Artificial Intelligence (AI) is taking the world by storm, with many different industries utilising this technology to increase productivity and reduce costs. But how can AI be used in finance?
What is AI?
Artificial Intelligence (AI) can be defined as using computer science to create smart machines that can simulate and perform tasks usually completed through human intelligence.
AI has a variety of uses and is being utilised across multiple industries on a daily basis, some examples of AI that most people are aware of include smart assistants such as Alexa or Siri, chatbot assistants or self-driving cars.
How can AI be used in finance?
AI isn't limited to large corporations. Many SME's and startups are using AI to reduce risks and save time with many of their tasks. The finance industry is one that has welcomed AI with open arms and can be used for a multitude of tasks.
One popular use of AI in the finance sector is for fraud detection. AI systems can look for unusual financial activity on an account, which may have been missed by human error. The majority of uses for AI in the finance sector focus around saving time, allowing the finance team for your business to spend more time on growth.
There are so many options available for how to use AI in finance that it is challenging to summarise in one short article. Instead, this article will focus on the pros and cons of using AI within your finance team.
What are the benefits of using AI in finance?
The pros of using AI in finance will vary from company to company, and by what a business owners deems valuable. However, these are some benefits of using AI in finance that the majority of businesses will benefit from.
Automation of mundane tasks One fantastic benefit of using AI for your finance tasks, is that you can remove the repetitive and mundane tasks from your finance team. Your team will benefit from greater job satisfaction if they found these tasks tedious, and you'll free up their time to dedicate to more important tasks such as growth and strategies.
Increased efficiency AI uses real-time data and is able to process this at a speed much quicker than a human could do manually. This will result in increased efficiency across your finance department, but will also help you to make informed decisions at lightening speed. The information you require can be gathered accurately within seconds with AI, allowing you as a decision maker to have the data you need to make developing strategies as the information becomes available.
Greater accuracy There is always room for human error, and unfortunately this is something a business will have to deal with somewhat regularly. Of course, you can limit the risk by hiring experienced professionals, but there is no way to completely rule out human error when manually completing tasks. This is one of the reasons many companies are moving towards AI, as they come with greater accuracy than humans.
Increased compliance One of the biggest tasks for a financial team is to ensure the business is compliant and working within regulations. AI can be harnessed to ensure your company meets compliance, to prevent unnecessary fines or punishments.
Cost reduction With AI completing many tasks for your business, you may find you require less team members to complete these financial tasks, which could result in cost reductions. Hiring full-time staff is one of the biggest expenditures that a company can make, so more and more businesses are looking for ways to reduce this cost. Additionally, with the greater accuracy and efficiencies discussed above, your business could reduce their costs by avoiding fines for non-compliance or reduced business due to human errors.
What are the drawbacks of using AI in finance?
There is no doubting that AI is here to stay, but that doesn’t mean it is a replacement for your finance team. Some of the cons to using AI in finance include:
Customer experience A positive customer experience is essential for any business to survive, and many customers are distrusting of AI and prefer to work with real people. For this reason you may decide to keep any investment in AI to internal processes. If you do decide to introduce AI for customer facing tasks, such as chatbots, you could miss opportunities with customers who find these frustrating or inaccessible.
Unable to contribute to business strategy Computer systems are built to be analytical instead of strategical. Your AI system may be able to provide in-depth information and analysis, but it will be unable to act on this information in a strategical manor.
Even if the AI system could be taught the basics of business strategy, they will be unable to tailor this to each businesses personal strategy and make reactive changes based on the impact. Business acumen is something that AI cannot replicate.
AI can be expensive The production, maintenance and software updates required for artificial intelligence can make it a costly addition to your business. There will be some cost savings related to AI automating some manual tasks as discussed above, which may balance some of the expenditure required to set up AI within your finance department, but AI will still require significant investment. Additionally, any failure of this software will result in costly repairs and retrieval of lost information.
Security risks In an attack called 'data poisoning', hackers may take advantage of the complex AI systems to access highly confidential data as well as inserting bad data into system. The hackers could insert data to make the AI output benefit them directly, or lead to the failure of your business altogether.
Reliance on technology The more that AI is implemented within a business, the more like your employees will come dependant on the technology which could impact their creative abilities. In the event of a system failure, it could leave a business in a vulnerable position unable to quickly pull manual data.
Should I implement AI within my finance department?
There are many pros and cons to using AI in finance, and the answer may not be obvious as to whether you should implement AI within your business. Ultimately, this decision will come down to your business structure and your existing team.
At The Finance People, we believe there is definitely a place for AI in finance. The time saving abilities and automation of repetitive tasks will definitely benefit most businesses, but there is no replacing the support and guidance of an experienced and strategical finance expert.
A balance between artificial intelligence and real finance professionals needs to be sought. There are alternatives available for SMEs and startups looking to save time and costs within their finance department. To free up your teams time, you can outsource finance functions such as payroll or bookkeeping. Alternatively, if your business is looking to benefit from the guidance of an expert but reducing costs is a big focus, a part-time FD may be the perfect solution for you!
The Finance People have a variety of flexible and affordable options available. Get in touch for a no-obligation consultation to see how we can support your business.