Artificial intelligent and financial management – what kind of a pair?
Snowfox participated in a master’s research that investigated the experiences and perceptions of artificial intelligence (AI) in financial management. Snowfox has a good understanding of the experiences of financial management personnel regarding AI. But an academic study gives a much-needed analytical perspective into the views of financial administrators. In this blog, I cover how financial administrators see the future of their work.
The thesis can be obtained from the database of Jyväskylä university’s library.
How does AI look like through the eyes of financial management?
Financial management can get massive savings and significantly increase efficiency through AI. Unfortunately, AI is not yet widely used in financial management processes. That is why it is often seen as an incoherent or even scary new component.
Possibly because AI is not widely used there is a lack of knowledge on the subject. It seems that financial administrators don’t even know to dream about AI solutions because they don’t have enough know-how on the subject. This lack of knowledge is the greatest challenge in utilizing AI in financial management.
AI differs from other automation, as it makes it possible to solve more abstract problems automatically. Perceiving this can be challenging if one looks at AI from the point of view of traditional automation. When the potential of the technology is not recognized, development initiatives are postponed. This slows down technological development that could potentially help with scalability.
When the lack of know-how is mixed with the confusing public discussion about AI, it’s no wonder that financial administrators struggle to understand AI.
Academics often define artificial intelligence as a disruptive technology, regardless of where it is used. Disruptive technologies often disturb the old, normal ways of doing things. This leads to a rapid pressure for change and almost always to a need to adapt into the changing environment.
Why should financial management care about AI?
If using and understanding AI is challenging, why should it be used in the first place? Why add challenges to current processes that are already working well?
There are – at least – two reasons:
- Usually the existing challenges are a result of processes that are not working as well as organizations tend to think.
- Using AI will be inevitable in upholding efficient financial administration processes in the future.
The first reason might sound unfair towards financial administrators. But here is an example that came up in the research countless times:
When you ask from a purchase ledger team what percentage of the invoices that pass through them can they correctly post, the answer is usually around 100%.
But when the same process is then tested with AI, it is quickly discovered that the success rate of manual labor is not even close to what was believed. In many cases the AI is more accurate than manual labor. This comes even clearer if business units are responsible for posting purchase invoices.
The future of financial management
The study found that especially financial managers have a clear understanding of where financial management is heading in the future. Using AI was seen as a necessity for providing cost-efficient and high-quality financial administration services.
It seems that excessive caution with new possibilities is a greater risk than building the capacity too late.
Where to start when an organization has no AI know-how?
Many financial administration organizations have no own legal or IT department, as they are outsourced to an external partner. But this is not necessarily a problem. Creating a working AI solution to a specific problem requires a lot of resources and personnel with specialized skill sets. Even for large organizations it is usually better to find a proven solution from the market, rather than develop their own.
When choosing the partner for the project, it’s important to think about the big picture.
- Is the offered solution long-lasting?
- Will it be further developed in the future?
- Does it create genuine added value from day one?
- Can you test the solution with your own data in your own environment before making the decision?
- Can you get out of the contract easily if need be?
The question isn’t whether AI is needed in financial management. The question is how long can you go without it. It is time to harness the potential of AI now, so that the force of change doesn’t overwhelm you in the future.
A good first step is to consider the possibilities of the technology in the automating posting and routing of purchase invoices. Is it possible to gain major advantages with a low financial investment while preparing your organization for the future?