Is artificial intelligence (AI) “disrupting” financial planning and analysis? We hear and read this a lot. But I challenge that premise. To me, the word “disrupt” means to interrupt, alter, or cause a disturbance or a problem. I don’t see AI that way. I see it as having the potential to enhance and/or improve the FP&A function. Semantics? Maybe.
I define AI as automated systems that are capable of ingesting information and instructions, learning from interactions with human beings and responding to new situations and questions in a human-like way. It goes beyond technologies such as Robotic Process Automation (RPA) that merely automate rules-based activities. AI enabled systems can recognize patterns and adapt to new situations.
While that may sound like science fiction, consider that not too long ago, the idea that you could talk to a machine and it would respond to questions or requests would have been considered in the realm of sci-fi. Now, thanks to advances in Natural Language Processing, i.e. Siri and Alexa, we can do exactly that. Similarly, AI is the future of FP&A and the larger finance function in the not-too-distant future.
How FP&A Benefits from AI
There is constant pressure on Finance to provide accurate and timely analysis to support effective business decision making. From the many discussions I have had with Finance leaders, there is overwhelming agreement that their business partners want a better understanding of the information and analysis they receive from them. They want and expect Finance to simplify it for them. AI, while not a complete solution, is a powerful tool to enable Finance to meet the business’s needs and expectations.
The benefits of AI are many-fold: it can help develop better, more accurate real-time reporting, automate trigger-based processes for compliance, and minimize manual interventions, thereby increasing the accuracy of forecasts. It can help to optimize the use of resources, increase productivity, and expand the number of scenarios and simulations that can be run in the least amount of time.
As organizations strive to foster an analytics culture for data-driven decision making, AI can be an important component, providing predictive and prescriptive analysis. AI can help the FP&A function develop a better understanding of the business’s key metrics and support development of a common strategic vision.
A Vision for AI-enhanced Businesses
FP&A teams can look forward to operating in a world where we have access to instantaneous and continuous insights in a low- or zero-touch environment. That enables the function to flourish by supporting the development and improvement in our people, data, processes, technology and performance indicators.
In an AI-enhanced FP&A operation, our people are highly-skilled and have the resources to not only perform effective root cause analysis, but to suggest actions that can influence and impact the organization, without huge amounts of effort.
We will have real-time data along with complete and accurate data in a timely fashion, and we will have it available from both external and internal databases on a real-time basis.
Our processes will be standardized at a global level. Reports will be automated and updated, mimicking human actions through existing user interfaces based on pre-defined rules. The ability to integrate the perspective of past, present and future performance will lead to better decision making and improved benchmarking capabilities.
Our technology will be automated tools, with guided interactivity and machine learning (ML) capabilities and cognitive tools with predictive and prescriptive insights. These new tools will support ad-hoc reporting that can leverage unstructured data. Our KPIs will be around lowered costs, real-time business insights, and our ability to provide customized services, provide decision support and value-enhanced advice.
Harnessing the Power of AI for FP&A
Too good to be true? The current state of AI deployment can be fairly described as “developing,” with organizations identifying practical applications and making initial investments.
I believe there are four components to the successful application of AI in FP&A: a well-defined, high ROI problem to be solved; easy access to clean and well-labeled data; robust and scalable algorithms, and computing power. Many organizations are already taking the first steps down that path.
I believe we, as a profession, are well on our way to developing, utilizing, and maximizing the power of AI. Change is often difficult, but it starts with believing it is possible. To quote Albert Einstein, “The world as we have created it is a process of our thinking. It cannot be changed without changing our thinking”.
This article previously appeared on LinkedIn.