Aaron Harris, Chief Technology Officer, Sage
Artificial Intelligence (AI) is well known in finance for driving the automation of simple, repetitive tasks. Yet, the benefit for finance teams goes far beyond just automating processes like account reconciliations and expense management. The real value of AI is in its ability to elevate finance professionals into future-gazing and future-shaping strategic advisors.
It is important for CFOs to understand these wider benefits at a time when roles and expectations for finance teams are changing. 96% of CFOs responding to Sage’s recent study felt roles would change over the next three years, and 85% expect to be more involved in strategy and counsel for the overall business. The path from CFO to CEO is becoming more well-trodden and, more than ever, finance is expected to interact and collaborate with the wider business.
Incorporating AI tools into ways of working that go beyondautomating tasks can support these broader responsibilities. Let’s focus on three areas where AI is doing this already…
Forecasting and forward planning
When it comes to forecasting, it can be easy to see the magic of AI in its ability to be more accurate than humans. While there are cases when this is true, the real magic is how it can dramatically reduce the time and resources spent to forecast.
Rather than fixating on AI being able to improve the accuracy of your forecasting, the real value comes in building models that deliver results more quickly, which can then be reviewed and interpreted by a human.
For example, when working with our customer to implement more efficient cash flow forecasting, it became clear that you can’t just throw AI at the task and ask it to predict everything. You need to dig down into the individual components that contribute to cash flow. The biggest lever for this customer was whether their customers renewed annual subscriptions, but the business only had the capacity to forecast this once a quarter at most.
Introducing an AI model that predicted customer renewal ratesmeant they could run the same forecast in an hour. Now, while it wasn’t always more accurate than the human-led forecast, what was important was that it allowed them to detect a change in their business in close to real time so they could act on it. Helping the finance team do their job more efficiently and adding more value to the overall business by providing additional insights, time and resources that could be spent on forward planning.
Upskilling and career development
Upskilling has arguably never been more important in finance. Recent research has found that a lack of skill in team members was amongst the biggest challenges for finance leaders, while 84% of CFOs admitted facing a significant talent shortage in their teams.
Pair this with CFOs also managing an ever-increasing array of responsibilities, many struggle to find the time and resources to dedicate to finding a solution. AI can support this upskilling challenge.
Large Language Models (LLMs) like ChatGPT have proven to be a powerful teaching tool. They can help all employees become more productive, but they help the less skilled, less experience employees more.
With nearly half of CFOs reporting a lack of talent needed for forward looking finance operations, employing LLMs can help educate individuals on everything from regulatory frameworks to finance best practices. And as is so often the case with AI, it gives senior leaders back time. We should never stop mentoring more junior colleagues, but if AI tools can alleviate some of the time spent training and tutoring, this can open time to spend on more strategic elements of the role.
But it isn’t only new employees that can upskill with the aid of AI. I’m speaking from personal experience when I say tools like ChatGPT can very quickly get senior staff up to speed as the demand for new skills continues to evolve in the digital age. Even someone like me who has been working in the tech sector for longer than I care to admit, learned Python with the help of ChatGPT.
Improving ESG reporting
Environmental, social, and governance (ESG) is an essential part of a businesses’ planning and strategy in 2024. The EU’s Corporate Sustainability Reporting Directive (CSRD) is introducing mandatory sustainability reporting, and 58% of CFOs expect engagement with ESG and sustainability initiatives to rise.
It is critical that finance teams can meet these new demands if they want the business to provide accurate information and be seen as a leader in ESG. This is where AI can play a significant supporting role.
Let’s take carbon emissions as an example. It is not that AI can predict emissions with 100% accuracy. It is that it is good at classifying and predicting emissions. Rather than spending time deciphering the emissions of a specific travel, utility, or office purchase in a big directory, AI can see something purchased on an invoice and instantly match it to the correct emission impact.
It can really get into the weeds to provide insights on what is impacting an organisation’s ESG efforts, uncover factors that would possibly have been missed otherwise, and quickly provide finance teams (and the wider business) the data needed to make proactive decisions on strategy.
Embracing the opportunity
We are in an age where CFOs and finance teams are being tasked with thinking more strategically. AI creates the bandwidth to make that possible. In recent conversation with Jacqui Cartin, EVP Group Financial Controller, she told me that Sage’s finance team has created 40,000 hours of capacity since implementing AI to automate repetitive tasks. At the same time, her team has increased their scope of responsibility. With their newfound focus on value-adding work that goes beyond checking the numbers, the team has been empowered to interrogate the data and ask more pertinent ‘so what’ questions on the data.
So, what do all three of the wider benefits discussed in this article have in common?
1) They allow greater flexibility. AI isn’t the solution for everything. But what it can do is give back time and resources to be allocated elsewhere while maintaining data quality. It’s up to each business to decide how to use it.
2) They elevate humans. Humans should always remain in control. We have unique capabilities that AI will never be able to replace. What AI does is make more outcomes available and makes more data available in real time to inform actions once the human takes over.
3) They improve our ability to be agile. By alleviating some of the stressors that come as a result of finance teams and CFOs roles evolving. As ways of working change, AI can act as a foundation, or springboard, for decision-makers and finance leaders to take these new responsibilities and demands in their stride.
