There is often uncertainty and trepidation associated with automation and advanced technology.
Many worry that a computer will one day replace their role. But what if we saw AI as an opportunity rather than a threat?
C.S. Lewis perfectly articulated the importance of multiple opinions. He stated, "Two heads are better than one, not because either is infallible, but because they are unlikely to go wrong in the same direction.”
Combining human experts with AI can revolutionize the way startups manage finance.
Read on to learn more about AI in finances, how it can improve human work, and how the best finance operations leverage both.
What Is Finance AI?
AI in finance refers to using computer programs to automate functions of financial operations, such as daily accounting tasks. Advanced AI tools support human teams by learning their processes, simplifying manual tasks, and reducing human error.
A financial platform powered by AI can help teams be more efficient, so they spend less time doing menial tasks or correcting errors. For example, using AI in bookkeeping can automate transaction categorization. The platform can learn to distinguish revenue statements from expense statements and the departments they belong to, sorting these automatically.
Finance AI also reduced time-consuming data entry tasks. Some programs permit the scanning of paper documents and can extract and digitize information for you, so your paper invoice can turn into a spreadsheet entry without you re-typing the whole thing.
However, AI in finance is an assistive tool, not an accountant replacement. Instead of substituting teams, machines should take human-led work to the next level.
How AI Improves Human Work
Integrating with AI doesn't mean people will be replaced. In reality, AI will enhance the financial experts day-to-day by supporting the menial tasks and repetitive procedures that humans can easily fudge.
This gives your team the opportunity to explore more complicated and nuanced situations that may be too unique for algorithms to identify. You'll often hear experts dub AI a collaborative tool, paving the way for the future in finance.
While accountants already have the experience to run advanced mental algorithms (or heuristics) , finance AI simply accelerates and improves the heuristics of seasoned controllers. They can improve their speed and accuracy while identifying and remedying problems. Most importantly, finance AI can free workers from specific operations that may be overly time-consuming.
How Is AI Used In Finance: Specific Operations
Financial Operations (FinOps) is full of specific operations that many startups are still doing manually. Whether you have several teams focusing on these when they have other more pressing matters or not enough staff to tackle all operations efficiently, AI may be the answer.
That's because AI can be assigned tasks that are often tedious and time-consuming for your team, freeing them up for more important tasks. You may find that the AI execution of these operations is also more accurate due to the lack of human error.
Consider the following specific financial operations AI can take off your hands.
1. Monitor & Predict Cash Flow
Finance AI tools can help generate cash flow reports. These reports detail cash and cash equivalents as they move in or out of the startup. They can feature data from whichever period you need to see, such as the last quarter or week.
Cash equivalents that a cash flow report can feature include:
- Short-term investments
- Mutual funds
Monitoring cash flow can help verify your budget strategy is working. Using cash flow reports to predict future profits or expenses helps you prepare for these needs. When you use finance AI tools to generate these reports, you can quickly access this information and feel confident in its accuracy.
2. Daily Finance Insights
Much like checking your personal banking app to see your balance each morning, relying on finance AI to assemble daily finance insights can benefit your business. You need to know your balance before you start spending. Likewise, you need to know your daily operating expenses to inform your business decisions.
AI-powered platforms can generate daily reports that instantly give you the status of multiple financial facets in your startup. You'll know how much revenue you made last week or how many outstanding invoices need paid. Having this information at your fingertips will help dictate what kinds of moves you can make today in terms of finances.
3. Automated Reconciliations
If the end of the quarter is a dreaded time for your team, consider the benefits of automated reconciliations. You can feel confident in the results when you rely on AI accounting tools to create your reconciliations.
You can also save time with automated bookkeeping that you would otherwise spend balancing and rebalancing the books to compare. Workers can view AI tools as a partner double-checking their work. In the essential task of reconciling the books, a partner not prone to human error is invaluable.
4. Vendor Payments & Invoicing
Too many businesses leave money on the table with unsophisticated payment and invoicing systems. Finance AI can help to automate your payments and invoicing. It can ensure you never pay twice and invoice all clients for prompt payment.
AI-powered invoice tools can assist in making bills in seconds. They can walk you through multi-level flows so you can approve each element of a payment transaction and automatically sync payments with other financial data. This ensures you have real-time balances of your finances even while processing payments.
5. Real-Time Financial Report Building
Financial reports can be powerful internal and external tools for your organization. Internally, staff and shareholders may want to utilize financial reports to make process decisions. Externally, investors and lenders may require reports before making financial determinations.
The ability to provide real-time financial reporting accelerates these processes. It can help you have a quality, updated summary to review before making decisions. In business, time is money, so being able to provide reports efficiently can help you land investment deals.
Why Is Combining AI And Finance Teams Important For Your Startup?
AI finance tools work like all tools — they make your job easier. Imagine trying to drive a nail without a hammer. That's how attempting to do evolving finance tasks can feel without AI — unnecessarily challenging.
In a field where accuracy is paramount, it's a good idea to rely on sophisticated computers and programs that won't make the human errors your team may be prone to. You can feel more confident in data generated by algorithms, and for topics that require some nuance, you can still apply the human perspective.
Looking Toward The Future Of AI
How startups handle FinOps is changing. For many companies, reliance on AI tools and systems feels inevitable. But change can be scary.
Part of resolving this fear lies in understanding that change and reassuring your team that your goal is collaboration and efficiency, not replacement. Accountants aren't in danger of losing their jobs to automated accounting, and unified financial platforms can't replace an experienced finance professional. However, startups and finance operations teams that are not using finance AI to their advantage will get replaced by those that are.
Now you know there are many answers to "How is AI used in finance?" Seeking a financial platform for your startup that makes the most of AI-powered tools may be the best business step you can take next.