By Mike Whitmire, CEO and Co-founder, FloQast
Automation technology is snaking its way through the accounting departments of nearly every business. Large institutions with hundreds of accountants, small retail shops that do their own books, and all businesses in between are finding ways to use automation to improve their accounting functions. But one area of business where accounting automation is especially effective is in the buying and selling of capital.
Need for Automation in Capital Markets
Buying and selling financial instruments is a heavily regulated area of our economy, as it should be. The SEC and banks want to ensure buyers and sellers are protected, and investors should be able to rely on the reports and statistics that help them make purchasing decisions. Today, automation technology is vital to support this highly regulated trading environment. Accounting automation (and automation in general) can improve the efficiency of capital markets in some of the following ways.
Connecting Customers
Both primary and secondary capital markets want to find ways to connect buyers with sellers. These markets can use machine learning to analyze the needs of both parties and pre-match investors with the right opportunities.
Onboarding Clients When a new customer joins the marketplace, robotic process automation can walk them through the buying or bidding process and can later track their activity for regulatory compliance.
Sharing Analytics
Businesses looking to raise capital will want to know that their marketplace has a history of successful trades. Marketplaces can use artificial intelligence to organize and analyze data to show users that prior trades have been successful. This can help build trust with new users.
Validating Trades
The marketplace is dynamic, and a capital market needs to have technology that can keep up. Automation technology can ensure all trades are reflected in the marketplace in real time.
Reporting to Regulatory Bodies
Accountants can use automation software to instantaneously generate reports needed for quarterly or annual reports required by regulators.
It’s not only the marketplaces that have a need for better automation technology. Businesses seeking capital and the suppliers of capital (i.e., investors) can also benefit from accounting automation.
Accounting Automation for Businesses Seeking Capital
Businesses can raise capital by issuing bonds or by issuing stock. Whether the business is willing to pay interest for access to capital (in the case of bonds) or trade company ownership for capital (in the case of stock), they can find a use for automation technology.
Forecasting
Choosing how a business wants to raise capital isn’t a simple decision. They’ll need to ask themselves some of the following questions:
· How much capital do we need?
· How quickly do we need cash in hand?
· Are we comfortable diluting stock ownership?
· Is our business attractive to investors? To banks? To venture capital firms?
· What is our growth potential?
· Do we have a history of steady performance?
· What are current interest rates? This is where automated financial forecasting can come in handy. Businesses can build a dynamic forecasting model that shows how their decisions will impact future financial performance. Because these decisions are multifactorial, automation comes in handy. Automation technology can collect and categorize large swaths of data that the forecasting model can use to return its results, allowing the business to review multiple potential scenarios at once to see which outcome best suits them.
Building Reports
Automation technology can quickly and instantaneously sift through the business’s chart of accounts to build the reports needed for their bank or their investors depending on how they’ve chosen to raise capital.
Accounting Automation for Investors
Depending on the market, capital can be supplied by individuals, venture capitalists, angel investors, banks, and other lending agencies. Any type of investor can benefit from automation technology.
Assessing Risk
Not only does risk assessment software collect and analyze data, it can also compare the risk profiles of multiple different investment opportunities so that business leaders can choose sound investments.
Creating Investment Dashboards
Investors often seek investments from more than just one marketplace. By harnessing automation technology, they can build an investment dashboard that summarizes information from multiple capital markets. This will help them see their investment portfolio from a bird’s eye view.
Tracking KPIs
Investors will want to keep close tabs on the performance of individual investments, but they will also want to measure portfolio performance as a whole. They can use AI analytics to see if they are meeting their goals. Artificial intelligence is a cost-effective way to track progress toward key performance indicators (KPIs) so that investors can make adjustments if they’re far off their marks.
Opportunities for Accounting Automation are Nearly Endless
Raising capital and investing in a new business aren’t simple decisions. Each choice you make can have a big impact on you, your investment portfolio, your business, and the business you’re investing in. Using technology to make sense of your finances is a great way for you to be at peace with your decision.
