Nearshore Americas

As AI and ML Become Prevalent, CFOs Embrace Faster Finance Processing

Chief Financial Officers (CFOs) have had a busy pandemic. Charged with keeping their organizations afloat during the ‘black swan’ event of the recent global economic meltdown, they’ve had their backs to the wall battling to keep cash flow healthy while business continuity suffers.

Despite the eventful last 18 months, companies in the Nearshore have – in general – faired better than those in other sectors. Climbing demand for digital products and the desire of traditional companies to offload cost through outsourcing has seen tech companies and BPOs enjoy increased business, with many reporting significant growth.

Now, BPOs with strong digital capabilities in financial planning and analysis, as well as baked-in AI capacities, are in line for a boost in business from CFOs looking for enhanced process optimization, says Stephen Kopp, GBS and BPO advisor to G1000 companies at Kopp Advisors.

Stephen Kopp, GBS and BPO advisor at Kopp Advisors

“Cost reduction has been the play for the last 13 or 14 years when it comes to contracting BPO services. It was a given, a fundamental part of the contract, and it still is today,” said Kopp. 

But a change has come, and the recent helter-skelter financial period has changed CFOs’ main focus. “Now they’re saying, ‘I know you’re going to give me cost savings, but I absolutely want market-based critical service levels, KPIs and enhanced quality of service to our customers and suppliers,” he added.

New Financial Outlook for CFOs

In the aftermath of the pandemic, the optimization of back office activities has become a critical facet of an organization’s future-proofing activities. Driven by CFOs who express the need for ample working capital to face whatever crisis may come, companies are looking to outsourcers with high-end artificial intelligence capabilities to automate balance sheet activities like accounts receivable and accounts payable. 

Workday’s recent CFO Indicator 2021 report found that 60% of CFOs at medium and large global enterprises are investing in the development of financial operations in the cloud and using RPA, AI and machine learning solutions. 

“Frictionless finance—or using automation and machine learning tools to eliminate tedious manual tasks from core finance processes—appears to be the future of how enterprises will evolve to create data-driven strategies to meet the challenges that lie ahead,” the report found. 

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There’s a simple reason or this, Kopp explains. Rather than have cash lingering within the structure of an organization unable to be used, AI and ML is enabling companies to process payments more quickly and put that money to use to help support further growth. In a pandemic, getting cash from customer to bank account is essential.

“On average, 15% of a company’s revenue is caught up in cash applications. By speeding cash to bank by, for example, a month, enormous economic value is created for a company,” said Kopp. “The largest department in finance and accounting is cash applications. But being so manual, it’s ripe for artificial intelligence. When AI is applied, we’re seeing that 15% mark dropping to about 5%,” he added.

Prior to the arrival of AI and ML, cash operations was difficult to simplify. It required lots of manual hours for chasing up clients, resolving potential invoice disagreements, and a myriad of other potential issues that could face a company in putting the money they’re owed to profitable use. Even today, less than 20% of companies consider themselves to be nearing the end of automation of their finance departments, the Workday report found.

“On average, 15% of a company’s revenue is caught up in cash applications” — Stephen Kopp

At the base of most outsourcing relationships is cost, and it’s the same with finance process optimization. The cost requirements of a company to have RPA, AI and ML technologies in-house rather than farm them out to a company that provides these essential services to many other clients, means medium-sized organizations are a particularly suitable clients. This is backed by Workday’s report, which found that medium-sized enterprises were further along in their transformation. 

“These digital technologies require more maintenance than typical software because they’re integral to operations,” Kopp explained.

Clearly, there is plenty of business for well-prepared BPOs to capture in this burgeoning market.

Choosing Technology Wisely

Both organizations seeking BPOs for their back office services, as well as BPOs seeking to provide FP&A services and meet this demand for process optimization, must consider the technologies they employ. Major global technology players including Genpact, Accenture and IBM are leading the way Kopp believes, but the technology is still so nascent companies need to be wary.

“The marketplace is still evolving in digital, so though dominant players will evolve they’re not yet known. If a company not aligned with companies that become dominant players than this can have consequences in the future,” he said. 

Peter Appleby

Peter is the Managing Editor of Nearshore Americas. Hailing from Liverpool, UK, he is now based in Mexico City. He has several years’ experience covering the business and energy markets in Mexico and the greater Latin American region. If you’d like to share any tips or story ideas, please reach out to him here.

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