Think Tank

Artificial Intelligence and its impact on the future Finance function

Sanjeev Jha, CFO, India for Kelly Services

AI has been in the news for many a reason, not always the happy kind, but always engaging. While some believe it is over-hyped and others disruptive, if you believe in numbers you cannot ignore the phenomenon. AI has come a long way, from being a fringe technology to being adopted by the mainstream. Many companies have already seen the merit in adopting technologies built on the philosophy of AI. The Finance function is undergoing a sea change with the advent of AI in daily operations. Data gathering and analysis, which earlier were month-long tasks, now take only a few days, and modifications are possible in real-time.

AI not only improves the quality of data by minimising manual and repetitive errors, but it also analyses this data and extracts useful information that is relevant to organisational decision-making.

From a Finance perspective, one may wonder how AI differs from digitisation. While AI does require digital data to be available for it to work, it is what AI does with this data that is its selling point. For example, if a company has ensured that all its audit-related information is digitised, using AI, it can now learn from all its previous mistakes, using design tools that incorporate corrections for known mistakes. For businesses with international operations, AI can process auditing requirements of various regions in a fraction of the time a human being would need. Required regulatory reports and compliances can also be automatically generated using the AI tool.

Another example is in the area of contracts and agreements. Companies have implemented tools to read digital invoices and contracts and translate all fields to relevant data entries, without requiring any paper work or human intervention. Only fields that are not understood by the tool are identified and referred for manual checks. These manual corrections are then read by the tool again to self-correct for future transactions. Complex contractual clauses are identified and read with ease, with ramifications checked for pre-existing and existing company operations.

Before implementing AI, the CFO must understand how AI impacts the two most important resources of the company: money and people

There are many more such possibilities in general accounting operations, tax, payroll, cash disbursement, risk management and treasury. According to a McKinsey report, 42% of all Finance activities can go completely digital and a further 19% can be moved partially. This movement towards digital is already underway globally. The Big Four consulting firms have tied-up with AI specialist firms to offer AI in Finance. Some of their tools focus on the intelligent automation of audit and tax services. Other tools work with contracts, invoices and agreements to read, digitise and analyse various clauses to enable error-detection and fraud management. India’s home-grown IT giants have also added AI offerings in the Finance space.

CFOs can play a key role in accelerating this digital shift. AI not only improves the quality of data by minimising manual and repetitive errors, but it also analyses this data and extracts useful information that is relevant to organisational decision-making. With full automation of various transactions, valuable resource time is freed for the CFO to focus on strategic advising.

Prior to implementation, however, the CFO has to understand how AI impacts the two most important resources of the company: money and people. Hiring the right agency/people for hand-holding during the changeover will make the transition smoother, but comes at a cost. Further, the very mention of AI prompts discussions on man vs machine conflicts that are usually reserved for science fiction stories, with employees fearing large-scale layoffs. Both aspects will need to be adequately addressed at a company level.

Addressing cost vs benefit

The CFO will need to communicate how AI will serve the long-term company goals, and back arguments with cost-benefit analyses to get budgets allocated. The advantages of the new technology and the impact it will have on various activities will also have to be clearly outlined and communicated across the company. Phased rollouts involving current personnel, who will use the newly-designed tool and give feedback to improve the AI solution, will ensure that the AI tools remain relevant and cost-effective in the long term.

Addressing the man vs machine argument

While discussions on job redundancy are unavoidable, and hold true for skills that are transactional in nature, AI cannot aim at removing the human element from Finance. There will be a shake-up in the skill sets of personnel required. Skills such as data analysis, AI-tool familiarity, handholding and overseeing AI changeovers will be more sought-after. The key to addressing this middle-term shift in job profiles is keeping the team informed. The CFO should communicate how people will be affected, and how AI will enable their performance. Having the right people on the team – those with an attitude to learn and adapt – will help in terms of retraining and retaining.

While AI might sound like a lot of effort and money, it will pay back many times over. Experts worldwide agree that AI has finally arrived. For most companies, it is a question of when and how they will implement AI, especially in the Finance function. The advent of cloud-based solutions has ensured that AI solutions can be tailored to meet specific functional requirements, irrespective of whether the business is a start-up or an established one.

The advantages of speed and accuracy apart, AI may well be the difference between a deal won and a deal lost. Companies that offer AI will also be more agile in their customer response, capable of providing solutions on the go. AI has now moved from good-to-have to a must-have, compelling CFOs to move from discussion to execution. A middle-term shake-up of the Finance domain may be a given, but the future is already here – and it looks promising.