Has your controlling manager recently talked to your enterprise resource planning (ERP) system? Do you already use robotic process automation (RPA) for risk management – for example, to monitor money laundering and fraud in your company? Are your worldwide customer bookings being monitored by rule-based artificial intelligence (AI) systems in real time, and are they notifying you of any anomalies?
Those who answer yes to most of these questions are among the pioneers in the application of artificial intelligence techniques and technologies in their financial management processes.
Worldwide, the software industry, corporate finance departments, and financial service providers are working at full speed to find out where new AI-based processes might yield the biggest economic benefits and where AI can reproduce human labor efficiently. More than 70% of all finance organizations are planning to process large amounts of financial data in the near future with AI – at almost zero costs compared to today – and with much lower vulnerability to human errors alike.
AI in financial management today
Even today, the software industry is advanced enough to provide many useful AI applications in financial management in order to be more focused and cost-effective. For example:
- Recording of invoices and bookings in accounting can make use of computational linguistics and natural language processing (NLP) methods.
- By automating data retrieval, the cumbersome collection and processing of management reports is more efficient, even in smaller companies. New rule-based and self-learning systems are collecting and integrating data for reports and analysis more effectively than any employee can. This opens new opportunities to recognize patterns and identify new areas of focus.
- The compliance department has new opportunities to automatically understand and evaluate texts and reports that fall into their scope by using language-based or rule-based software.
- The preparation of financial statements will be partially automated. The requirements for any global accounting standards, such as IFRS, or even local standards like GAAP, are automatically taken into account by the AI agents.
But despite all the euphoria and techno enthusiasm, there are other, less positive aspects associated with AI. Many companies are threatened with the loss of valuable employee knowledge due to possibly misleading information and wrong decisions made in implementing automation technologies. Whenever automation maximizes efficiency, it also impacts people and their roles. Thus, from an organizational standpoint, AI technologies also have a massive impact on HR structures, responsibilities, and roles along the whole financial management process. AI is putting an end to organizational charts as we know them today.
The impact on employees and organizations
“Overall, we will see a tsunami of new AI-based technologies rolling over the finance department within the next three to five years,” said Prof. Dr. Kai Reinhardt, chair for Digital Organization Development at HTW Berlin (School of Technology and Economy, University of Applied Sciences, Berlin, Germany). In his view, almost all sub-processes in finance will have the technical potential to apply AI technologies. Together with a team from HTW Berlin, he is currently involved in a research project (in collaboration with SAP) studying the effect of AI on employee skills, competencies, and roles in the finance department.
According to the researchers, the increase in automation, especially applied to transactional and repetitive standard tasks, removes a large part of less-complex tasks within employees’ individual role profiles. Translated, this means that many companies are faced with deciding what happens to their employees’ freed-up time. On one hand, it can lead to restructuring and eliminating redundancies, however, this risks valuable knowledge being lost. Studies show that up to 50% of the positions in finance could be affected by automation. On the other hand, are the employees’ competencies becoming redundant? Should a majority of employees really leave the company only because of AI? Or are there ways to develop new competencies and workforce structures from a strategic perspective?
“We are currently looking for answers to these questions in our project,” said Professor Reinhardt. Specifically, the research team is investigating how much effect the AI-based technologies are having on any concrete process step within financial management. “Our prediction is that technologies such as RPA and speech recognition are unleashing massive technological potential, but we believe that the changes for employees are not as bleak as the consulting industry wants us to believe.”
A comprehensive redefinition of roles
According to the researchers, the downstream impact of technologies could be less destructive and radical. Rather, technologies could lead to a comprehensive redefinition of personal roles, responsibilities, and competency structures in the coming years. “It’s about making the employees fit to handle the new technologies and to strengthen their skills,” emphasized Professor Reinhardt.
Fundamentally, the researchers see two key developments:
First, the existing role profiles and competency models need to be adapted and further developed for all employees, especially in the finance organization. This is all about a higher qualification of employees and deciding which strategic/high-value tasks, like business support, employees can take on.
On the other hand, it involves the deep integration of AI-based tools in their individual work environments. “Decisive for dealing with the AI-induced change is the homeopathic and user-friendly integration of technologies into the working environment,” he remarked. One success factor will be to evaluate the roles in financial management relative to the influence of artificial intelligence on the skills needed, from accountant to credit analyst and treasurer, up to the director level. Demands on new skills in all roles along the financial core process will increase and will be very different from today, according to the researchers.
Survey: please participate
The survey for this particular research project is closed, but we kindly ask all finance professionals to participate in our Finance Audience Persona Insights study.