The Record to Report (R2R) process was essentially created to collect, process, and analyze financial information to generate insights into how a business is performing. However, as the focus of R2R has largely been on compliance and reporting so far, its true potential for decision-making to augment business has so far been under-utilized. Because of this, the significant costs incurred in R2R become a burden and eat into organizational bottom-line rather than augmenting the business. Accounting experts have consistently worked on innovating the R2R function to reduce reporting time, attain greater accuracy and provide more insightful analytics. This blog will focus on how we can achieve this optimization by leveraging new age technologies such as Robotic Process Automation (RPA) and blockchain.
RPA and blockchain have emerged as leading-edge solutions to improve the efficiency in R2R. In a survey conducted by Deloitte, 52.8 percent of finance professionals said that their organizations are planning to leverage automation to increase efficiency with internal controls as the top priority for such efforts.
The most important function of R2R – as organizations become more data and analytics driven – is to reflect true and fair picture of a company’s financials with the highest level of accuracy within optimized timelines. It is essential that more time is spent on analysis rather than on assimilation of data. An optimized R2R function accelerates the analysis process and enables fast decision making based on insights derived from huge piles of data.
Using Blockchain and RPA to Optimize R2R
One approach for effective R2R is to shorten the timelines by automating transactional and repetitive functions. RPA can be effective in case of repetitive processes such as picking up values from various account heads and repositories and preparing journals for accruals of expenses or purchases. An important aspect to look while using RPA is spreading journals throughout the month rather than letting it peak at the close period. The standard accruals entries must be part of the detailed manual. These entries can be passed during the lean period (between the previous close and next open period). One can assess the risks and materiality and arrive at the procedural changes required so that the entries can be spread out.
Blockchain distributed ledgers can be used to reduce time and increase accuracy in reporting. The use of blockchain across customers and vendors can enhance the level of controls and auto-balance schedules every hour. This would require a high degree of collaboration between the customer and the vendor. This would also require collaboration at the business and corporate levels with significant investments. A well-implemented blockchain can aid in doing away with core peer-to-peer (P2P) and over-the-counter (OTC) reconciliation function to reduce dependencies and automate the processing function as the ledgers are interconnected.
Benefits of RPA and Blockchain in R2R
By setting up a framework that effectively utilizes blockchain and RPA for R2R, organizations can reduce the cycle time taken to complete processes and reduce the efforts taken for audit exercises, thus resulting in greater business benefits. The faster the results become available, the more time the financial officers and the boards have to analyze it. A frequent reporting of results and margin can help focus on the right areas, whether it is product profitability or working capital management. The inputs derived from R2R will help monitor the budgets and reassign them to the other centers that might be in greater need of resources.
To summarize, we have looked at the benefits of implementing blockchain and RPA for R2R function. Through RPA and blockchain, routine and repetitive activities can be optimized, hence freeing up substantial time and efforts that could be directed on more strategic areas. Organizations can also drive auto reconciliations across intra and inter business units by enabling blockchain and focus on the critical areas of financial planning and analysis.
We would love to hear your views on how you have leveraged technology in your R2R journey.