The terms Artificial Intelligence and Machine Learning have been around for a very long time. But towards the end of 2022, with the release of ChatGPT, AI has been invading all areas of business conversation at a startling pace.
According to a PwC survey, around 54% of organizations are adopting AI and analytics in some form. Some businesses depend on external vendors and tools to give them an AI advantage, whereas others are developing their own LLMs or large language models and training datasets to embrace AI fully. As a business owner, integrating AI into your financial processes is not just preferable these days, but crucial to your existence and profitability.
The Current AI use cases in organizations
Most organizations have already started scratching the surface of the AI maze, using ChatGPT for routine processes, and trying to improve the productivity of teams. With Google integrating Bard into the search engine, and Microsoft integrating Copilot into their Office suite, we are going to see mighty changes in AI adoption in the coming years.
A few Financial Services companies are using AI in automated chatbots, fraud detection, or calculating credit risk these days. A well-known example is COIN short for Contract intelligence, an intelligent Machine Learning algorithm used by JP Morgan for interpreting loan agreements. It has saved lawyers and loan officers hundreds of hours that they spent in reviewing documents, and also brought down human errors in loan servicing.
The Future of AI in Financial Planning and Analysis
What is happening now is really minuscule compared to the vast number of use cases that AI can help in. Financial Planning and Analysis involves large volumes of data that need to be collected, reviewed, cleaned up, organized, presented, and interpreted to derive meaningful information. And this one factor is enough to help us understand how much AI and large language models can help in financial analysis.
Here are some of the key areas that AI can transform in the coming years or even days, since we cannot even grasp the changes that can happen in the coming years.
Bookkeeping and Accounting
You might wonder what role AI might play in the oldest and simplest of financial functions. Bookkeeping and Accounting does involve a lot of manual work in entering all the bills and financial transactions into a system, categorizing them, reconciling them with bank records, and generating reports or financial statements. With AI-enabled tools, most of the data entry can be automated either by moving all invoicing to digital, or using OCR to convert physical bills to digital ones. Classification of expenses can be easily done by these tools, since they can scour vast amounts of historical data to figure out where to classify a particular expense, whereas a human would have to remember the categories each time.
Data Processing and Automation
Financial Planning and Forecasting
As already mentioned, one of the biggest advantages of AI in financial analysis is its capability to analyze vast volumes of data and come up with patterns that data analysts might overlook. It is extremely difficult to do what-if analysis or scenario analysis manually, look at various factors, and come up with financial forecasts. AI-enabled predictive analytics can analyze various factors and scenarios super-quick, and come up with accurate financial forecasts, helping business owners make quick and informed decisions about budgeting, resource allocation, and investment strategies.
Cost Optimization and Resource Allocation
Cost optimization is extremely crucial for small and medium businesses, that need to manage funds for operations as well as growth. Identifying areas where expenses can be curtailed without affecting the business, by analyzing historical spending patterns and business impact, can be easily done by AI-enabled tools. These tools can give recommendations on cost-cutting measures or cost re-allocation measures for better profitability.
Try out www.concur.co.in, www.receiptcat.com, or expensify.com for better optimization of your expenses and costs.
Some organizations are already using AI for fraud detection since it is easier for AI to identify behaviour patterns to zero in on suspicious transactions. Most of the time, the system will only get a few milliseconds to analyze a transaction, and this is impossible for humans. Thus, integrating AI tools into your organization’s Financial planning can help you craft better fraud detection and alert strategies, making your systems trustworthy.
Fraud.net and Sift.com are popular tools for fraud detection and management for financial transactions, and there are various tools like Forter.com and Clear.sale specifically for e-commerce transactions.
In addition to detecting fraudulent transactions, AI can look at market conditions, economic patterns, and historical data to provide you with insights into potential risk factors for your business. This helps you move from a company that reacts to a situation, to a company that pre-empts a situation and is ready with a strategy. This proactive approach enables you to detect and manage risk better, ensuring a more stable financial position.
A few of the popular risk management tools are riskident.com, logicmanager.com, and risklens.com to help you prepare for fluctuating economic conditions.
Stay ahead of the AI game
The data clearly shows that all organizations, big and small are gearing up for the AI game, exploring and implementing AI-enabled solutions to improve processes, decision-making, and productivity.
As a business owner, it is imperative that you embrace AI technologies to transform your financial planning and analysis for more accurate forecasting, effective data processing and automation, enhanced fraud detection, and improved cost optimization. Here’s a siren call to integrate AI into your financial strategies, not only to stay ahead of the competition but also to pave the way for sustained growth and success of your business.