Understanding the ROI of Finance & Accounting Automation

The most successful restaurant companies today understand that technology is a key ingredient to growth and scalability. For many groups, the journey to adopting modern technology started with moving to a cloud-based POS system. Beyond POS, much of the technology innovation has been focused on increasing sales. New solutions such as Third-Party Delivery and ordering apps drive top-line revenue and were critical to helping many restaurants survive the pandemic shutdowns.

But investing in technology just to drive the top line is missing a bigger opportunity. Technology can also help restaurants run more efficiently – both in the four walls of the restaurant, and in the back office. More efficient operations help lower costs, and drive scalability of the business.

Fortunately, there has never been a better time to leverage technology in your restaurants. The pace of tech innovation is only accelerating, and there are more solutions than ever to address the challenges with rising costs and labor shortages. Sadly, finance and accounting often get overlooked when adopting new technologies.

The continued use of outdated technology is contributing to both the staffing challenges and workload pressures. Unfortunately, many accounting teams are still stuck with antiquated software and manual processes, and there isn’t awareness of how much these inefficiencies are costing the business.

With business software now deployed in the cloud, and huge data sets that can be shared between applications almost instantaneously, there is now the ability to automate business processes and significantly reduce manual work in the back-office.

Common Accounting Automation Challenges

A common theme Tablespoon hears nearly every day is the pressure on accounting teams to be able to get more done with fewer resources. When the pandemic hit, many restaurant groups had to downsize their office staff to lower costs, and a lot of those accountants found jobs in other industries. Now, coming out of the pandemic, it’s difficult to find qualified accounting staff who have experience in the industry. Of course, hiring is an industry-wide challenge right now, but being under-staffed in the back office makes it harder to address those challenges.

At the same time, many brands are back in growth mode and are opening new locations, which creates more accounting work. Not having enough back office staff, or staff with the right skills and experience, can start to hinder growth. When P&Ls aren’t produced in a timely manner and are not as accurate as they should be, operators are running blind.

What Does Accounting Automation Mean to Finance and Accounting? Benefits of Automating Accounting and Finance Departments!

The need to do more with less and pressure to reduce costs all the way down the P&L calls for a technology led solution – which is automation. But when we talk about automation, what does that actually mean to finance and accounting?

Keep the Lights On: Simply put, accounting automation reduces the amount of time spent on those manual “keep the lights on” tasks that absolutely must happen to keep the business functioning, like processing accounts payable. Restaurant accounting offers plenty of opportunity for automation – the transaction volumes are high, and the processes tend to be very repetitive.

Speed Up Processes: Automation also provides speed – when accounting workflows are automated, it becomes possible to have real-time visibility into the financial performance of your restaurants, enabling better and more informed decisions. That real-time insight is especially critical when costs are rising rapidly.

Financial Controls: Another important benefit of accounting automation is the added financial controls. By automating an accounting process, software provides additional security and control over that process. It then becomes possible to audit the process, rather than the individual transactions.

Increased Accuracy: Automation also helps bring greater accuracy to accounting information, since the risk of human error is significantly reduced.

Reduce Process Time: By significantly reducing the amount of time required to process day to day accounting entries, and bringing greater accuracy and control, automation can drive a faster financial close. As just one example, instead of starting a bank reconciliation at the end of the period, automation enables daily reconciliation of cash and bank deposits, so the accounting team only must review exceptions. At the end of the period, the bank reconciliation is already done – and there is greater control and visibility over cash since variances are getting flagged as they occur, instead of weeks later.

The ultimate potential for accounting automation is to eliminate the traditional “month end close” and instead have a “continuous close”, where all the transaction entry is fully automated, and software is analyzing transactions in real time to identify irregularities. This is how we get to a true daily P&L, where operators have visibility into store performance daily, or even by shift or daypart. We’re not there yet, but the technology to achieve this exists today.

With accounting automation bringing better controls, greater accuracy, and a faster close, now you’re able to scale much more effectively. As new locations are opened, software handles a lot of the accounting lift. You don’t have to increase headcount in the back office, and this is where you start to really see the return on investment with this technology.

ROI of Accounting Automation

What exactly is that ROI potential? A recent survey by McKinsey found that employees across all functions spend about one third of their time on repetitive tasks.

I can tell you from experience that in restaurant accounting, that number is a lot higher. It is very common to have multiple FTEs that spend all day, every day, doing manual, repetitive entry. This is in part why Business Process Outsourcing has always been attractive in our industry – the opportunity to shift data entry and other manual tasks offshore is one way to manage G&A costs.

Ultimately, automation is going to be able to replace a lot of these functions. But even if you take the McKinsey study at face value, the opportunity to repurpose 13 hours per week per employee represents a substantial opportunity.

Automation is Awesome. However, There are Common Pitfalls To Consider.

So far, automation sounds great, right? Why wouldn’t everyone implement this tomorrow? Unfortunately, it’s not as simple as flipping a switch.

For automation to be effective, the underlying process or workflow must be able to be defined and must also be standardized. As an example, different staff members may be performing the same task in different ways, which is much harder to automate. Defining a standardized process for day-to-day accounting tasks, and then training the staff to implement the standard process, is a great way to ensure that automation will be effective.

Another challenge is the accounting team itself – and this applies equally to an internal accounting department or an outsourced team. Let’s face it, many accountants like predictability and do not embrace change easily. The mentality of “it’s easier for me to input this” is very different than “how can I do this more efficiently”. Some accounting staff may even view automation as a threat and actively resist the changes, though in my experience most people will welcome tools that help them do their jobs better.

Having the right tech stack in place is also critical. If you’re still using on premise accounting software that hasn’t been updated in 10 years, you’re going to find it very difficult (if not impossible) to implement accounting automation. Tech innovation is taking place in the cloud, so your ERP system needs to be cloud-based to seamlessly integrate with your POS and operations systems.

Then there’s the reality that any company trying to scale already has a tremendous amount to do. Trying to figure out where to start on the automation journey can be hard – especially if the team is already struggling to keep up with the day-to-day or doesn’t have the right experience. Unfortunately, it’s all too common for companies to continue incurring the cost and pain of inefficiencies and manual work, because of the perception that introducing changes will take time that no one has.

While there are some challenges, the benefits of automation far outweigh those challenges. With the proper foundation and guidance, companies of any size and at any stage of growth can see the ROI.

By Implementing Accounting Automation, You Can… A Real-World Example

I want to share a real-world example of the benefits that a QSR franchisee received by implementing more automated systems. This franchisee had grown from a handful of locations to more than 30, and their accounting staff was overwhelmed. They had been using small business accounting software that worked just fine when they had a handful of stores but couldn’t handle the growth and complexity of their business. As a result, it was taking longer and longer to get the books closed and the team was getting burned out.

Implementing a cloud-based ERP and introducing more automated workflows helped this franchisee save 55 hours on monthly reporting, reduce accounts payable processing time by 83%, and close the books 50% faster. With all this time savings, they were able to support opening 6 new stores while reducing their back-office staff by half of an FTE. But what I think really stands out is the impact for their controller. By streamlining their financial close she was able to take on additional responsibilities and work on more value-added areas for the business. Even more importantly, she got her weekends back. She’s now able to spend more time with her family, take vacations, and have more balance. And that is a very different kind of ROI that doesn’t necessarily show up on a spreadsheet.

Additional Outcomes To Consider:

Set-up repeatable allocations to allow for more time spent on oversight, analysis, and strategy
Make real-time corrections and eliminate post-period adjustments
Compare allocation methods to drive strategy
Increase transparency with a rock-solid audit trail
Automate purchase order workflows – you can automate 90% of the purchase order process
Streamline payment and billing reconciliation
Automate bank reconciliations for a continuous close

Accounting Automation Technology

It’s important to note that not all automation technology is created equally. There is a lot of marketing hype around this, so I’m going to briefly introduce the different technologies available today and share a few examples of how they apply to accounting automation.

Artificial Intelligence: The first is Artificial Intelligence, or “AI”. By now you’ve probably heard of AI, as this technology is in use in many of the apps and products, we use every day. At a very high level, Artificial Intelligence refers to the ability for computers to apply problem solving and other human cognitive skills. For example, AI powers the speech recognition used by apps like Siri and Alexa.

In accounting, AI can analyze large data sets and look for patterns. One use case is for data mapping – where a human must match one value, like a case of tomatoes, with another value, like a General Ledger account. AI technology can automate a lot of these kinds of mapping processes. Another application that’s exciting for us accounting nerds is the ability for AI to analyze the complete general ledger and look for irregularities. This can help identify human errors such as coding mistakes, and potentially even catch fraud.

Machine Learning: Related to AI is Machine Learning, or ML. Machine learning refers to algorithms that “learn” from a sample set of data to improve the algorithm and complete a task with greater accuracy. ML works together with AI to really supercharge accounting automation.

For example, in Accounts Payable, Artificial Intelligence can analyze an AP Invoice, identify the vendor in the accounting system, and suggest the expense category to use. When the AP clerk reviews that bill and makes any changes – for example, let’s say the AI automation suggested an incorrect expense account – Machine Learning algorithms will track and “learn” from those human-made changes to make the coding recommendations more accurate in the future. But because this technology and the underlying data live in the cloud, the algorithms aren’t learning just from your company. Machine learning can look across an entire brand, or all restaurants within a certain geographical area, to develop very sophisticated data models.

Robotic Process Automation: Another type of automation technology is “Robotic Process Automation”, or RPA. RPA can watch a user a perform a series of tasks, and then perform those same tasks just as if the user were doing them. The key benefit of RPA is the ability to automate repetitive tasks that cross systems which are not integrated.

There are many examples of these workflows in a typical restaurant accounting department, but let’s talk about sales tax. The typical process for filing sales tax involves a series of manual steps where the accountant runs reports from various systems, exports the data to Excel, applies formulas to translate or analyze the data, then logs into a government website to either import a file or manually enter sales information into an online webform. If an RPA bot is programmed to perform these tasks, the user only must review what gets submitted. The key point here is the government website isn’t going to be integrated with your POS or accounting system, and this is where RPA is useful. The software bot is essentially working at a terminal and logging into and out of various systems just like a human would.

Automation-Lite: Finally, there is another category which I call “automation-lite”. This is where the solution involves a combination of software and human intervention. In evaluating any automation solution, it’s important to understand the technology involved, and whether you’re simply outsourcing a function or fully automating it.

Accounting Automation for Scaling Restaurant Companies

No matter what stage of growth you’re in, automation can be deployed today and create significant cost savings and benefits that can help you scale.

And for those of you who are outsourcing your accounting today or considering doing so, ask your outsourcing provider whether they are incorporating automation into their workflows. The same ROI benefits that internal accounting departments can gain by implementing automation also apply to outsource providers. If the outsource provider can automate a lot of their day-to-day work, then they can offer more value-added services to help you grow.

Three Accounting Automation Takeaways

I want to leave you all with some takeaways and recommendations on where you can start.

Standardize Accounting Processes: First, it’s important to standardize as much of your accounting processes as you can. One suggestion is to engage with your accounting team and understand where they are spending the most time or running into bottlenecks. When undertaking any big change like this, I’m a big proponent of trying to find “easy wins”. For example, introducing automation just for one process, like accounts payable, can create immediate benefits and make things easier for the staff.

Select the Right Tech Stack: Second, it’s important to have the right tech stack. There must be collaboration between IT and Finance & Accounting on any big technology decisions to ensure that new systems will integrate and enable automation for accounting.

Engage Outside Help: Finally, engage outside help if necessary. It can be very intimidating to evaluate all the various solutions out there and make informed decisions, especially if your accounting department is stretched thin.

With so much of restaurant accounting involving repetitive tasks and transactions, automation can help transform your organization and lower costs, while enabling you to scale. Regardless of the size of your group, or where you are on your digital transformation journey, there are steps you can take today to put this technology to work and see the results in your company’s performance.