Like many job roles and departments, the finance function is likely to undergo major transformation in the coming years due to automation and the use of artificial intelligence (AI) technologies.

CFOs and FDs need to understand and keep up to date with developments in automation, data analytics and other AI technology in order to ensure that their businesses do not get left behind by competitors.

Whilst AI and automation are huge topics in their own right, in this blog I look at the key areas that business leaders and finance leaders need to consider when looking at these innovative technologies.

With so much terminology, let’s start with some key information on the different terminology and technologies out there.

What is the difference between artificial intelligence and automation?

There are distinct differences between AI and automation that many people still don’t fundamentally understand.

Automation will execute the same task over and over again, without manual effort, intervention or changing the task. Automation is focussed on undertaking repetitive tasks to increase efficiency, reduce time, human error and costs.

AI is focused on technology and algorithms that can learn over time. AI can undertake deep learning, dynamically respond to new information and complete tasks with improved efficiency over time without human intervention. As well as undertaking tasks, AI can help to analyse data, solve problems, undertake complex decision making and create forecasts and predictions.

Some other terms that you may come across are:

Machine learning

Machine learning is a subset of AI and focuses on developing algorithms and models to help machines learn from data, predict behaviours and trends.

Predictive analytics

Predictive analytics uses technology to predict what will happen in a specific time frame based on historical data and patterns.

Generative AI

Whilst less important to a finance function and currently used more in areas like marketing, generative AI learns patterns and structures to generate something similar or new. Used more currently to generate things like content, pictures, art, product designs etc.

Copilot

AI Copilots act like virtual assistants that you can use to ask questions, explore data and discover insights.

The finance function 

The finance function tends to have many routine and repetitive tasks that can easily be automated. Much of this automation already exists in online accounting software and includes areas such as invoice generation, tracking receivables, logging payments, automatically reconciling bank transactions, or automating the capture of data from receipts and invoices.

There are many finance functions that still perform tasks and processes manually. Using automation to perform these tasks and change these processes can significantly increase efficiency by reducing processing times as well as reducing costs and may result in more accurate data. By releasing your finance team from these types of routine tasks, your business will not only help to save time, but you’ll also be able to employ their time and knowledge in other more business critical areas.

The use of AI can further increase efficiency by providing a more in-depth analysis of a business’s finances, which in turn can be used in areas such as improving working capital management, predicting customer debts and the order-to-cash cycle. AI can also help to identify opportunities for the business through its use in forecasting, planning and customer behaviour modelling.

The CFO/FD

The role of finance leaders in today’s companies are forever developing around providing future insights, increasing risk management, improving efficiencies and leveraging technology.

It is the role of the modern CFO to utilise financial data to drive growth, report to key stakeholders, detect risks, forecast future trends and drive digital transformation in the finance function as part of overall business strategy.

Implementing AI and automation can help CFOs in the following areas:

Financial planning and analysis

Financial Planning and Analysis (FP&A) is a critical function for CFOs and their teams who are responsible for budgeting, forecasting, and strategic decision-making. Traditional planning primarily looked at the past to provide insights into the future; However, as AI develops, CFOs will be able to deliver deeper insights and more predictive analytics in areas such as market trends, customer habits and financial projections.

Future business growth & scenario planning

Part of the CFO role is often to also look at the financial viability of future opportunities for growth. AI is able to identify patterns by processing vast amounts of data, provide increased data visualisation, more accurate forecasting, detailed reporting and AI scenario planning.

Increase productivity and efficiency

CFOs will have responsibility to help the business increase productivity and efficiency. Automation can enable this by automating routine tasks, reducing errors and streamlining or replacing out-dated processes. Using technology to automate repetitive and time-consuming tasks allows for faster completion of deliverables.

Fraud detection & risk management

AI can be a valuable tool to analyse internal financial control points and detect fraud in a company. AI and machine learning are able to identify fraudulent activities in large datasets by recognising patterns and anomalies quickly.

AI enables companies to better manage risk through enhanced risk identification, improved assessment, mitigation and prediction accuracy. It does this by analysing complex datasets and identifying patterns that human analysis may overlook.

Data driven decisions

AI can quickly and easily make connections between diverse data points and provide finance with access to data trends. Finance can then use these insights to guide decision making when forming strategy and plans.

Beginning and developing your automation and AI journey

If an AI digital transformation is to succeed in any business, it is important that the business as a whole has a clear AI strategy in place which aligns across all departments.

Initially, focus your automation & AI journey by listing all the things that the departments repeat regularly and map all your key processes in order to begin to better understand your AI and automation needs. Then look for the right tools to offload or automate some of these tasks and processes.

The next stage may be to move away from the more operational tasks and look at more strategic areas that AI can support. This may be areas around financial planning and reporting, scenario planning, risk management or fraud detection.

AI and automation challenges

Integrating AI and automation into finance teams isn’t an easy journey or transition. The following will be challenges you will have to consider and overcome:

• Lack of understanding or trust in these technologies.
• Data quality, data silo’s and how to integrate systems.
• Skill gaps in the team around programming AI, data analytics, data science, AI technology etc.
• Staff fears for their future roles.
• Overcoming data bias.
• Data security, privacy and transparency.
• Ethical and regulatory concerns.
• Explainability.

Summary

AI and automation are rapidly developing, and this is in turn transforming the way that finance functions operate. Finance teams have a key role to play in terms of adopting new technologies and using AI and automation now and in the future.

AI in finance has the capacity to bring huge benefits to a business including automating and speeding up processes and tasks, improving productivity, reducing human error, risk reduction and providing for easier and more accurate financial forecasting and modelling.

AI can deliver these benefits to both the finance function and the business as a whole, but businesses must remember that AI, in its current form, will not wholly replace human intelligence as it still has its limitations with challenges around bias, a lack of critical thinking and decision-making capabilities of people.

Finance professionals and teams will need to adapt and learn new skills and shift their day to day focus from more mundane, repetitive tasks to more strategic work. Artificial intelligence is helping CFOs and FDs develop those strategic insights and by harnessing real time insights and predictive analytics, finance professionals and their teams will play an even more central role in driving business growth.

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