3 Ways to Improve Financial Management with AI in 2021

This article was first published on Fei Daily.

Here are three reasons to invest in AI-powered solutions for business spend management.

The past year was a whirlwind of challenges and quick decisions to adapt, especially for finance managers who dealt with the economic impact of the pandemic. As the new year gets underway, it’s important to reflect on 2020 as a case study to ensure finance departments are prepared for anything.

A key learning from the experience was the need for automation. Many finance departments that relied on manual processes had to introduce automated solutions under pressure to get work done during the transition to remote work. For some, artificial intelligence (AI) was the solution to quickly replicate tasks and processes that were formerly done by people. More finance departments started to lean on AI and machine learning (ML) algorithms to make quick decisions backed by near real-time financial transparency to meet the business needs brought on by the pandemic.

But according to a recent study, many companies are still behind in updating their IT infrastructure. IBM found that 60 percent of technology leaders feel their “IT modernization program is not yet ready for the future” and almost one in four have just begun modernizing their IT infrastructure.

Much uncertainty remains in 2021, and financial leaders must advocate for technological enhancements in their departments to solve for it. Here are three reasons to invest in AI-powered solutions for business spend management.

Managing Spend

Numerous manual processes can be replaced by automation and AI. For example, companies that use AI-powered spend management solutions can eliminate paper processes and tedious spreadsheets. In accounts payable departments, optical character recognition and ML automatically “read” and enter invoices into the payment system, then match invoice and purchase order information.

Replacing manual processes with automated AI solutions can save a lot of time, with companies reporting hundreds or thousands of hours saved each fiscal year. AI can also predict which companies are likely to default on payments—based on factors such as previous late payments and customer complaints—and which are most likely to pay on time. 

Solutions that use AI enable real-time spend management, which helps finance managers improve budget management and liquidity.

Increasing Compliance and Eliminating Errors   

Finance departments can also benefit from AI through automated expense reporting and management. These solutions use optical character recognition and ML to recognize handwritten tips and totals from pictures of employees’ receipts, then automatically populate line items in an expense report.

This process allows employees to submit expense reports in near real time, which helps finance departments close out budgets on time and better inform financial reporting. It also gives businesses a much-needed competitive boost by improving productivity. A recent SAP Concur-commissioned study found that 38 percent of employees in the Asia Pacific region submit expenses manually by filling out a form and enclosing physical receipts, which takes away from higher-impact work.

AI-assisted expense management solutions are also valuable for ensuring accuracy. These tools automatically review each expense report and flag inaccuracies in seconds based on comparisons against hundreds of data elements. For example, when medical technology company Smith+Nephew started using an AI-powered audit tool, it increased expense reporting accuracy from 77 to 98 percent. This accuracy allowed the company to completely remove finance managers from the approval process and redeploy their time to other business demands.

While AI-powered audit tools save time, they can also save companies money. The typical fraud case lasts 14 months before it’s detected and costs businesses a median loss of $8,300 a month, according to the Association of Certified Fraud Examiners (ACFE). AI helps alleviate this financial pressure by examining massive data sets and spotting patterns or anomalies within scope and at scale, reducing costly errors and potential penalties along the way.

Maximizing Profitability

AI and ML strike a balance between companies’ priorities and employees’ needs. For instance, a longstanding conundrum of business travel is how to balance saving money and catering to employees’ travel preferences. This is where AI reconciles the competing needs. It can make cost-saving recommendations based on employee preferences and company policies, and it can interact with other applications also using AI to maximize efficiency and profitability.

There are many reasons to invest in AI-powered tools now, and the future will only bring more benefits. Soon, intelligent assistants will go beyond automatic data capture and analysis to predicting and making recommendations based on instantaneous analysis of a variety of data sources. For example, assistants powered by AI and ML will predict when a company will exceed budgetary limitations based on its previous spending patterns and those at similar organizations. They will also make recommendations to maximize budget, while maintaining the employee experience, based on employee satisfaction studies as well as costs and policies at other companies.

“Businesses are more interested than ever in AI and ML technology,” said Kevin Permenter, Research Manager, IDC. “Our research suggests that many businesses are even willing to pay a premium for these technologies. Some companies have already started using AI and ML to enhance user experiences or automate tasks. As more trust builds with the technology, businesses will begin taking actions based on AI-powered recommendations.”

The pandemic underscored the role of technology in our new normal. In fact, IDC predicted that worldwide revenues for the AI market would increase by 12.3 percent in 2020, totaling $156.5 billion. This will likely increase in 2021 as more finance departments use AI and ML to capture total spend across an organization, eliminate inaccuracies, and budget for maximal profitability.

Laura Houldsworth is the SVP & General Manager for Asia Pacific Japan and Greater China, SAP Concur.