Since OpenAI’s publication of ChaptGPT in November 2022, artificial intelligence (AI) has gained a lot of attention worldwide. Almost every demographic a statistician can categorize, including individuals and households, businesses and sectors, and even entire nations, were captivated by the appeal of this new AI tool and platform. Indeed, as the Google Trends graph below illustrates, artificial intelligence has been and remains one of the most searched-for topics on Google. But why?
Fundamentally, ChatGPT’s human-like intelligence and adaptability are what ignited this exponential interest in and popularity of AI. The unexpected, if not frightening, potential of this AI platform has sparked a worldwide imagination about the myriad ways AI could disrupt and enhance almost every aspect of life.
The financial operations performed by chief financial officers (CFOs) are one sector of business where AI will continue to disrupt and enhance. In this post, we’ll examine six ways AI will help CFOs deliver even more value to their companies and boost shareholder value by facilitating better decision-making.
Six Ways AI Can Assist CFOs In Making Better Decisions
There are numerous ways AI can assist CFOs and their company in carrying out their responsibilities and finishing tasks more quickly, precisely, and with fewer resources and human intervention. Six high-level ways AI will benefit CFOs both now and in the future are listed below.
1) Reduced Human Error
Numerous CFO-related duties, such as accounting and finance, involve a lot of repetitive work with big data sets. These data sets might come in a variety of formats from various software platforms, like enterprise resource planning (ERP) systems or financial planning and analysis (FP&A) software.
Typically, this calls for a human to export data from numerous systems, import the data into a spreadsheet like Microsoft Excel or Google Sheets, normalize the data, and arrange the reporting as necessary. The exporting of incorrect data, assuming that the data from each ERP system is collected using the same basis, incorrect data normalization, and providing inaccurate summary reporting are just a few examples of the numerous human touch points in this relatively straightforward process that are susceptible to human error. By automating these procedures, AI can minimize or perhaps completely eradicate human error.
2) Improved Data
Business executives, CFOs, and other C-suite professionals frequently have to make critical decisions without having all the information necessary to choose the best course of action. These choices might range from tactical ones, like predicting product demand, to strategic ones, like joining or leaving a certain market or industry. Now think about whether the data used to make these choices isn’t as reliable as the decision-makers think.
According to a global survey of finance professionals and C-suite executives, 70% of them have really “made a significant business decision based on inaccurate financial data.”
When AI is utilized to replace human-performed financial tasks like data entry, collecting, and financial reporting, it becomes simpler to perceive and comprehend how AI may increase the accuracy of financial information. AI is incapable of making careless errors like simple typos in numbers, wrong data ranges, etc. But, as we’ll discuss next, it also eliminates less well-known and valued human faults.
3) Elimination Of Self-interest And Human Bias
AI can eliminate two possible human errors: dishonest reporting and confirmation bias. The utilization of data and information to validate or reinforce an existing opinion or preconceived view is known as confirmation bias. Regardless of what conflicting interests may desire, AI will only interpret the data as it is. Additionally, AI will generate financial reporting summaries based solely on the available financial data. It has no interest in disclosing the financial results in any form, whether they are positive or negative.
However, people could be motivated to report financial data in a way that will best serve their own interests. For instance, businesses can incorporate revenue statistics from months beyond the reporting period if they wish to demonstrate excellent revenue outcomes. If they are discovered, it is simple to blame human mistake for the false reporting.
4) Quicker Financial Disclosure
In the CFO organization, there are a lot of financial reporting requirements. Managing daily, weekly, monthly, quarterly, and annual reporting takes a lot of work and other resources. According to a CFO.com article, for instance, the median time needed to close out and report month-end results for 2,300 firms was 6.4 calendar days, while the top 25% took 4.8 days and the lowest 25% took ten or more calendar days.
This is just one reporting cycle that the CFO organization must plan and supply, and the man-hours needed to finish it are significant. It is evident that there is a chance to utilize AI and machine learning to streamline and shorten the time required to finish any type of financial reporting when you take into account each reporting cycle.
5) Financial Transaction Automation
Professionals in finance and accounting frequently joke that they are constantly in a reporting cycle, and this is usually the case. Reporting, however, is limited to the burdensome tasks that the CFO group must complete. Among other things, the CFO group is in charge of making sure the company’s daily financial operations go without a hitch. This includes making sure that invoices are paid, that there is sufficient cash on hand for accounts payable, that clients are invoiced, and that the debt products’ agreed-upon covenants are being followed.
One clear advantage of utilizing technology and artificial intelligence is the ability to automate these routine, repetitive tasks. It will guarantee that the transactions are finished on time and cut down on the number of man-hours needed to finish or assist the recurring operations. Transactions will be included in the necessary financial reporting when they are finished on schedule. Financial transactions are frequently delayed, and in order to make sure that they are included in the financial reports, manual estimates are required. Like anything done by hand, it is subject to human mistake and takes up time that may be better used for strategic endeavors and value-added operations.
6) More Time For Strategic And Value-Added Activities
Under the CFO, finance and accounting professionals frequently get requests for ad hoc reporting and financial analysis. When it comes to supplying financial data to support decisions under consideration, they must assist every department inside a business. These ad hoc requests could range from straightforward and non-urgent tasks like comparing sales data across a range of items to more complex and urgent tasks like figuring out the Net Present Value (NPV) of a significant investment that a board of directors is debating.
Groups under the CFO have little time to devote to supporting the company’s tactical decisions because of the substantial time requirements for reporting and routine financial tasks like FP&A.
When asked what they need most from their finance divisions, CEOs and board members say they want “fast, reliable, and concise information” on the economic evaluation of tactical and strategic choices, according to an article on CFO.com. But according to data from 832 firms, completing and managing transactions takes up 50% of a finance team’s time, as the article shows.
This issue was resolved when Datarails introduced its AI solution, FP&A Genius. Executives can self-serve and ask specific inquiries about the numbers with the help of finance staff.
CEOs and other business leaders can obtain answers directly, saving finance staff from having to spend days responding to such queries.
“How is our revenue trending vs. last year?” and “Which customers drove our revenue variance to budget last month?” are typical queries posed by CFOs and CEOs. What cost owners are overspending in February, and how can we see our sales pattern over the past 12 months?
Each time, the CEO or senior executive gets the information right away, freeing up their financial team to work on more fascinating and valuable strategic duties.
In Conclusion
It is obvious that businesses must adopt new practices and embrace technology if they wish to enhance the financial data they have available for both tactical and strategic decision-making. The CFO organization is one of the many corporate tasks that AI has the ability to enhance. In addition to saving time on tedious financial reporting and daily financial transactions, it will lessen human mistake and bias.
More precise and timely financial data will be the end result of these AI advantages, and highly qualified and compensated finance professionals will have more time to contribute more to crucial business decisions like capital investments, mergers, acquisitions, divestitures, and so forth.