Artificial Intelligence is having a moment but will it last? Open AI’s Chat GPT chatbot opened a lot of eyes when in less than a week it added one million users at the end of 22.
To put that number in perspective let's compare that to other popular platforms and see how long it took them to reach one million users.
This shows how quickly Artificial Intelligence (AI) can reach mass adoption with the right product and right use case. The reality is Chat GPT is just one more step albeit a big step in the use of AI to enhance our personal and professional lives. AI continues to become an integral part of our daily lives from personal voice assistants like Siri and Alexa to customized feeds on social media platforms.
Even with the tremendous growth in adoption of AI/ML technologies by corporations, finance and FP&A lags behind in its use of AI and that must change. If FP&A wants to become the value-creators the business needs it must use AI to not only automate processes but to improve accuracy of the budgeting and forecasting process
Finance as a whole has lagged behind many other departments not only in its use of AI but its use of Advanced Analytics. A Dresner Wisdom of Crowds Market Survey found that only 20% of finance has deployed Advanced Analytics which is less than many other department included in the survey.
Despite low adoption of AI within finance we are starting to see momentum. A recent study by the Business Application Research Center (BARC) found that the use of predictive planning technology in corporate planning has increased from 4% in 2020 to 27% in 2022. This is a move in the right direction and signifies that FP&A departments and finance in general is more ready and willing to adopt AI than ever before. However, using it for predictive planning is just a start and broader adoption must occur for finance to get the full benefit of AI.
Using AI will allow FP&A to focus more on creating value for the business by simplifying and streamlining routine tasks, and assisting with some of our most complex analyses. Today FP&A departments spend most of their time collecting, consolidating and confirming data. All of these tasks are tasks that using AI can help automate. In addition to the above mentioned task other
ways exist for Artificial Intelligence to assist the FP&A department including:
🔸 Automated Planning - when a company builds a plan to reach a goal, there are endless routes the company can take to reach that goal. What AI does is computing all those potential paths, finding the best one given the company constraints and what is the company trying to optimize for (growth, cash, expenditure etc.). Artificial Intelligence further benefits from having all the actuals data flowing in from the company planning tool (ERP, HRIS, CRM, billing, etc.)
Analogy: Navigation software, the user inputs the destination, and the navigation software calculates the best travel route based on our criteria and constantly adjusts that route based on road conditions, traffic etc.
🔸 Risk Derived Planning - Using AI and probability-science can make it easier to understand the risks in our plan and develop scenarios to manage risk. AI is used in many areas of the business to assist in risk planning and managing risk and FP&A should be no different.
🔸 Forecasting - AI can help eliminate human bias in the forecasting process. Many companies (Facebook, Microsoft) are using Machine Learning to improve forecasts. Companies have more data than ever before and Machine Learning can help process that day to improve the accuracy of our forecasts.
🔸 Anomaly Detection - AI can find data anomalies and identify patterns that a human cannot easily do. An example of this would be month end variance commentary. Historically the FP&A department has had to research each variance one by one, often sorting through journal entries and transactional data to understand what is the primary driver of a change. With AI and anomaly detection one can often be directed to what specific items are driving the change.
🔸 Process Automation - Using AI/ML to automate and streamline routine tasks such as reporting, data sanitization and data unification from different data sources.
Moving forward FP&A must increase the use of AI/ML if it hopes to keep its seat at the table as a key strategic partner for business leaders across the organization. Using AI will allow for processes to be automated and for insights to be gained from data that is often not possible without new technology. One tool that embraces AI/ML is Fintastic. Fintastic combines all the benefits of legacy tools with the power of AI.
In the words of its founder Jonathan Einav: “We’re introducing a new approach in the FP&A world. We use probability science and risk derivative planning to provide actionable insights and recommendations that forever will improve the way companies make decisions.”
If you are interested in learning more about how Fintastic uses AI to help FP&A departments achieve its maximum potential, you can schedule a live, dedicated demo here!