When industry futurists sing the common refrain that artificial intelligence will change the way the world works, they're not saying anything new. Most industry insiders know this is true. AI is already revolutionizing many business functions within manufacturing, healthcare, retail and more. One area that might come as a surprise, however, is the back office of finance. Yet, because of its ability to process and analyze large amounts of data in record time, AI is poised to completely transform financial planning and analysis (FP&A), empowering a new generation of finance leaders to drive their organizations forward in a fast-changing and unpredictable business world.
This next generation of “digital native” finance leaders coming up through the ranks will increasingly use technologies like AI and machine learning to elevate and evolve their jobs. The Excel spreadsheets and on-premise solutions of yesteryear will finally be replaced by cloud-based automated corporate performance management (CPM) software tools. And these paradigm-shifting solutions will support the next class of digitally-driven finance leaders in their crusade to make more timely and cost-efficient data-driven business decisions that drive competitive advantage.
So how will the modern technologies on which CPM solutions are based transform financial reporting and accounting? AI works by combining large amounts of data with fast, iterative processing and intelligent algorithms, enabling the software to learn from patterns or features in the data. These capabilities help AI thrive in environments like FP&A where routine tasks, such as month-end close, generally follow a systematic set of rules in a repeated process. Additionally, with its ability to reason and explain based on data input and output, AI can offer decision support for specific tasks. These benefits may give the impression that AI will eliminate jobs. Instead, AI has the power to enhance the finance professional's job and elevate them into a much more strategic role.
Automating FP&A through AI-powered CPM software solutions completely transforms the role of finance from reactive to proactive, reporting to predicting, and observing to advising. Some key benefits include:
More Efficient FP&A
Forward-thinking finance executives understand the value of cloud-based CPM software for quicker insights. The past year underscored this need as finance teams were required to access financial data remotely and instantaneously to make critical and timely decisions around budgets and forecasts based on a variety of what-if business scenarios.
Imagine the advantages AI presents finance leaders facing similar situations in the future. Leveraging machine learning, AI-powered CPM can quickly analyze an organization's data (we're talking hundreds of thousands or even millions of general ledger transactions per month) and provide top level insights while also rooting out possible issues. This helps elevate the finance executive into a more strategic role, where he or she is helping to navigate the organization's next move in a crisis, or for competitive advantage.
AI works well to surface anomalies and risky transactions faster and more accurately than any human could effectively deliver. In fact, AI analysis is up to 900 times more likely to identify errors in data. This offers a dramatic reduction in time and errors and mitigates the risk associated with traditional FP&A processes such as monthly, quarterly, and yearly period closing, and more.
Typically, when financial reports don't balance out, delays result in additional costs and business risk. Having suspect transactions instantly identified by AI-powered CPM removes the need for human analysis and enables teams to act quickly to resolve issues.
Higher Level Insights through a Virtual Financial Analyst
One of the more unique features of AI is its natural language processing capabilities. These helps finance leaders become digital natives by having the machines work on their behalf by taking budgeting, planning, and reporting to the next level. Similar to the way consumers interact with virtual assistants like Siri and Alexa, finance leaders can simply talk to a Virtual Financial Analyst and ask it to automate time-consuming routine tasks, generate or distribute reports, and gain the deep and consistent insights they need to do their jobs. The VFA becomes the CFO's own personal analyst to facilitate and improve human interaction with the organization's CPM software while handling the repetitive tasks and providing intelligent insights with speed and accuracy no human could affordably provide.
FP&A organizations hoping to court the new generation of “digital native” finance leaders should consider making an investment in AI and Cloud-based CPM software. These modernized finance solutions supports the modern CFO and provides them with the digital transformation tools needed to ready their business as the future of work evolves.
As stated in Prophix's survey with FSN Research, most businesses were unprepared to conduct nimble and agile budgeting and forecasting during the pandemic, hindering their responsiveness for making critical business decisions. -- Over eighty percent of finance teams surveyed were unable to forecast beyond a year, and over 50% couldn't project further than six months. Two thirds of organizations said they were able to reforecast their earnings in under a week, but only 39% are able to do so within +/-5% accuracy. Furthermore, those that were able to apply scenario planning features through CPM (83% of CFOs) were able to make quick changes, such as adding or removing a new cost line item from a budget or forecast model, versus 58% of their less-prepared as their fellow colleagues