The Evolution of Finance: From Manual Processes to Automation

Published On : 07/25/2024

By Ewa Bochnak, member of Finance Alliance and CFO Connect . On the way to become a fully qualified member of CIMA

The field of finance has changed massively in the past decades, from the large numbers of manual processes and small free labor to the ground-breaking automation and current highly featured technological industry. The changes of this industry tremendously contribute to higher accuracy, speed, operating cost effectiveness and progressed decision making through automation and AI. As a key of the financial industry, I witness the fastest progress of the innovation of automation and AI.

Initially, a manual nature of the key processes of finance was observed: finance professionals were required to perform a wide range of processes, such as bookkeeping, financial reporting, budgeting, forecasting while being heavily dependent on human intervention. The entire financial team had to carry out numerous data collections and computational processes in order to fulfil their delivery commitments, where a significant amount of time was spent on routine tasks, such as entering debits and credits into ledgers, sketching financial reports, calculating or maintaining budgets and forecasts. As a result, numerous redundant data-sets had to be collected and aggregated, which undermined efficiency of the entire process due to the excessive amount of effort to generate fruits of financial calculation.

It was automation that brought in much-required change to the field of finance. Sophisticated accounting software, Enterprise Resource Planning Systems, and so on began replacing the manually done processes. Such systems could perform the repetitive tasks at very high speed and accuracy, hence reducing the load on the finance professionals’ shoulders. That paradigm shift was accelerated by the development of computerized spreadsheets, followed by cloud computing, and then highly developed financial management applications to put companies in the position of realizing much-needed streamlining and efficiency.

AI has added a new dimension to finance automation by changing the way business is done. From capturing and reconciling financial data, these AI-driven systems can automate it with very negligible errors, freeing much time for accountants. It is predictive analytics that goes very deep into historical data and current market trends, driven by AI algorithms, and comes up with the most accurate financial forecasts, thus allowing businesses to make informed decisions for effective planning. More than this, AI monitors real-time transactions for some peculiar patterns to identify fraud, therefore saving potential financial losses or improper utilization of the business’s assets. AI, in its various forms, relies on blockchain technology to automate contractual agreements through smart contracts, ensuring compliance and thus eliminating manual monitoring.

Benefits of Automation in Finance

There are several benefits of finance automation. Much more time will be available for the finance teams to spend on the strategic activities by automating routine activities. This saves time in addition to lessening the effort taken to perform the operational procedures. The accuracy will be increased by reducing the chances of human error; hence, reliable financial data and reports can be obtained through automation. In return, this will involve less manual effort, hence a reduction in operational costs and better optimization of resources. Deep insights from AI-driven analytics into financial performance enable firms to make more informed and strategic decisions. As a business grows in size, so is the case with the volume of data and transactions, but the automated systems can easily accommodate this increase without an equal increase in workload.

Challenges and Considerations

Though there are obvious advantages, getting along with automation poses its problems. Huge investment is needed in the technology to be used and the training required for automation. Security and privacy of the financial data stored in an automated system are very essential. And most of all, how the company will manage the transition from manual to automated systems without problems from people who resist change needs serious planning. The obstacles can be vanquished only through strategic planning at the corporate level, entailing stringent cybersecurity measures and comprehensive change management strategies.

Future of Automation in Finance

The future is bright for AI in finance. Further trends that are watched out for in the future are further advancements of AI-driven decision support systems, deeper integration with blockchain for secure transactions, and leveraging big data for even more precise financial insight. Only those businesses that are able to adopt technologies in a strategic manner will be better placed to stay ahead of the curve, drive financial health, and innovation. Continued evolution of these technologies is going to further increase their effect on finance and make it an intrinsic part of modern business strategy.

The shift from manual processes to AI-driven automation in finance has been gigantic. AI and advanced technologies have empowered not only the efficiency and accuracy of activities but also businesses to drive and enable strategic and well-informed decisions. As automation evolves further, its role in enabling companies to navigate with better agility and insight the complexities of the financial landscape will only grow. This change should, therefore, be embraced by businesses seeking strong performance and sustained growth in the current economy.

Jessica Weisman-Pitts

Jesse Pitts has been with the Global Banking & Finance Review since 2016, serving in various capacities, including Graphic Designer, Content Publisher, and Editorial Assistant. As the sole graphic designer for the company, Jesse plays a crucial role in shaping the visual identity of Global Banking & Finance Review. Additionally, Jesse manages the publishing of content across multiple platforms, including Global Banking & Finance Review, Asset Digest, Biz Dispatch, Blockchain Tribune, Business Express, Brands Journal, Companies Digest, Economy Standard, Entrepreneur Tribune, Finance Digest, Fintech Herald, Global Islamic Finance Magazine, International Releases, Online World News, Luxury Adviser, Palmbay Herald, Startup Observer, Technology Dispatch, Trading Herald, and Wealth Tribune.