong, long-term strategy and partnership.”
Accenture is successfully leveraging its robotics expertise to automate processes with Latin American customers. “For some companies, the ratio of headcount reduction is 10-1 with the introduction of automation,” said Gomez. “Here in Latin America, we are helping Microsoft with its OneFinance initiative, which is a global finance and procurement transformation program. Our assistance is helping them to achieve a cost reduction of 35%. We are also working with British Petroleum (BP) to reduce their financial operating costs, again by 35%, but this is not only about cost reduction; the CFOs are looking for companies with deep expertise in F&A that can provide end-to-end finance transformation. At the beginning, clients want to know about all the people working for them, but when they start to reap the benefits, they stop asking.”
IBM’s core technology assets play a big part in its approach to F&A. “Cognitive computing is one way to improve F&A processes, reading documents much faster, getting advice on regulations, and analyzing patterns of failure and behavior, etc,” said Ramos. “Cloud can also provide scalability, assisting with the massive calculations that need to be performed at the end of the financial year.”
Legacy Reliance & Security Awareness
While new technologies offer clear benefits, many clients are loyal to legacy F&A systems and are reluctant to be more progressive, so the industry needs to change the way it presents these benefits, dropping archaic slideshows and presentations for a more results-driven approach. Accenture is now showing clients their robotics and analytics tools in action, as well as referring them to CFOs of other clients for testimonials and feedback. “It’s vital that we show clients the Finance and Accounting of the future,” said Gomez.
According to Lozano, Genpact still experiences a high percentage of legacy buyers, contrary to a low amount of progressive buyers where deals don’t have global scope. “In order to take a more progressive approach to F&A, we are identifying the high-impact, low-implementation opportunities for improvement,” said Cesar. “This involves creating a plan with timelines and presenting a final business case.”
Within F&A, companies manipulate financial information and interact with critical information that is covered by non-disclosure agreements, but according to Gomez, security is no longer an issue. “Almost 50% of the information is automatically manipulated, not by human interaction,” he said. “Clients are no longer concerned about security because of contractual arrangements and our reliance on technology. The risk is mutual for them and for us, as our reputation is on the line.”
Ultimately, if clients can adopt a more progressive approach and abandon their legacy way of thinking, finance & accounting will continue down this fast track to becoming one of the most automated services industries in the region.