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HOW TO USE RPA IN FINANCE? USE CASES

Manual data processing, especially that involving numbers, has a higher scope of human error. The process is not just time-consuming but is quite expensive as well. The effective solution to the problem is RPA, robotic process automation in finance. Financial institutions have been using RPA for finance and accounting processes for quite some time now. The technology is evolving quickly and can handle data more efficiently than humans while saving huge costs.

The figure mentioned above clearly shows the effectiveness of implementing RPA in the financial sector. As against manual processes, the automated processes run smoothly.

The effectiveness of RPA in finance can also be gauged by the fact that about 80% of the finance leaders have either implemented or are planning to implement robotic process automation in their business processes, as per Gartner.

Hyper automation will not be the wrong word to describe RPA in finance and accounting as it can perform up to 30 times more work than a human. The technology has evolved from performing simple individual tasks of automation to processing full-fledged automated reports, data analysis, and forecasting while interacting with other technologies.

Along with saving costs on human resources, by handling huge, recurring data-related tasks, the same can be utilized in a better way with a focus on more meaningful outputs. 

RPA Use Cases in Finance

Let us explore some of the RPA use cases in finance that surely will be worth the investment you will make.

PO Processing

Fintech organizations are often heavily involved in cash inflows and outflows. The repeated task of creating purchase orders for different clients and forwarding them, getting the approval is not just monotonous but is prone to mistakes if done manually. 

Processing the same through RPA integrated with AI will not only eliminate the possibility of errors but will smartly capture the data to create P’s. With the automated system in place, an automated approval matrix can be created and forwarded for approvals without human intervention. Simple, effective, quick, and cost-saving are some of the most obvious benefits of RPA in finance for PO processing.

Invoice Processing

The invoice processing tool is a repetitive and tedious task, especially if the invoices are received or generated in varied formats. 

As a customer-centric organization, financial organizations struggle to raise correct invoices in the client-required formats on a timely basis. On top of that, the approval matrix and process may lead to a lot of reworks in terms of correcting the formats and data. Automation can take up the tedious repetitive task while ensuring the correctness and forwarding the invoices to the aligned approving authority in no time.

Overall accounts payables and accounts receivables can be wholly automated with an RPA in the finance industry. The maker and checker process can be almost eliminated as the machine can perform the tasks of matching the invoices with the relevant POs.

Accounts Reconciliation

This is a critical business process that might take up a significant number of business hours for the accountant or team of accountants to ensure the balance comparisons are accurate. Back and forth references and logins required into different systems require the eye of a hawk to ensure no errors were made and the numbers are compared accurately. 

To understand it better, an organization with different functions and sub-companies follows different structures and processes in maintaining its accounts. Bringing all of them into a common format of processing might not be possible based on the business requirements and client needs. However, the central team faces challenges in reconciling the accounts of all the departments/sub-companies. The process is tedious, error-prone, and repetitive. Implementing RPA can bring relief to the central team.

This is the primary benefit of RPA for accounting. RPA bots make the task quick and consistent by auditing and reconciling the data at every step and process with the minimal human intervention of incorporating the basic elements of these tasks. Human intervention is only needed when the data reflects misalignments.

Tax Calculations

Collating data for tax calculations, creating tax basis, preparing reports, etc., when automated and performed with the help of RPA bots reduces repeated task redundancies and inaccuracies that might happen while performing the same manually. Digits and figures are required to be accurate to the decimal places to eliminate mismatches in the reconciliation and data processing. 

Although most businesses run their process through tax processing software, there is still a significant amount of manual work involved. Most of this manual work can be done using RPA bots to reduce time and costs while ensuring better accuracy and adherence to compliance parameters.

Budget Planning & Forecasting

Fetching details with the help of RPA bots from various reports and systems with accuracy will help in creating the variance reports providing various angles to view and analyze data. Based on historical data and current information, comparison and trends can be drawn upon that are the proven successful ways to forecast and plan your business.

Financial Reporting

Keeping a track of business transactions and profit and loss daily help you plan ahead of time and warns you of the issues on time. Being proactive in managing and handling these issues saves you from losses. The changes can be implemented to correct and improvise the existing methods and processes of business.

Banks and financial institutions are required to generate extensive reports that reflect performance, statistics, and trends that involve huge data. The data extracted manually will be tedious and unreliable. However, robotic process automation in finance and accounting facilitates gathering data from different sources and data present in different formats. Collating, reporting, and analyzing this data leads to better forecasting and planning.

Payroll Processing

Payroll processing is one of the most important processes for any business. Timely and accurate processing leads to building a happier workforce that, in turn, leads to the building of a satisfied customer base and a successful business. 

With financial institutions having their presence in multiple locations across the globe, capturing the productivity, attendance, and tax regime as per the geographical location becomes tedious. Collecting such data and performing calculations is prone to errors that might lead to dissatisfied employees. RPA provides you with a breath of fresh air by automating the whole process. Timely and correct calculations lead to happier employees.

Performing the tedious tasks of timesheet validations, deductions calculations, tax calculations, overtime payouts, etc. can be managed by RPA bots with zero errors and delays.

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thefintech.info

WHEN DOES CREATIVE ACCOUNTING BECOME FRAUD?

Creative accounting refers to accounting rules being bent, or questionable accounting judgments being applied in the preparation of financial statements. The term is used as an innuendo for poor accounting behavior in organizations of all sizes.

Shareholders, managers, and wider civil society as a whole are all users of financial statements – they use them to be informed about the activity of an organization. The tax authority would like to see a company’s profit before tax, a labor union would be interested in the total wage cost of the firm compared to the prior year, and potential investors would like to track growth in revenues.

When creative accounting is applied, this can distort the picture shown to users of the accounts and can be considered financial statement fraud. False accounting is actually a criminal offense, as defined in the Theft Act 1968.

Why do people account creatively?

Accountants rarely employ creative accounting for the thrill or enjoyment of exercising power and control over the financial reporting of an institution. It is usually driven by pressure exerted on the accountants by senior management who wish to hit a specific financial target (or to not exceed a previous target by too much margin).

This pressure can be explicit or exerted indirectly on the accounting team, resulting in the accountants looking for any levers within their grasp that they could use to impact a reported result. This might include reassessing the valuation of large, judgemental provisions, or failing to accrue for a cost that has yet to be presented to the organization as an invoice, but which has certainly been incurred. 

When does creative accounting become fraudulent?

Creative accounting becomes fraudulent the moment it has a material impact on the financial statements. Given that creative accounting is used purposefully to impact the result, in practice, creative accounting is virtually always fraudulent. If it had no material effect then why would an accountant bother to employ it in the first place? 

What should you do if you see creative accounting?

The correct thing to do in these cases is to report the fraudulent accounting to your line manager or in some cases the Board of Directors or an independent whistleblowing hotline. You should be afforded some protection as a whistleblower within an organization but this has not been the case in reality. Some companies behave in a hostile manner towards whistleblowers.

 

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thefintech.info

WHAT IS FINANCIAL ACCOUNTING?

If you’re starting a business, you’re probably asking, ” What is financial accounting?” The long story short is, that this is about recording transactions. All your small business debits and credits.

What Exactly is Financial Accounting?

This covers all business operations over a specific time. There are categories detailing the financial transactions involved. Like revenue, expenses, liabilities, and equity. This type of financial accounting aims to corral the numbers. To give a good picture of small businesses’ financial position over a specific period.

There are three statements included in the final report. Financial accounting brings all the necessary information into one place. That makes it more user-friendly and easier to understand. Without this type of financial reporting, SMBs would have a hard time operating.

Types of Financial Accounting

There are several different types of accounting methods involved. Learn more about the accrual method and cash accounting below.

Accrual Accounting

The accrual method is specific. Expenses and revenue are recorded as soon as a transaction occurs. As opposed to cash accounting which notes when payment is made or received. Accrual accounting is more common.

Cash Accounting

The cash method is different. The financial information recorded is more immediate. Revenue and expenses are recorded as they happen. There’s a drawback with this. The cash basis of accounting doesn’t always provide accurate financial results for bigger companies and ones with larger inventories.

The cash basis method is good for sole proprietors.

Main Financial Statements in Financial Accounting

Financial accounting statements have reporting requirements. This type of accounting is the process of seeing how the following financial statements interact.

Income Statement

This shows profitability for a specified period. It’s also called a profit and loss statement. Included are revenue from sales and expenses to arrive at a net income. A big indicator of financial health.

Balance Sheet

A balance sheet is one of the most important financial statements. It’s a summary of the current assets, liabilities, and shareholder’s equity. Public companies include accounts payable and account receivable.

A retained earnings statement is added, along with the stockholder’s equity.

Statement of Retained Earnings

This financial statement is in between the income statement and the balance sheet. It’s another one of the accounting practices focusing on transactions. It reports on any deductions like dividends paid and the net amount left.

Cash Flow Statement

Financial statements dealing with cash flows are big indicators of how well a small business is doing. A statement of cash flow on any balance sheet should be positive. A good cash flow has more money coming in than going out. A negative cash flow on basic financial statements can lead to bankruptcy.

A cash flow statement also looks at how well you generate money. These financial statements use an indirect or direct method to gauge business operations. A cash flow statement complements the income statement and balance sheet.

Why Financial Accounting is so Important

Recording a company’s financial transactions over some time is critical. Financial accounting rules cover several important aspects in the same period. Like stockholders equity.

Here are five reasons why these financial statements matter.

  • They Detect Fraud: These accounting rules weed out fraud. And suspicious activity. Like an income statement full of fake revenues.
  • They Highlight Performance: A company’s annual report accesses its performance in previous years and industry averages. The net income measures sales revenue.
  • They Determine Taxes: The accounting principles involved determine the taxes a small business needs to pay.
  • They Help With Decisions: Any company’s management uses these financial accounting reports to move forward with decisions about loans, expansions, etc.
  • Double-entry accounting: It provides a comprehensive income picture. Management can trust numbers like these since there are at least two accounts. One debit and one credit.

A trial balance detects any errors. Using the accrual basis also helps to see which months are profitable.

They Are Legal

The GAAP ( see below) are accounting standards adopted by the securities and exchange commission. These records can be presented in court.

Financial Accounting Vs. Cost Accounting

There are some differences between these two types.

  • Cost accounting handles cost records. Financial accounting cuts a bigger swath. It handles all of a small businesses’ financial data.
  • The period these get reported is different too. Costs get reported at frequent intervals while a financial report comes at the end of a fiscal year.

Similarities include the fact they both use the double-entry method to record a company’s business transactions.

Financial Accounting Vs. Managerial Accounting

There are similarities and differences between these two methods too. The differences come down to the purpose for each.

  • Financial accounting collects data that gets turned into financial statements.
  • Managerial accounting is internal. It’s used to look at business transactions.

Both of these look at the numbers for a small business. They are similar in that they show how any transaction affects a bottom line.

How Much Does it Cost to Hire a Financial Accountant?

As you might imagine, the cost to hire one of these professionals varies. Location, experience, and the type of work that needs to be done all factor in. According to ZipRecruiter, the national average is $55,045 a year which translates into about $26 per hour.

Deciding on the features you need will affect the cost. Maintaining financial records and tax planning advice are just a few to think about. Managing equity accounts that highlight performance is another.

 

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thefintech.info

HOW TO PAY YOUR UNPLANNED EXPENSES: A GUIDE TO FINANCIAL SURVIVAL

No one ever plans on having an unplanned expense, but they always seem to crop up when we least expect them. Whether it’s a car repair, a medical bill, or a home repair, these expenses can be costly and difficult to pay for.

Here are a few tips on how to pay for your unplanned expenses:

Good 7 Ideas:

  • Sell some of your unwanted belongings: We all have things lying around our house that we don’t use or need. Selling these items can help you raise some extra cash to cover your unplanned expenses.
  • Get a part-time job: If you have some extra time, getting a part-time job can help you cover your unplanned expenses.
  • Ask for financial help from family or friends: If you’re struggling to pay for an unplanned expense, ask your family or friends for financial help. They may be able to lend you the money you need.
  • Create a budget: Creating a budget can help you better understand your finances and where you can cut back to free up some extra cash.
  • Look for discounts and coupons: When you’re buying items to cover your unplanned expenses, look for discounts and coupons to help save money.
  • Apply for a personal loan: If you’re struggling to pay for an unplanned expense, you may be able to apply for a personal loan.
  • Use your credit card: If you have a credit card, you may be able to use it to cover your unplanned expenses. Just be sure to pay off your balance as soon as possible to avoid interest charges.

The best tip is to always be prepared for the unexpected by having an emergency fund. This way, when an unplanned expense does crop up, you’ll have the money you need to cover it without having to worry about how you’re going to pay for it.

Bad 7 Ideas:

  • Borrowing money from a high-interest lender: Borrowing money from a high-interest lender, such as a payday lender, will only make your financial situation worse.
  • Skip paying your other bills: If you’re struggling to pay for an unplanned expense, don’t skip paying your other bills. This will only damage your credit score and make it harder to pay off your debt.
  • Charge your expenses to a credit card: If you’re struggling to pay for an unplanned expense, don’t charge it to a credit card. This will only add to your debt and make it harder to pay off.
  • Take out a title loan: Taking out a title loan is a bad idea as it puts your car at risk of being repossessed.
  • Get a payday loan: Getting a payday loan is a bad idea as it can lead to a cycle of debt
  • Dip into your retirement savings: If you’re struggling to pay for an unplanned expense, don’t dip into your retirement savings. This should be a last resort as it can set you back financially in the long run.
  • Declare bankruptcy: Declaring bankruptcy should be a last resort as it will damage your credit score and make it difficult to get loans in the future.

The worst tip is to try to cover your unplanned expenses with debt. This will only make your financial situation worse and can lead to a cycle of debt. If you’re struggling to pay for an unplanned expense, look into some of the other options on this list before resorting to debt.

Why do unplanned expenses happen?

There are several reasons why unplanned expenses happen.

Sometimes, they’re due to an unexpected event, such as a car accident or a medical emergency. Other times, they’re the result of poor planning on our part.

For example, we may not have saved enough money to cover a major home repair. Whatever the reason, unplanned expenses can be difficult to pay for.

How do people usually struggle with that?

According to a survey by the National Foundation for Credit Counseling, 38% of Americans say they wouldn’t be able to cover a $400 emergency expense with cash or savings. This means that nearly four in ten Americans would have to resort to borrowing money if they faced an unexpected expense.

It’s the problem of too little savings and too much debt that often leads to financial difficulty. If you’re struggling to pay for an unplanned expense, it’s important to take a look at your overall financial situation and plan to get out of debt and start saving.

 

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thefintech.info

HOW THE FINANCIAL TECHNOLOGY SECTOR CAN CORRECT ITS GENDER IMBALANCE

Emulating the failures of the traditional finance and tech sectors, fintechs are missing the opportunity to offer genuine support and accessibility to female professionals.

The statistics paint a bleak picture. In terms of recruitment, just 30% of fintech professionals are women, according to an article by Business Today. However, fintech’s gender imbalance is not an issue rooted in recruitment alone. When looking at foundership, a 2020 report by Deloitte found that female-founded start-ups generate 50% less capital from their funding rounds than their male counterparts.

These statistics highlight fintech’s failures across the board. Wholesale changes to fintech’s recruitment, management, and support systems are required to adequately address the sector’s gender imbalance. Despite this, female figures in the industry are becoming increasingly vocal about how companies can make a difference.

Here are ways in which real improvements can be made:

Avoid recruitment bias

Starting with recruitment, companies need to address the foundations of their talent acquisition process. Companies across the sector are not just failing to hire enough women, but also completely failing to attract female talent.

Recruitment issues begin with how jobs are presented. This includes adopting more inclusive job advertising and working with recruiters to ensure a diverse array of talent is attaining access to the role. Additionally, incorporating a diverse interviewing panel can help to ensure that female talent is assessed as fairly as possible.

Consulting with a diverse panel of interviewers also plays a key role in ensuring that any unconscious biases are combatted. By comparing several unique perspectives, it helps to prevent ‘Mini-me Syndrome’, in which managers or interviewers favor candidates who are as similar as possible to themselves in terms of age, gender, mentality, or sector experience.

Until firms take action to prevent bias and inequality in recruitment processes, women will continue to seek roles in other, more inclusive, industries.

Create a safe workspace

Creating a safe workspace is vital in the retention of female talent. All employees need to feel comfortable, included, and respected irrespective of their gender. Creating a safe workspace involves ensuring all members of the workforce can share their issues or grievances.

With fintech being a predominantly male-dominated sphere, it can often be more difficult for female professionals to speak up about workplace issues. Hosting talks and seminars offering female perspectives can help to ensure all voices are heard and represented. This is important in preventing women from experiencing ‘Imposter Syndrome’ – a psychological condition in which an individual doubts their competence and struggles to recognize their merits. Preventing ‘Imposter Syndrome’ plays a key role in helping women find the confidence to apply for senior roles across the industry.

Promoting female voices and addressing their concerns with genuine brevity, helps to support women throughout the workforce. In turn, this plays a vital role in encouraging women to remain in, and progress through, the fintech landscape.

Promote allyship

To increase the number of female fintech professionals, companies must begin ensuring that a culture of understanding and education is instilled from the top down. This helps to promote an allyship process, in which everyone plays an active role in the inclusion, support, and growth of others, helping to eliminate daily micro-inequalities and aggressions.

Examples of allyship include speaking up when you witness micro-inequalities or aggressions (even if they are not directed at, or directly affect, you), finding the time to share experiences of inequality, and developing a deeper understanding of how they can be avoided going forward, and staging internal workshops to develop a greater understanding of personal needs and identities in the workplace.

Directly conducive to creating a safe workspace, promoting allyship requires holding regressive or exclusionary behavior to account, with the end goal being an environment in which all members of staff are educated and keen to support each other. Removing the elements of toxic masculinity that are prevalent in both the traditional finance and tech sectors will ensure that women feel the allyship of their employers and co-workers going forward.

Visibility

While the majority of fintech’s gender issues require exhaustive change and overhaul, a simple, but hugely important, step that all companies could take is to increase the visibility of their female leaders. By highlighting the tireless work of females across the industry, it provides visible role models for women interested in entering a career in fintech, and those women already in the industry who are striving to become VPs or CEOs.

To consider fintech a realistic career path, women need to see more examples of their gender achieving success across the sector. Championing female fintech leaders and ensuring that they are visible throughout the corporate structure can play a pivotal role in encouraging women to take their first steps into fintech, slowly but surely working away from the gender imbalance.

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thefintech.info

4 STEPS TO FINALLY TAKING CONTROL OF YOUR FINANCES

Key points

  • Taking control of your financial life can give you peace of mind.
  • There are a few simple steps that will help you get control over your finances.
  • These can include making a budget, creating a debt payoff plan, and making smart saving decisions.

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Getting control over your finances can have numerous benefits. You can accomplish important goals, reduce the chances of ending up in credit card debt or deal with your current debt for good, and have the peace of mind of knowing you’re prepared for whatever life brings your way.

But, while there are advantages to effectively managing your money, it can be difficult to know how to make your funds work best for you. The good news is, there are only four steps you need to take to finally take control of your finances for good. Here’s what they are.

  • Take stock of your situation

If you want to take control of your finances once and for all, you need to know what the current state of affairs is when it comes to your money. By looking carefully at what you are spending, how much debt you have, what financial goals you’re working toward, and what you need to do to accomplish them, you can move forward with making a solid plan.

To take stock of your situation, you should:
  • Make a list of all the debts you owe, along with the interest rate and outstanding balance.
  • Track your spending for at least 30 days to see where your money is going.
  • Look carefully at how your spending matches your budget if you have one.
  • Review any financial goals you’ve set and see if you’re on schedule to accomplish them.
  • List your assets, including any savings.

This will give you a big picture view of your current financial life, so you’ll know what changes if any, you need to make.

  • Make a budget

If you don’t already have a budget, making one is crucial to taking control of your finances. By developing a budget you live on, you can ensure you’re prioritizing your goals and spending money on things that add the most value to your life.

Your budget will serve as the foundation for the rest of your financial plan, as you can ensure you’re devoting enough funds to doing important things like repaying debt and preparing for a secure future.

  • Create a debt payoff plan

If you’re in debt, chances are good you’ll want to repay much of what you owe. Paying off certain low-interest debts with long payoff times, such as mortgage loans, often isn’t the best idea. But if you have high-interest debt such as credit cards or payday loans, you’ll want to pay that off ASAP.

To decide what debts to focus on paying off, consider what your return on investment will be. If your interest rate is 3% (like on a mortgage), then your ROI is limited to the saved interest. Since you can earn more than 3% with other investments, the debt shouldn’t be included in your early payoff plan.

For the debts, you do want to pay off, focus on repaying those with higher interest rates first. Pay the minimum on all your outstanding obligations, then send as much extra as you can toward your costliest debts until they’re paid off in full.

  • Maximize the value of your savings

Finally, you’ll want to make sure you’re saving appropriately for the future. This means you should have specific savings goals, including investing for retirement as well as for big purchases such as a house, home maintenance costs, or vacations. You should know how much to invest each month to accomplish each goal on your desired schedule, and should ideally automate contributions to your investment accounts so you can hit your targets on time.

You’ll also want to make sure you have the right accounts for each type of savings, including a high-yield savings account for your emergency fund which needs to be accessible, as well as tax-advantaged retirement accounts.

By taking these four steps, you can take full control of your finances, make sure your money is used wisely, and get on the path toward a more secure future.

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