According to research by Forrester, inefficient processes cost organizations up to 30% of their annual revenue, and digitalization can save up to 90% on operational expenses. Therefore, almost all companies are heading toward digital transformation. Banks are no exception to this.
One area to touch on during the digitalization journey of banks is the financial statement preparation process. The usage of different templates for financial documents, trial balances, and statements, the repetitive character of tasks, and manual data entry that is prone to errors make this process an ideal candidate for transformation. However, it is easier said than done. In this case article, we will share our thoughts and experience on how we overcame some challenges in IsBank which is one of the largest banks and has more than 1100 branches and 10 million digital customers in Turkey.
The Bank faced the workload stemming from preparing interim period financial statements for their customers with a commercial credit relationship. During this process, bank supervisors were gathering the trial balance and declaration of the customer, standardizing the financial documents, composing the balance sheet, and storing it in a non-digital environment. As creating financial statements by using the trial balance requires specialization, this process was executed by only a small number of people in the Bank. If this information is needed by other departments, officers were sending interim period financial statements via e-mail. As each process was handled manually by employees, these steps were typically taking 30 minutes for each interim period financial statement and there was always a risk of human error. As these processes could not be fulfilled for all customers, only 1,200 interim period financial statements were prepared and stored in the Bank’s database, so these repetitive tasks were consuming 600 valuable hours of employees each year.
In addition to these, if the financial statement is prepared for the fiscal period, they end up spending additional hours on the financial analysis process such as making financial adjustments and preparing financial analysis reports. Even if the balance sheet of fiscal period declarations were digitalized before, some valuable parts of this declaration could not be digitalized yet. A major part of this tedious work was being done by the branch employees who already had little time to spare during their daily routines. These steps are named financial statement adjustments were typically taking 55 minutes for each customer. Given the sheer size of the customers (~13,000 commercial customers), these repetitive tasks were estimated to consume 11,916 valuable hours of employees each year. What is more, these financial documents were not fully digitalized, so the Bank was not able to capitalize on this critical data and information in its other processes.
How did DefineX help?
Given the Bank’s context, we teamed up with Bank and devised an approach that blends Robotic Process Automation (RPA) with some custom development. Repetitive financial actions and RPA logic were deeply analyzed and defined by the experienced R&D Team of the Credit Portfolio Management Division. While Bank’s internal resources implemented a 3rd party RPA solution for automating manual tasks with the logic created by the R&D team, DefineX created a technical solution for the financial analysis application of the Bank.
In the new solution, Bank users have simple tasks that anyone can easily do with minimal business knowledge. They start the process by creating a new financial statement process and uploading the financial documents of the customer to the Bank’s legacy financial analysis application. Afterward, the RPA solution takes it over. It periodically pulls these documents and kicks off the automation process. The automation process needs a set of customers’ financial data such as fiscal period credit limit and risk data, previous fiscal period trial balance data, and the latest interim period financial statement data, which are retrieved from the Bank’s database by APIs.
After the automation process is completed, the data is sent back to the Bank’s database by using APIs. The steps of the automation process differ according to the period of the financial statement created, the types of documents uploaded, and the industry of the customer. For example, if the trial balance and declaration are uploaded to the interim period financial statement, the solution will prepare the balance sheet, standardize the trial balance and send them to the Bank database.
Furthermore, we also created a notification infrastructure for letting the users know the last status after the automation process. In addition to this, an alignment solution has also been developed that transmits stored data to the bank’s other systems, so that all these documents become digitally available for many other processes.
Some data that the solution needs must be retrieved from The Banks Association of Turkey (TBB). In order to get these data, we scheduled a background process that works monthly for the eligible customers gets the financial data from the TBB, and stores them in the Bank database.
With the completion of the project, the financial statement preparation process is completely digitalized and the main objectives of the Bank are successfully delivered (even exceeded). While the financial statement entry, adjustment, and analysis duration were reduced by 98%, 12,290 hours of branch employees were released for use in more valuable tasks. In addition to this, as each bank employee can start the automation process with minimal knowledge, more financial statements were entered into the Bank system. Between the end of October 2021 and the end of October 2022, i.e., within 12 months period, interim period financial statement entry numbers were increased by 4,992%, and 29,456 hours of effort that would have been spent on the old solution is saved.
Secondly, the fiscal period financial statement adjustment operations were fulfilled in detail by the new system and more adjustments were entered into the Bank System. Between the end of January 2022 and the end of October 2022, the fiscal period financial statement adjustment entry numbers increased by 118%, and 25,605 hours of effort spent on the old solution is saved just in 9 months. Thanks to these, many more interim period financial statements are now being entered into the Bank system, and hence, the dimension of data stored is diversified.
As a result, the Bank saved in total 67,351 hours of effort in one year by implementing a new system for financial statement entry and adjustments. This translated into almost 30 Full-Time Equivalent labor savings.
Table 1 – Financial statement process durations of old and new solutions
As of the end of October 2022, the outputs of the project were:
The duration to produce interim period financial statements was decreased from 30 minutes to 0.5 minutes (a decrease of 98%) and the duration to make adjustments for fiscal periods was decreased from 55 minutes to 1 minute (a decrease of 98%).
+60,000 balance sheet constitutions of the interim period financial statement were performed by processing trial balances.
+28,000 adjustment operations of the fiscal period financial statement were performed by processing fiscal term declarations.
The new solution provided a 93% success rate with different trial balances and declarations,
Digitalization is one of the game changers for companies that are used to manually fulfilling a huge operational workload. Despite banks being frontrunners in this long marathon, we managed to deliver promising results. According to our experiences and project outputs, it can be said that digitalization has a significant impact on companies regardless of size and industry. With the solutions we provide and the innovation we bring, we assist our clients in clearing the roadblocks of their digital transformation journey.