AI is a term that is thrown around constantly. Manufacturing, Customer Service, and Data Entry are all examples of jobs in which AI is attempting a makeover. Despite mixed success, employees and workplaces are planning for a future filled with integrated AI and human components.
FP&A is essentially a combination of the 2, as human planning intertwines with computing to produce the best possible financial model for the future of a business. With the world becoming more and more technologically focused and AI taking a stronger role, Will it replace human work in FP&A as well?
A recent DataRails and University of Baltimore study found that dysfunctional financial reporting processes are set to cost US businesses $7.8 billion in 2022, which includes $1.7 billion in lost economic opportunities for FP&A teams. With numbers like that, AI seems like a great solution to replace the slow, biased FP&A decisions that are prone to human error!
However, the biased and human aspects are what sets FP&A apart from jobs that have been replaced by AI. Automation is able to successfully replace predictable and manual job descriptions such as bookkeeping and data entry, but predictability is what differentiates it from FP&A.
Why FP&A is unique
Wikipedia describes Artificial Intelligence as “when a machine mimics 'cognitive' functions that humans associate with other human minds, such as 'learning' and 'problem-solving'".
Here lies the problem. “Mimicking cognitive functions” is not a one size fits all answer as it is with other solutions that AI replaces. In FP&A there are simply too many human factors that AI can't replace. The human ability to take risks, gut feelings, and abundance of emotions are what makes FP&A both successful, and sometimes unsuccessful.
Encyclopedia Britannica expands on the role of AI: “Still, despite continuing advances in computer processing speed and memory capacity, there are as yet no programs that can match human flexibility over wider domains or in tasks requiring much everyday knowledge.”
Similarly to how there is no AI that can accurately predict the stock market due to its unpredictability and unlimited influencing factors, FP&A has similar characteristics as well. There is no one solution for FP&A, (and just like the stock market) even if there was one, the repercussions of everyone using this “guaranteed success” would disrupt the market and influence the economy in ways that the program wasn’t able to predict, essentially rendering it useless!
This doesn’t mean that AI has no room in FP&A. In fact, experts have shown that the right combination of AI and human input will provide the most efficient FP&A results for the company, and cut down on the huge amount of money lost in financial reporting processes.
Here are a few of the ways that AI contributes to financial planning:
Makes more calculated decisions- While AI will not make the final decision, it can help speed up the process by a large margin. When a person deliberates, they go through many things in their head including all of the data, past experiences, and emotions before they come to a conclusion. If technology can gather all of the data and automate numbers and manual tasks, then the finance professional is already 2 steps ahead. Instead of wasting time and energy on these tasks, more brain power is available for the aspects in which human intelligence is critical.
Real time actions and updates- AI not only helps organize previous data into time saving formats but it also provides real time updates that humans simply can’t provide. Real-time detection of online fraud, and re-planning parts of the organization based on adverse results are both examples of ways AI can learn about the organization and give helpful real-time results.
Forecasting and Predictions- One of the biggest strengths of AI that performs significantly better than humans is predictions and hypotheses. The human mind is usually biased one way or another, and will not think of nearly enough future positive and negative scenarios. This is one of the biggest problems in FP&A, and where AI plays a role. With a comprehensive list of scenarios already on hand from an automation platform, finance professionals and managers can then go through them in order to predict and analyze. This not only saves the time it takes to create the predictions, but it also balances out the human biases intrinsically involved in thinking ahead.
Overall benefits of automation- In addition to the forecasting and predictions, along with the more calculated decision making mentioned above, comes many more direct and indirect benefits to AI. Allowing more time for finance experts to use their skills and experience instead of constant manual inputs, gives both employees and managers a feeling of efficiency that increases motivation. This also leaves more time for employees to learn new skills, one of the biggest reasons that is cited as fueling the Great Resignation.
In conclusion, AI is a great tool that has already disrupted many industries and even overtaken quite a few. However, it has a unique place within FP&A. Finance experts don’t need to worry about AI overtaking them, and can even embrace automation as it improves financial planning in numerous ways, contributing to an efficient FP&A process.
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