What is AI?
The term “artificial intelligence” was coined in 1956 by John McCarthy and is defined by The Oxford English Dictionary as “The theory and development of computer systems able to perform tasks normally requiring human intelligence”.
It is thought that over the last 20 years, digital disruption has been responsible for over half of the Fortune 500 companies going out of business, and AI, or machine learning, is set to continue this disruption. Economists call AI a ‘general purpose’ technology, which means the technology will have both a direct and a spill-over impact on society, just like the development of electricity and internal combustion engines had in the late 19th century.
AI is now part of our lives, whether that is facial recognition to activate our phones, the Alexa device in our homes, or the automated text function on our emails. AI also has the power to transform business processes, with software to help across all functions including marketing, customer service, and HR. However, it will come as no surprise that as a Portfolio Finance Director, I am interested in how AI can help the finance function of my clients’ businesses.
How can AI help my business?
AI has the potential to save you time and money by automating repetitive, laborious tasks such as bookkeeping, invoicing, inventory, and payroll.
Time spent on data entry can be reduced with software that automatically captures data from sources such as bills, bank statements, and receipts. For example, the Xero integrated invoice scanning app Hubdoc can extract 70% of all financial documents such as receipts, invoices, and bills using machine learning. AI also uses mapping systems to ensure that the right data is saved in the right place which means further time is saved as you can search online rather than manually searching through filing cabinets (and looking for those misplaced receipts…).
Online payment service apps such as Stripe, use machine learning on billions of data points and help users by reducing payment fraud, increasing revenue across conversion, and revenue recovery. All these aspects can benefit a company’s cash flow. Furthermore, data from Xero shows that businesses using online payment services to manage their accounts receivable get paid faster, and with more accurate invoices being raised and issued quickly to clients, it improves the customer experience – win-win.
How to know what software you need
So, if the above has piqued your interest and you want to research systems to use in your own business, where should you start?
Identify your accountancy needs – what is it that you need help with? Putting your needs in priority order will help you identify the must-haves for the software and prevent you from being distracted by other attractive features. Once you know your must-haves, you can then spend time researching software that meets these needs. Remember to focus on what you need it to do, not what the technology can do.
Budget – be realistic about what you can afford and make sure you have a full understanding of the costs. Check with the provider that there are no additional costs or fees that you need to be aware of. AI has been the domain of huge corporates with multi-million budgets. That’s no longer necessarily the case with monthly subscription-based apps available at reasonable prices.
Security is a key concern so ask the provider to talk through their security features in layman’s terms.
What is their customer support like? What are their working hours and are they based in the same time zone as you? Do you have direct phone access or is it online?
Can they give you examples of how their software has helped other businesses similar to your own?
Be realistic about your business growth and check that any software will be able to grow with your company if required. You don’t want to have to spend more time switching systems if you find you outgrow your original choice.
Finally, it is worth checking that any software you choose is compatible with both your bank, to enable direct bank feeds and Making Tax Digital (HMRC has a tool on their website to help you find compatible products).
The death of accountants?
So now you know which system you want to use, you may be wondering what you need an accountant for? With the software taking care of the repetitive and humdrum tasks, a good accountant will have the time to focus on strategy and creative ways to differentiate your business from the competition. Your accountant will be able to help you design your “App-Stack” and implement the finance elements which will enable them to take large amounts of data from the system and model it for various scenarios (mind you, there are apps that are starting to do this too!). These insights will ensure more informed decisions can be made and the more prepared your company will be to survive the current economic downturn and indeed look to grow and succeed.
What the tech can’t do is understand your business, explain the numbers, and tell the story about where the business has been and where it is going. It cannot replace your accountant’s industry knowledge, connections, and experience with other businesses.
So for now, I believe that accountants are safe, though as a final thought, I fully concur with Erik Brynjolfsson and Andrew McAfee, who said in a Harvard Business Review article, “AI won’t replace managers, but managers who use AI will replace those who don’t.”
If you are an SME owner and would like some guidance on this topic then please contact me and I will be happy to help. I aim to simplify finance for business owners by tailoring my experience within large corporates to benefit SMEs. I have a passion to help business owners achieve their potential and would love to hear from you to see how I can help your business to thrive.