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AI in financial planning has shifted from a set of novel applications like ChatGPT to an arms race with tools that can manage many financial processes. CFOs and finance teams are now deploying and customizing advanced AI in FP&A as a core necessity for continued growth.
AI technology includes components such as machine learning algorithms, deep learning, and robotics. It goes beyond chatbots and automating repetitive tasks to empower finance professionals with advanced capabilities that optimize reports, enhance decision-making, and navigate dynamic market conditions.
Integrating AI into Power BI, for example, helps finance professionals tackle some of their biggest challenges. This includes reducing the likelihood of manual errors in data management, improving forecast accuracy, and cutting the cost of producing large-scale planning. Let’s explore how AI is revolutionizing FP&A — and how it can help you overcome common financial challenges.
What’s Driving AI for Finance
An estimated 58% of finance organizations are using AI tools right now, up 21 percentage points from 2023, according to Gartner. Leaders tell the researcher that there is room for AI in financial planning across almost all business units and activities. Increased usage of intelligent process automation, error detection, and operational assistance makes sense given some of the core pressures facing financial leadership.
Pressure to Become More Agile
The CFO has become increasingly crucial in swiftly responding to valuable insights. With ongoing inflation and a global slowdown in output, unpredictable market dynamics have painted a bleak picture for essential financial factors like raw material pricing, inventories, and credit. The speed of change in these risk factors means any delay in decision-making can result in diminished quarterly growth, decreased market share, and potentially jeopardized job security. The need for timely action has never been more paramount.
Overwhelming Data Volume
Finance teams are utilizing a wider range of internal and external datasets. Consolidating and controlling data from these sources, technologies, and formats has reached a point where it has become exceedingly challenging. As organization complexity increases, more factors and departments impact financial performance. To maintain precision in forecasts and financial reports, teams must include data from numerous places, ranging from accounting software tools to CRMs and third-party Saas applications. Even minor errors can lead to discrepancies in the decision-making process, ultimately widening the divide between valuable insights and actionable business outcomes.
Greater Threats from Errors
The need to respond quickly to scenarios based on that increased data volume means finance teams face an increased risk of error — especially with any manual task like copying across datasets — and even a small error can have a cascading effect. Companies are adopting nearly any tool that can reduce the risk of errors or proactively search for them. AI’s ability to learn from mistakes and refine searches for a growing number of issues will make it a compelling option when it can keep up with finance’s growing data complexity.
4 Ways AI Can Improve xP&A
Extended Planning and Analysis (xP&A) is a natural evolution of traditional FP&A, eliminating barriers between finance and other departments while leveraging the data they can provide. AI finance tools are a natural fit. They enable companies to process this larger amount of data quickly to generate a holistic view of the business, improving the success of xP&A efforts in multiple ways.
Reduce Time-to-Insight
AI can bridge the data-to-insights gap by putting together data sourced from a variety of formats and condensing it to create financial models and reports. Best of all, it can recommend CFOs on which course of action to follow without any human input.
Unlike situations that are crippled by analysis paralysis, the self-learning and correcting approach to next-gen FP&A can help you act in near real-time. It saves countless man-hours lost in manually searching through each piece of information. Professionals can quickly respond to fluctuating prices, restock inventory levels, and prioritize payroll and operational spending to mitigate financial performance loopholes.
Enable Real-time Monitoring
AI doesn’t sleep. These tools can continually work at identifying patterns using the most up-to-date information, and automatically rerun assessments whenever data is updated. This can power strategic decisions, create alerts for significant deviations, or improve the accuracy of past projections. Real-time monitoring can help financial institutions understand performance and model accuracy, supporting immediate decisions as well as improving future demand forecasting.
Enhance Cleaning and Anomaly Detection
AI systems can look through large sets of historical data not only to improve forecasting but also to ensure new data sets are formatted correctly. Algorithms can quickly detect and even correct errors in data, speeding up the introduction of new information. Human approval of these steps will continually improve the accuracy of AI-powered tools. Similarly, that training can help AI identify unusual data points that could signify errors, risks, or opportunities.
Get a Handle on Big Data
AI in FP&A can also help you better manage zettabytes of information. Back in 2020, IDC forecasted that the global data volumes would reach 175 trillion gigabytes or 175 zettabytes by 2025, and we’re currently on track at 149 zettabytes.
AWS, Google, and Microsoft Azure cloud platforms paved the way in how data is stored and managed. However, converting unstructured into structured and useful data was where most businesses felt incapable of handling it. With generative AI, machines are learning how to handle these conversions for data analysis and even advanced functionality like fraud detection. Not only is unstructured data less of an issue, but that advancement is coming much more quickly and cost-effectively.
In the case of FP&A, legacy, Excel-based financial planning, budgeting, and reporting are already limited by the size of data volumes it can process. CPM solutions, in contrast, have enabled companies to be more adaptive in ingesting data from CRMs, spreadsheets, accounting software tools, and more to process and visualize data on tools using Power BI and Excel. With AI, CFOs can supercharge forecasts based on gigabytes of financial inputs cascading into various internal and external information.
Challenges of Using AI In Accounting and Finance
Leveraging AI in financial planning comes with significant challenges that could harm financial health if companies aren’t careful and vigilant with data and the decisions they make. Here are four immediate risks to financial processes and informed decisions when AI gets involved.
Data and Decision Transparency
AI systems and their decision processes are incredibly complex. This enables AI to review huge amounts of data to create informed decisions and forecasts. That can also lead models to become opaque in their decision-making processes. When that occurs, companies may struggle to properly audit data and decisions. If a mistake is made and not caught quickly, AI systems may also reinforce that improper decision and make it again. It becomes more difficult to correct errors when a system is opaque.
Regulatory Compliance
The black-box nature of many AI tools can create compliance risks when applied to highly regulated industries like finance. Systems must be designed to meet current regulatory requirements. The decisions companies make based on AI also must follow industry guidelines and rules. Data bias, discrimination, privacy breaches, and other threats can come with significant compliance threats or penalties.
Model Bias
AI models must be purposefully designed to avoid bias in their decision-making. Model bias may be a result of bias in the data or the decisions a company makes. If not corrected, historical issues can be reinforced by an AI tool. Something similar has been seen in mortgage-approval algorithms. Practitioners must be on guard against known biases in their industry as well as potential new issues that could occur for a variety of reasons. Companies will need people trained in model oversight and intervention to address these concerns.
Security and Integration
AI in FP&A applications typically involves looking at data across an entire organization. Much of the data collected and processed will be sensitive financial information or even confidential individual and company information. An AI tool may open up this data to unauthorized access or even breaches depending on access and guardrails. Companies will need robust data governance and security measures to protect investments and customer relationships beyond regulations like GDPR and CCPA. As an AI tool integrates more datasets and more people have access to its dashboards, the risk of exposure increases.
How Acterys Powers FP&A Processes Using AI
Acterys offers CFOs a comprehensive cloud-based CPM solution that empowers them with a consolidated platform for executing FP&A tasks and conducting highly precise financial forecasts. By utilizing a virtualized SQL data warehouse as its foundation, Acterys seamlessly integrates with a diverse range of data sources, such as CRMs, accounting tools, ERPs, SaaS applications, and numerous others, enabling unparalleled data connectivity and functionality.
Acterys also comes with a ChatGPT AI chatbot as part of its xP&A Suite. Here’s how this AI-driven tool simplifies and accelerates your FP&A processes:
Instant Answers to Data Questions
Need quick insights like “What’s the predicted growth rate for Product A vs. Product B?” or “What’s the gross profit margin across the US, EMEA, and APAC regions?” Acterys’ chatbot scans your reports in seconds and delivers answers in natural language, saving time and speeding up decision-making.
Intelligent Recommendations for Smarter Planning
Say goodbye to hours of sifting through data. Acterys AI identifies key trends across your internal business data and external financial research, providing actionable insights and saving valuable time. Stay focused on what matters most with recommendations tailored to your unique financial landscape.
On-the-Fly ‘What-If’ Scenarios
In today’s dynamic markets, agility is key. Acterys enables CFOs to run real-time “what-if” scenarios with ease. Simply input prompts reflecting the latest market data, and the AI-powered chatbot generates insights to support actionable strategies, ensuring your decisions are always informed by the most current information.
Ready to See the Power of AI Finance Tools?
AI for financial planning and analysis presents CFOs with multiple advantages in managing the increasing influx of data, swiftly addressing market opportunities and risks, and meeting essential requirements for competition in a post-pandemic world marked by financial impacts.
With Acterys, you can easily address all your financial planning and analytics needs. Ready to see how a unified approach can help your organization? Request a personalized demo today.
