CFOs have the chance to use automation and artificial intelligence (AI) for the best financial operations as their influence in technological decision-making grows.
AI has brought attention to the condition of financial software today and the evolving role of the CFO. Since CFOs now have more influence over important technological choices than ever before, it is their goal to see their company embrace AI and start using it right away to maximize future performance. According to the CFO, implementing automation and artificial intelligence is crucial to efficiently managing financial operations, spurring expansion, and optimizing value for the company.
Most importantly, AI has the potential to assist CFOs in concentrating on strategic decision-making at a higher level than the routine tasks of recordkeeping, reporting, and transaction management. For the CFO, what does this enlarged focus mean? How are businesses, finance departments, and even outside partners handling its effects? These are worthwhile things to investigate as AI becomes more and more significant in the financial sector.
AI And Financial Technology: A Comprehensive View
It may be helpful to assess AI’s current and future roles in the financial sector before delving into the ways that forward-thinking CFOs are utilizing AI-powered technologies. According to a 2022 McKinsey poll, the use of AI has more than quadrupled since 2017. In 2017, 20% of respondents said they used AI in at least one business sector, while in 2022, 50% said they did so. As a result, investment in AI has grown. In 2022, over 50% of respondents to the McKinsey poll said they will spend more than 5% of their digital budgets on AI, up from 40% in 2017.
By 2028, 50% of businesses would use AI to replace “time-consuming bottom-up forecasting approaches,” according to Gartner, which also predicted that AI will become a “practical, off-the-shelf innovation” during the following five years. Additionally, according to the same Gartner report, 80% of CFOs anticipate raising AI spending in the upcoming two years.
According to a global survey conducted by the World Economic Forum and the University of Cambridge Judge Business School, 85% of financial services providers currently use AI, but over the next two years, 77% expect AI to become indispensable to their operations, and 64% expect to become mass adopters of AI.
According to Insider Intelligence, the total potential cost savings for banks utilizing AI technologies was projected to be $447 billion by 2023. According to a 2021 Emergen Research market estimate, the global market for AI financial services is expected to rise from $8 billion in 2019 to $130 billion by 2027. A 2019 Deloitte Insights analysis stated that the early adopter phase of AI was already coming to an end, despite the fact that many firms have not yet fully embraced the technology. With AI now pervasive and here to stay, it has undoubtedly risen to the top of the list of concerns for astute CFOs. According to a 2023 Trullion study, over 60% of finance executives believe that automation and artificial intelligence (AI) will have a significant impact on their sector over the next ten years—more than cybersecurity, analytics, Big Data, biotech, and renewable energy put together.
The Function Of The CFO In The AI Age
It’s interesting to note that the push to adopt AI and investigate its possibilities coincides with another significant shift impacting corporate leadership: the changing role of the CFO. AI would be firmly planted in the chief information officer’s (CIO) bucket, since the CIO used to make important technology decisions. Nowadays, the C-suite makes a lot of tech decisions. For instance, the chief marketing officer makes decisions on the direction and choice of marketing technology tools, while the CFO, who may be the most practical person in the C-suite, is in charge of the entire technological stack. (The expanding significance of fintech has also led to the emergence of a specialist IT finance function.) As technology spending power moves, the CFO is in a prime position to promote investing in cutting-edge fintech solutions—and to highlight the distinctive opportunities AI offers.
From a day-to-day standpoint, the function of the CFO in the AI era doesn’t appear to be all that different from the role of the database administrator, which evolved with the introduction of the cloud, for example. Instead, AI has sped up the achievement of operational objectives that CFOs have long sought to achieve—becoming more lean and strategic.
By offering a reliable, dependable, and affordable platform that not only creates new organizational efficiencies but can also be shared with outside partners as required, AI-powered technologies assist CFOs in achieving those objectives. For instance, CFOs are able to collaborate with auditors and advisory companies more synchronously in the context of accounting and audit workflows, reducing the stop-start inefficiencies that sometimes impede workflows with external partners. Additionally, when financial teams and outside parties work together, the AI platform effectively provides a common language, which lowers friction overall. Organizations become leaner as a result of these efficiencies, which eventually provide CFOs more time to concentrate on strategic decision-making or use their expanded bandwidth to achieve other value-added goals.
According to study from MIT Sloan as recently as 2020, CFOs did not always position themselves at the forefront of AI. However, CFOs now undoubtedly play a crucial leadership role in embracing AI since they are responsible for reviewing, evaluating, and implementing technological solutions within their domain. The CFO is in charge of making sure AI is used in a way that precisely complements the financial and strategic goals of their company.
Comprehending AI
What exactly is artificial intelligence? And why should companies try to comprehend and make use of this contemporary technology? Though it was first proposed by renowned mathematician Alan Turing in 1950, artificial intelligence (AI) is a rapidly developing field of computer science that “teaches” robots to perform tasks that people typically perform. (ChatGPT, a generative AI platform that made news in 2022, is perhaps the example of AI breaking through to the general public.) We concentrate on the three primary technologies at the backbone of AI: computer vision, machine learning, and natural language processing.
Natural language processing allows computers to comprehend, evaluate, and produce language that is similar to that of humans; computer vision allows computers to identify, categorize, and react to images; and machine learning allows computers to learn from data and apply what they have learned. As Turing predicted, computers with these integrated capacities are able to use information for problem solving and decision making in addition to digesting it. Other recently released AI solutions include Claude, an AI assistant from Anthropic that can perform text-processing and conversational tasks; LLaMA, a large language model from Meta that offers a foundational performant model for AI researchers; and Bard, a conversational AI tool from Google that can be prompted to create content.
The routine and “labor-intensive” aspects of data management—defined by the MIT Sloan Management Review as “cleaning, extracting, integrating, cataloging, labeling, and organizing data, and defining and performing the many data-related tasks that often lead to frustration among both data scientists and employees without ‘data’ in their titles”—can be processed by AI and automation in any industry. According to the Trullion survey, finance professionals ranked automating data entry and financial reporting as their top priority. AI promises to have a particularly significant impact on workflows in the realm of CFOs because of its capacity to mine, organize, and evaluate large data volumes.
AI In The World Of CFOs
Among its various capabilities, AI excels at three tasks that are especially pertinent to finance, which is why CFOs are predicting a bright future with AI.
combining and centralizing a wide range of data kinds. AI can extract and understand data from unstructured sources like contracts, emails, and financial reports, as well as upload structured data from all papers produced by departments within the company. As a result, precise data may be swiftly and effectively extracted and tagged from any kind of file, which is increasingly crucial in the era of digital data explosion.
In addition, using AI guarantees that every transaction is backed by a complete audit trail, ensuring that outputs are consistently audit-ready. As Bank of England executive Mark Carney once observed, it would be impossible to keep up with the deluge of data that is continuously flowing into the bank without AI, as that would be equivalent to “each supervisor reading the complete works of Shakespeare twice a week, every week of the year.”
achieving high accuracy in automating repeated activities. Half of the Trullion survey participants believe that financial tools’ primary function is to cut down on the amount of time spent on manual labor. Data input, bookkeeping, financial reporting, audits, forecasting, and tax compliance are just a few of the typical yet crucial accounting tasks that AI-based systems automate.
Even abnormalities and trends that would point to unusual activity can be found by AI algorithms, which can then flag them for further examination. AI streamlines procedures, minimizes errors and redundant work, and lowers expenses by replacing manual accounting tasks. The growing need for process automation in financial institutions is a major factor behind the 2023 report’s prediction that the global market for AI in fintech would reach $9.8 billion in 2023 and grow to $30.6 billion by 2028.
Real-time collection, analysis, and interpretation of financial data. More rapidly and accurately than ever before, accountants can now evaluate large volumes of financial data with the aid of AI data analytics tools. CFOs won’t have to wait days for important answers thanks to improved access to timely, accurate, and up-to-date information. AI changes the game by giving CFOs the kind of meaningful insights they need to make informed, data-driven decisions and make them quickly. A 2022 global survey from Workday highlighted the significance of that development, finding that accessing “clear information that they can act on quickly…continues to be a struggle” for finance leaders; 64% of respondents said it took weeks to see results at the end of reporting periods, while only 31% considered themselves “confident in their teams’ ability to model multiple scenarios.”
Generative AI is another AI technology that has recently become widely used. Generative AI can produce original content, including “concise and coherent” text, audio, and video images, as well as “adding contextual awareness and human-like decision-making to enterprise and finance workflows,” according to a recent Deloitte report. Given how intelligent generative AI is at synthesizing financial data and providing real-time answers to questions, it is easy to see how well it can meet the needs and goals of any CFO. In fact, according to a recent study of senior AI professionals conducted by Dataiku and Databricks, over 60% of them intend to employ generative AI within the next year, and 45% are “working actively” on use cases for the technology. This “global widespread use of technology not even a year old” appears to the researchers to be “nothing short of amazing.”
Using AI
Though AI has a big impact on every position in the finance organizational chart, CFOs may rely on it to optimize high-stakes data analysis and for financial and operational advice. AI technology is no longer viewed as being too costly or dangerous to use because to ongoing advancements and growing competition. CFOs who are well-versed in the tangible benefits of AI should be pushing their teams to use the technology throughout the company, even if it means helping staff members get over their fears and uncertainties.
Practically speaking, that entails identifying the most promising areas for automation without necessarily starting with a high return on investment (ROI). Since they can pave the way for future high-ROI use cases, it becomes sense to start by automating areas that will yield a small return on investment. For instance, investing early on in the extraction of important data from contracts, invoices, leases, documents, systems, and databases makes sense. One of AI’s major strengths is its ability to bring together high-level data like never before and link it to accounting operations. As over 40% of the Trullion survey participants pointed out, it’s critical to guarantee a seamless interaction with current platforms in the finance technology stack as the automation introduction process moves forward.
Successful AI implementation goes beyond the company when CFOs choose to highlight the technology’s advantages to their consulting and auditing firms. Why would financial executives push for the use of third-party AI technologies by advisers and auditors? For starters, most CFOs could quickly come up with more valuable uses for the extensive financial data that auditors have gathered. CFOs have another chance to extract strategic insights from their data using the information gathered during annual audits.
According to 60% of Trullion survey participants, many professionals are prepared to adopt this technology. They said they would use the time that AI and automation freed up for planning and creating high-level insights, as seen in Figure 2. Nevertheless, CFOs should anticipate facing obstacles during the AI adoption process, such as the requirement to cultivate company-wide support and select the most suitable implementation partners. However, there are a lot of potential benefits, including increased operational efficiency, improved compliance, and substantial competitive advantages. Additionally, the most likely CFOs to take advantage of fresh growth prospects and maintain their competitive edge are those who work with creative cross-functional teams and monitor new developments in technology.
The Human Aspect
The very human ambiguity around this new frontier is turning out to be one of the more complicated difficulties that CFOs may face when implementing AI. The word “AI” alone occasionally seems to be able to elicit cultural opposition among employees, as some question whether this technology is truly wiser than they are. Will it affect the stability of my employment in the long run? Thankfully, this response appears to be waning as many workers grow more accustomed to and less fearful of AI technology.
At its most basic level, artificial intelligence (AI) frees accounting professionals from laborious manual operations, such as daily clerical work that grows more and more tiresome. (The Trullion survey revealed that 95% of finance professionals work with Excel spreadsheets for at least an hour every day, and 61% of them do so for more than four hours; among controllers, that number rises to 70%.) By taking over this work, AI frees up accountants’ time to focus on more strategic and creative tasks. CFOs must assist workers realize that their employment will only grow more exciting rather than disappear. Furthermore, generative AI technology seems to have the potential to generate new employment opportunities.
CFOs are advised by the Brookings Institute to establish company cultures that are predicated on the idea that “humans should not cede significant decision-making to machines.” Instead, professionals should use technology to improve their work and prioritize their own tasks.
Even while CFOs are concentrating on artificial intelligence, the fact that traditional accountants are leaving the field in increasing numbers may be a bigger worry right now. A recent wave of inadequate internal control over financial reporting disclosures may be explained by this concerning trend, which has also contributed to the continued scarcity of accounting personnel, according to several industry experts. Indeed, according to over 30% of respondents to the Trullion poll, financial executives today view attracting and keeping top people as their biggest difficulty. By revitalizing the sector and drawing in the best personnel, implementing AI technology could be the solution to closing the gap. (Of course, finding talent in AI technology has become difficult in and of itself.)
Regulatory compliance, another of CFOs’ top priorities, may be significantly impacted by AI. The threshold for compliance is high because of the numerous federal and international regulations that govern accounting. Through the easy and fast extraction of vast volumes of data from the broadest range of sources, the cross-referencing of data and accounting judgments, and the verification and validation of information, artificial intelligence (AI) adds an additional layer of accuracy and insight. It can show that the results are repeatable and assist regulators understand how important conclusions are reached. As a result, finance teams can now produce financial reports and disclosures that are more accurate and trustworthy than ever before thanks to AI technology, and they can be accessed instantly by both finance teams and external stakeholders. CFOs will almost certainly always be required to oversee and steer the process and ensure that it is as thorough and economical as possible. Navigating the particular complexities of regulatory compliance inside any institution requires a human executive.
Could the role of CFO be replaced by AI? Up until recently, the CFO role was immune to automation because to its intricacy. According to scholarly study, C-suite professions are among the top 12% of occupations that generative AI may someday replace or change. Currently, however, Fortune states that AI “isn’t ready to allocate your company’s capital, evaluate your employees, or negotiate contracts with your suppliers and customers.” AI will never “make us feel that we have been heard, been valued, and been judged by something we can understand, meaning another human being,” according to legal expert David Wilkins.But one thing is certain: AI technology and a human CFO work well together. That combination of strengths appears to present the best opportunity for a stable, effective, and productive organization for the foreseeable future.
The Journey Of The CFO
According to the majority of business leaders polled for Workday’s 2022 study, IT is still having trouble “freeing data from silos” to assist better informed decision making, and it’s difficult to remain ahead of evolving business needs without a “timely, clear view” of organizational finances. AI provides workable technological answers to those problems that are already accessible. More sophisticated features, such as those that use generative AI to improve budgeting and financing planning, are more futuristic. CFOs will eventually be able to test out several “what-if” situations, such as “What if we change the head count in a certain department? How would that affect our budget?”
Even though artificial intelligence is currently receiving a lot of attention and excitement, CFOs should really be planning for adoption five, ten, or twenty years from now. Companies are positioning themselves for success in the future by selecting advanced AI-enabled products as predictors of things to come. Similar to how they planned to succeed in a cloud-based world years ago, businesses are getting ready to succeed in a new AI-powered world, and they’re gaining a significant competitive edge in the process.
One of the most potent new technologies we’ve ever seen is artificial intelligence. While it isn’t a panacea that can transform a company in a single stroke, it does have the amazing capacity to bring about change through successive small victories. It has led us to the brink of a fundamental shift that is expected to have a greater impact than any recent technology innovation, including the cloud. CFOs who adopt AI now will undoubtedly be well-prepared for the future; those that do not will inevitably fall behind, as the more astute and resolute CFOs will take their place.