You crank up your car in the morning, and your phone suggests you take an alternate route to your office. How did it know you were heading to the office? Why is it saying to go a different route than normal? All of this is possible due to advancements in artificial intelligence, or AI.
Encyclopedia Britannica defines AI as “…the ability of a digital computer or computer-controlled robot to perform tasks commonly associated with intelligent beings.” AI’s impact obviously spans far beyond predicting traffic or making suggestions for daily routines. How has AI already affected the business ecosystem? What effects will this emerging technology have on companies moving forward?
AI has the potential to change how businesses manage their finances forever. Below, we have assembled the top three things for CFOs and finance teams to know about artificial intelligence today so that their businesses can thrive in this developing landscape tomorrow.
#1 Successful AI requires front-end evaluations.
AI can position your finance team for innovative success, but it’s important to know exactly how AI would impact your operations before you implement anything new.
Companies are devoting a great deal of time and resources toward AI initiatives, and executives believe that the implementation of AI within their organizations gives them a competitive advantage worthy of the investment. There is also a significant amount of fear potentially missing out—the thought that not investing in AI will leave one behind. While all of this may be true, and the hype and advantages may seem lucrative, it is important to keep in mind that an ineffective application of AI may be more detrimental to your company than inaction.
A common mistake made by CFOs is poor implementation of AI within their organizations. Too often, organizations will focus on the technology itself without taking into account what the business’s needs are. Instead of efficiencies, this commonly results in companies allocating valuable resources toward a new problem caused by poor implementation.
On the other hand, successful implementations often include a thorough planning phase, an identified business need and an implementation plan. It’s important for organizations to fully assess their current processes, needs and the potential impact an AI introduction would have prior to any sort of implementation.
#2 AI is already impacting the way companies handle their finances—whether they know it or not.
While many companies may not yet be implementing AI technologies within their finance operations, chances are that at least one of their vendors is. Larger accounting software companies, such as Intuit (Quickbooks) and Xero, already have embedded artificial intelligence into their products via natural language processing (NLP). NLP is a subspace of artificial intelligence in which a machine can understand and interpret what is being asked in human language. For instance, rather than having to look through a guide to determine how to book a monthly recurring journal entry, users can simply type, “How do I record a transaction that repeats every month?” Utilizing the key words in the sentence, the built-in NLP capabilities can direct a user to those specific instructions.
In addition to NLP, Xero has introduced machine learning into its cloud product. Machine learning is another subspace of AI in which the technology builds a library of knowledge based on an initial dataset. For instance, Xero’s software automatically assigns account codes to a bill being input based on a number of factors, including vendor name, amount and invoice date. A minimum of 150 bills are needed to be entered and coded preliminarily by a human in order for Xero to begin to suggest account codes for subsequent bills entered. As more bills get entered and the suggestions are accepted or corrected, Xero will continue to refine its knowledge base and provide more accurate suggestions going forward.
Even if your company isn’t directly employing any artificial intelligence techniques in-house, depending on your accounting software company, AI could be even closer than you think.
#3 Finance teams are already using AI to increase efficiency and effectiveness in everyday processes, and the possibilities are endless.
When thinking about areas or processes that may benefit from AI, it’s often helpful to think about routines. Inherently, finance is a highly decision-based area, making it a natural fit for AI productivity. Whether it’s reconciling a bank statement, booking an accrual journal entry or performing a three-way match, these tasks are all within the possibility of automation with AI.
With the infusion of artificial intelligence within finance teams, companies are adapting to changes concerning their internal controls, particularly within the review function. As computer coding is being utilized to detect errors and fraud in real time, those responsible for review functions find themselves going over an exception report, rather than through the population. This results in those individuals having additional time to perform higher-value functions and tasks. Revenue forecasting is another area in which companies are utilizing the capabilities of artificial intelligence. Not only are forecasts being generated in real-time, but executives are finding that the machines are accurately predicting future revenues. As actual results are captured, machine learning is applied so that any calculation adjustments can be made and factored into all future predictions.
All routines, both basic and advanced, could conceivably be learned by a machine then replicated. Routine period-end procedures, such as accruals and reconciliations, are likely to be done automatically. More likely than not, aspects of AI will be implemented as monitoring functions as well. With AI, any outliers, whether it be a large amount input or an oddly coded expense, will be flagged in real time as they are entered, and the user will be prompted for confirmation. This immediate detection control will reduce errors by a significant amount and give the reviewer a higher level of confidence upon their review. As far as the potential for the technological aspect of AI for finance teams, the possibilities truly are endless.
Artificial intelligence is being infused into our lives daily. What business needs can you identify at your organization where AI can help? What can you do to position your company on the cutting edge of this technology?
In terms of AI, it’s not a matter of if or a matter of when. It’s here today. On the surface, it may be most recognizable in self-driving cars, online shopping recommendations or facial recognition by social media, but soon it will become common for business operations and finance teams.
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