Artificial intelligence (AI) is changing the face of American businesses. AI and machine learning are reshaping everything from marketing to financial management. Controllers and CFOs need to understand just how this new technology can impact their most important processes.
What Is Machine Learning in Finance?
Artificial intelligence (AI) is an umbrella term that refers to software that can mimic human decision-making processes. Machine learning is a subset of AI — it’s the capability of using statistical data to improve (or “learn”) over time.
Machine learning can be used for a variety of financial applications ranging from assessing credit risk to approving loans to managing corporate financial tasks.
Financial professionals rely on these tools to help them analyze complex patterns; software can provide analysis at faster rates than any human. And the adaptable nature of machine learning can help organizations remain flexible, adapting to changing market conditions or shifting internal processes.
Ways AI and Machine Learning Can Improve Your Financial Management
How can CFOs and controllers use AI and machine learning to enhance their financial management processes? Here are four main areas that AI can dramatically improve.
Financial Forecasting
An AI-powered platform can evaluate historic data relating to supply and demand, sales figures, inventory management, and internal costs. The software can then generate models that reliably predict future supply and demand and operational costs based on historic analysis.
At their simplest, these tools can help financial professionals produce accurate sales forecasts.
AI can evaluate past trends in supply, demand, and the cost of goods sold (COGS) and use this data to generate a roadmap for future sales. But machine learning can integrate many different data streams, providing forecasts for virtually any area of your organization for which you have reliable data.
Because machine learning is, by definition, adaptable, you’ll be able to leverage these tools to put together financial forecasts that adapt to a changing financial climate. In other words, you’ll be able to make reliable forecasts while also staying flexible in the face of market volatility and economic uncertainty.
Risk Management
Today’s corporations face an ever-evolving set of industry and government regulations, to say nothing of the omnipresent threat of fraud and cyberattacks.
AI and machine learning can assist with compliance and risk. For instance, advanced software can review contracts for you, making sure that vague language is given greater clarity and that the terms of your contract conform to established regulations.
The best platforms can even use machine learning to compare contracts to the “preferred language” of your corporate database. When contracts deviate from this language, the software can assess a risk level (e.g., high, medium, or low) to help you make a decision about moving forward.
Fraud Detection
Fraud detection has historically been within the purview of forensic accountants and legal specialists. But AI and machine learning are making it easier to detect fraud and prevent the loss of company data and resulting damage to your reputation.
AI-based platforms can monitor your financial transactions and compare each to historic data. When a transaction occurs that deviates from previous patterns, the system can flag it for suspicious activity. As a result, organizations can identify suspicious activity and fraud attempts in real-time.
Best of all, machine learning allows the system to remain flexible, adapting to new patterns and trends to avoid future conditions that relate to fraud. And if the same fraud attempts are made over time, the system can provide guidance on how to improve cybersecurity to prevent future threats.
Investment Decision-Making
The best investments demand careful planning and research. Investors will need to look at data such as revenue growth, industry trends, corporate structures, and changes in the economy that might influence the price of an asset.
AI can do that for you. AI and machine learning can evaluate historical trends and make reliable predictions about a company’s future success or the upward trajectory of a given asset. This way, AI and machine learning tools can help you make more reliable investment decisions, often delivering actionable results in nearly real-time.
This is helpful for organizations making investments in other companies or assets, but it might also help a company communicate its own worth to investors. AI-driven tools can provide a data-driven analysis of your organization’s financial health, showing investors the value of making an investment.
The Right Tools for the Right Leader
Machine learning and artificial intelligence are here to stay. In fact, these tools will continue to transform many aspects of modern business. Companies that expect to maintain a competitive edge will need to learn to leverage these technological solutions to improve their performance as well as their financial health.
No technology can ever replace the decision-making power of human leadership, but with the right tools, business leaders can make strategic decisions that drive the company forward.
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