Why AI in Finance Is the Future of Our Industry
Now more than ever, financial teams are expected to set up their businesses for faster business rebounds and ensure the company’s financial stability. This comes from the months and years of struggling through pandemic shutdowns and shaky economic conditions.
As a result, CFOs and their teams are expected to deliver their financial data faster than ever before. But simply hiring additional analysts won’t improve efficiency. That’s why artificial intelligence (AI) in finance is the industry’s future.
In this article, we’ll discuss the need for adopting AI in your financial department and how it can help you, your CFO, and your financial team better deliver strong financial data.
Finance and Machine Learning
The terms ‘machine learning’ and ‘artificial intelligence’ have become buzzwords in recent years. Investors continually invest in AI technology each year—some estimates predict a 23.37% compound annual growth rate for AI software in finance between now and 2025.
Thankfully, we don’t need to know too much about AI and Machine Learning to utilize it. These tools are created with simplicity in mind, helping financial professionals make better decisions.
What Is AI’s Role in Finance?
The primary role of a CFO is to provide strategic data-driven insights so the company can make better decisions. Closing the books and forecasting: These are just the building blocks of the ultimate deliverable—business intelligence, insights, and better decision making.
The primary role of AI and machine learning is to assist the CFO and other financial analysts in achieving the goal of clarity and rich data. The new AI and machine learning tools that are being developed help finance professionals extract relevant insights, from both financial and non-financial data, for fact-based decision-making.
How Is AI Used in Finance?
What are the practical applications of artificial intelligence in finance? The truth is a large portion of finance’s workload can benefit from AI integration and automation. CFOs should look for chances to automate areas that consume valuable resources and slow down financial operations.
The following are seven common use cases for AI in finance.
1. Planning, Budgeting, and Forecasting
CFOs forecast your financials for months and even years into the future. They use details like current cash flow and operational efficiencies to determine your company’s monetary needs. While CFOs can adequately make predictions using this kind of data, AI assists them in ensuring their predictions are based on accurate and reliable information.
2. Financial Reporting
Certain AI software can automatically generate financial reports. This means your finance teams can spend more time analyzing the financial data to make decisions rather than creating the reports themselves.
3. Operational Accounting
Operational accounting is essential to maintaining the day-to-day operations of your business. AI assistance ensures your daily budgets accord with your forecasted annual budget, and alerts you to decisions that would create dissonance.
Tax laws change regularly—if you’re not keeping up with those changes, you may incorrectly file your taxes and be subject to an audit from the IRS. AI assistance helps you monitor the tax laws your business and industry must uphold and automatically withhold the required amounts.
Reconciliation requires a lot of cross-examination to ensure financial records match. While spreadsheets have helped financial analysts streamline reconciliation, AI can automate the entire process. With machine learning and rapid analysis of your documents, your financial data can be reconciled in seconds.
6. Fraud Detection and Prevention
In the off chance your business experiences fraud, AI will alert you. This may include when a third-party attempts to defraud an employee through a phishing scam or other attack. It can also alert you when the company is missing out on regulatory compliance, helping you avoid even unintentional internal fraud.
7. Risk Assessment and Management
There’s always some level of risk when dealing with financials, but it’s the CFO’s job to mitigate and manage that risk. AI technology can assist with risk assessment models, giving CFOs the information they need to measure the risk associated with investments and transactions adequately.
How to Integrate AI and Machine Learning into Your Processes
Accounting software is getting smarter, with many base-level services integrating AI and machine learning capabilities we’ve seen in other programs. As such, it is already performing tasks that previously required human intervention. This is thanks to AI, machine learning, and robotic process automation (RPA).
Using RPA, a company can configure software, or a “robot,” to perform many tasks. RPA scenarios range from generating an automatic response to an email to connecting two systems that hold data to deploying thousands of bots programmed to automate jobs in an ERP system.
What Is the Difference Between RPA and AI?
You might hear “robotic process automation” and think it sounds similar to “artificial intelligence.” While both processes assist you in automating your financials, they have two slightly different approaches to doing so:
- RPA uses structured data to come to a logical conclusion.
- AI uses unstructured data to come up with its logical conclusions.
Since most finance departments have to deal with structured and unstructured data points, using RPA and AI technology is essential for the success of your business.
What Is the Future of the Finance Industry?
Contrary to popular imagination, the finance world of the future will not be operated by a robot army. It will, instead, comprise a team of trusted advisors in the organization utilizing advanced tech.
Artificial intelligence and finance professionals are meant to work side by side to ensure their financials are calculated, organized, and reported correctly. It will accomplish this by:
- Minimizing human error
- Automating manual work related to month-end close processes
- Accelerating previously slow processes
Combine the Power of AI with a Fractional CFO
Want to maximize your efficiency with your finances? Combining top-of-the-line AI technology with the services of a fractional CFO may be just what you need. With the cost and time savings a fractional CFO offers, you can leverage technology to optimize your finances which will ensure financial integrity and sound decision-making for years to come.
Learn more about Ampleo’s outsourced CFO services today.