In today’s industry, the leaders of support functions, like HR and finance, must do more with less—especially now. These leaders are investing in enterprise resource planning (ERP) automation, but often struggle to understand how to leverage their systems.
With full organizational commitment and careful execution of five critical steps, finance and HCM organizations can make the most of ERP automation. This technique creates an “automation engine”, improving their business processes and ultimately optimizing their overall organizational efficiency.
The first step toward automation is to establish a clear goal of minimizing exceptions and maximizing straight-through-processing (STP). An exception is anything that causes work to stall, like stopping to get an approval, more data or to perform additional offline research. Not only do exceptions make automation more difficult to build and maintain, they negatively impact efficiency, quality, timeliness, internal control, overall effectiveness and the ability to scale. An STP goal should start at the leadership level and be formally included in individual goals. At the individual level, it should be determined which person or role directly causes which types of exceptions. Care should be taken to not measure or hold people accountable for exceptions they do not control.
Policy. Policies and internal controls should be reviewed and updated with the overall goal to minimize customer, supplier, approver and segregation-of-duty exceptions. A method to document and track exceptions should be established, preferably within the ERP. Stricter policies enable back-office efficiencies but lessen front-office flexibility; as part of regular policy review, a balance should be struck between the efficiency and control.
Process. Pain points and exceptions should be reviewed at the task level. Determine what the process would need to look like to achieve a one-and-done result. Require each task to not proceed to further stages if it does not have all necessary data and approvals. Process hand-off rules should be defined and configured into the ERP in the form of business rules & workflow.
Performance. Exceptions should be categorized by type and prioritized. A practical way to categorize is by who caused the exception. In accounts payable, type examples could be supplier, buyer, requisitioner, etc. Exceptions should then be tracked and trended. Many ERPs have standard reports that can help with this process, an example being an accounts payable match exceptions report. These performance reports should be used to drive continuous improvement.
Organization. Process breakdowns most commonly happen when end-to-end processes span more than one organization. For example, requisition or purchase-to-pay activities can start in either the supply chain — or any other part of the organization — and end in finance. The biggest process breakdowns typically happen in hand-offs from one organization to the next. Fixing these inter-organizational hand-offs are critical and should be addressed through inter-organization goals that start at the top of the organization and drill-down to individual performance goals. Without an inter-organization process improvement commitment, automation potential is often severely limited.
Talent. Like anything else, you must have people with the right attitude, incentives, talent and skills to implement changes beyond their part of the overall end-to-end process. The more rules and workflow that can be embedded into the system, the less dependence there is on people; talent does remain an undeniably key ingredient in driving automation. In addition to process change, talent is needed to design, implement and operate automation tools such as robotics process automation (RPA). This type of talent can come in the form of employees, contractors or outsourced resources. As part of the foundation, a skills inventory should be conducted, and skills and talent gaps should be noted and addressed.
Data. Incorrect, incomplete, duplicate, non-standard or otherwise flawed master data is the most common type of exception preventing STP and automation. An organized effort to clean and maintain master data is critical to the success of any process optimization or automation initiative.
ERP and enabling technology. At their core, many processes involve inputting, reviewing, moving and approving data. There are essentially four ways to automate these data management activities: systems integration, ERP rules and workflow, enterprise automation software (such as RPA) and desktop automation enablers (such as Microsoft Excel.) ERP rules and workflow can be very powerful and should be fully utilized before implementing RPA. Rules and workflow can be used to send a work product back to its originator if certain predefined criteria or rules are not satisfied. When these rules and workflow do not exist, individuals are often left to send emails and keep an offline follow-up log, which is extremely inefficient and fraught with error. These rules are best developed when a new ERP is being deployed but can be added as part of a continuous improvement plan.
Third-party software automation tools are intended to supplement your systems architecture and infrastructure (i.e., integration, rules & workflow). Using RPA as a band-aid to automate poor systems flow and data management can become too unmanageable. ERP rules and workflow should be designed to operationalize polices and internal controls. With a goal of maximum STP, the configuration of ERP rules and workflow can look much different than a traditional configuration. In general, the following rules and workflow guide will help enable an ERP for maximum automation:
Enterprise automation tools such as RPA supplement ERP rules and workflow automation. They are commonly used to automatically read, validate and input data in PDF form. They also can be used to mimic human activities done outside of the ERP, such as running reports, pulling numbers from those reports, allocating or manipulating those numbers and inputting data into the ERP. A common use case for RPA is taking a supplier invoice in PDF form, then reading, validating and inputting that invoice data in the ERP, eliminating the need for human involvement. Automation initiatives need to be driven by people that understand both processes and automation technology. These resources need to be identified, secured and set up for success by implementing all steps outlined above.
Automation is not a one-time activity, but an ongoing component of an overall continuous improvement program closely linked to performance management (as described above.) Automation percentages should be measured and trended, and exceptions should be measured and broken down by type. Exception types should also be analyzed, and related mitigation plans should be developed and implemented. Formal continuous improvement methodologies, such as Six Sigma, can be helpful in keeping people and processes updated. Solutions that provide daily dashboards (such as the example below) can help keep the focus on the right activities.