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April 21, 2024

Maximizing Finance Team Efficiency with AI and Automation

Beyond the Buzz: AI Adoption in Finance:

Finance leaders are buzzing about the transformative potential of generative AI tools like ChatGPT and Google Gemini. However, to truly harness this power, CFOs need a deeper understanding of how these tools can integrate seamlessly with existing workflows, processes, and organizational data. This deeper understanding will be crucial for reshaping the future of the finance function with generative AI. 

This interest in AI isn't just anecdotal. A recent Centime survey of over 400 finance leaders demonstrates a strong backing for AI adoption, with 75% showing at least 'somewhat' support, and a significant 33% fully endorsing it. This overwhelming enthusiasm underscores the readiness of the finance sector to embrace AI's capabilities (Source: Centime Survey).

As with other technological innovations, the integration of generative AI into finance is expected to follow an S-curve pattern of adoption, as detailed in Exhibit 1 (Source: BCG). Currently, finance teams are investigating methods to improve existing procedures using generative AI, including text generation and analyzing small datasets. As AI progresses, it will not only fundamentally change core finance functions but also reshape how finance operates and collaborates, while helping to minimize risks. Over the medium to long term, AI is poised to serve as a revolutionary alternative to traditional financial planning and analysis tools, significantly amplifying finance teams' predictive capabilities. Such advancements will enable finance leaders to make more informed strategic decisions, thus substantially improving both operational efficiency and effectiveness.

Integrating generative AI into the finance function, as detailed in Exhibit 1, will require overcoming specific challenges. These include the continuous consolidation of disparate data sources to create a single source of truth, ensuring the accuracy of this data, and upholding high standards for data hygiene, security and privacy. Beyond these data orchestration challenges, finance teams must adapt financial workflows to leverage AI's efficiencies and invest in upskilling financial professionals. Doing so will enable them to harness AI's potential effectively.

To navigate these challenges and remain at the forefront of this trend, CFOs should start exploring the most impactful uses of generative AI in finance and prepare to harness its evolving capabilities.

While near and medium term uses of generative AI will help augment existing financial processes and drive finance team efficiency, the long term impact will be transformative.

Near and medium-term uses of generative AI:

At present, the integration of generative AI into finance functions focuses on augmenting existing processes through insights generation and one-off analysis of small data sets. Currently, financial analyst teams are mostly leveraging generative AI in the following ways:

  • Goal Setting: Analyze historical business data in conjunction with market trends for realistic financial goal setting. 
  • Forecasting: Sift through vast amounts of financial data, identifying patterns and trends that might be missed by manual analysis. This allows analysts to gain deeper insights into factors affecting cash flows and build more accurate forecasts.
  • Scenario Analysis:  Quickly create different financial performance and budget simulations based on various assumptions (e.g., changes in customer behavior, and interest rates). This allows analysts to assess the financial impact of potential events and make better-prepared plans for different scenarios.
  • Budget Variance Analysis: Enhance ad-hoc variance analysis by utilizing a wide range of a company's structured and unstructured data. This approach helps in pinpointing the factors behind discrepancies.
  • Reporting: Drafting clear, concise reports that include visualizations and detailed explanations of performance metrics and budget discrepancies. 
  • Other use cases of generative AI for finance teams include cost optimization, contracts and credit reviews, credit risk modeling, liquidity analysis as well as tax compliance and strategy.

Sample Use Case: Forecasting Revenue:

To illustrate the practical application of generative AI in revenue forecasting, consider this scenario: A financial analyst wants to forecast revenue for the next 6 months based on the last 13 months of revenue data. To get assistance from generative AI, the analyst provides it with 13 months of revenue bridge data along with some clarity around the data structure, some key concepts and assumptions to be built into the model. Once done, generative AI can assist with:

  • Presenting multiple revenue forecasting approaches with description and selection criteria
  • Generating forecasts for each of the revenue bridge components based on your selected approaches.
  • Explaining the logic behind each approach and its impact on forecast optimism/conservatism.
  • Visualizing the outputs as shown in Exhibit 2.

Exhibit 2: Forecasting outputs produced by AI using 3 different approaches:

This simple example of revenue forecasting provides a glimpse into how generative AI can revolutionize your day-to-day processes. By taking over the heavy computational tasks, AI frees up valuable time for you to partner strategically with your business for maximum impact.  Moreover, by feeding the AI models with richer data sets, including segment and customer-level information alongside external factors, assumptions based on your experience can further enhance the precision of your forecasts and empower you to make data-driven decisions with greater confidence.

Medium-term and long-term impact of generative AI:

As data in organizations gets consolidated and data orchestration workflows get automated, in conjunction with the improvement in generative AI’s ability to accurately analyze large data sets and finance professionals become more adept users of the technology, we expect to see a gradual increase in the number of AI-driven assistants that operate alongside practitioners. We also envision the seamless integration of traditional AI (Machine Learning, Deep Learning, rule-based systems) and generative AI into combined use cases. For example, a traditional AI forecasting tool could produce forecasted financials, while generative AI could explain variances and, more importantly, offer recommendations on different forecast scenarios and associated business decisions.

With great power comes great responsibility:

As previously mentioned, integrating AI into the finance sector smoothly comes with its set of challenges, ranging from consolidating diverse data sources to guaranteeing the security and integrity of financial data. Overcoming these obstacles is essential to harness the transformative potential of AI in finance. Some of the key challenges include:

Consolidating Data:

Fragmented data across systems (accounting, billing, CRM, etc.) limits the power of automation and AI. Unifying this data into a single source unlocks better visibility, and control, and fuels powerful AI models specifically trained on your business, not generic public data. To overcome this challenge efficiently, businesses should consider an integrated solution that can continuously unify, transform, and enrich data and provide a single source of truth as an output. This will streamline data integration, enhance data visibility, and ensure information feeding your AI models is always up-to-date, enabling the generation of real-time insights that are as timely, valuable, and impactful as possible.

Monitoring Data Accuracy:

The accuracy of AI outputs hinges on the quality of the data used to train them. To ensure reliable results, finance teams must make data quality a priority. This requires strict data governance, data integrity monitoring, and automated anomaly detection in the data used to train AI models. If historical data undergoes continuous changes, AI models will generate varying outputs, which could affect their credibility.

Ensuring Data Security and Privacy:

Training AI models on public clouds can expose sensitive Personally Identifiable Information (PII) to breaches, posing compliance risks under regulations like GDPR and HIPAA. To mitigate these concerns, finance teams should consider training generative AI models using private AI solutions. This approach keeps PII secure within controlled environments, reducing the risk of breaches while upholding data privacy and security standards. 

Avoiding Prompt Leaking:

Prompt leaking in the context of generative AI refers to the unintended exposure of input prompts (the queries or instructions given to an AI model) to third parties. Finance teams deal with highly sensitive information, including financial forecasts, internal financial statements, investment strategies, and more. If the prompts used to generate analyses of this data are leaked, it could lead to a breach of confidentiality and for public companies it could lead to exposing insider information. This not only risks the company's internal information but could also affect the company's reputation and stakeholder trust. Robust data security measures like data encryption, access control, audit trails, and data anonymization could help address these risks. 

Mitigating Hallucination:

Generative AI hallucination refers to instances where AI models generate false or misleading information, despite being prompted correctly. This phenomenon can occur due to various factors, such as training data limitations, model misinterpretations of the input, or biases in the data the model was trained on. For Finance teams leveraging generative AI for financial data analysis, the risks associated with AI hallucinations are significant and multifaceted. It can generate misleading financial insights, potentially leading to a cascade of negative consequences, including strategic blunders, compliance failures, reputational damage with investors and regulators, and resource misallocation. To harness the power of AI for financial analysis while mitigating the risk of AI hallucinations, finance teams must implement a multi-pronged approach. This includes:

  • Establishing rigorous validation processes to ensure AI outputs are accurate and reliable before informing decisions.  
  • Training data should be comprehensive and unbiased, drawing from diverse sources to minimize bias and strengthen the model.  
  • Continuous monitoring and feedback loops are essential to improve AI performance over time.  
  • Transparency is paramount. By openly disclosing the data sources and methodologies behind AI-generated insights, finance teams can build trust and empower stakeholders to make informed decisions. 
  • Collaboration with AI experts and data scientists is also crucial, as their deep understanding of AI limitations and risks allows for responsible and effective utilization of this technology in financial analysis.

Embracing the Buzz!

Finance teams eager to embrace AI can start by identifying low-risk, high-impact opportunities to integrate AI into existing processes. This could involve exploring built-in AI functionalities within their current tools like ERP or EPM systems. But early wins are just the first step. Building a long-term foundation for AI success requires a comprehensive data strategy. This involves building in-house or adopting a continuous data orchestration and integrity monitoring platform that can continuously clean, transform, and enrich data, ultimately providing a single source of accurate data. This focus on highly accurate data availability will ensure reliable AI outputs and will empower future AI initiatives to maximize finance team efficiency.

Eva Shah


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