Chief Financial Officers (CFO) need to get their skates on if they want to be ready for the potential disturbances of the next technological revolution. If the words of the World Economic Forum (WEF) are to be believed, commercial Artificial Intelligence (AI) will intensify its presence in 2018.
AI has many definitions but one of the most succinct describes it as the development of computer systems that can perform tasks normally requiring human intelligence such as speech recognition, decision-making, language translation and visual perception.
The year 2015 is considered the turning point for AI when it moved out of the laboratory onto centre stage. As Andrew Moore, the dean of the School of Computer Science at Carnegie Mellon University explained, “the kinds of massive scale machine learning which was previously only available to the likes of Google and Microsoft, became available to many researchers through advances in computer technology.”
Consequently, many start-ups in the past year have an AI focus. According to researchers at CB Insights, 2016 was a record year for AI startups. The number jumped from 160 deals in 2012 to 658 in 2016. Although non-US deals have increased, about 70 per cent were US startups. These AI startups ranged from retail to medical and included finance players.
AI requires large databases so that programs can learn from the past to anticipate the future. Moore remarked that AI has the potential to “remove the boring parts of white collar work.” When it comes to the processes that CFOs depend on, futurists expect AI will result in the automation of manual tasks in the finance department at faster speeds than the human brain. The immediate production of real-time balance sheets and other analysis could allow businesses to react quickly to customers’ changing needs, identifying cost savings or producing better products.
AI is already beginning to automate tedious tasks such as data entry. But automation is occurring at the staff level, and it will creep up the corporate ladder and begin to automate higher level accounting jobs, predicts Michael Whitmire, CEO and co-founder of FloQast, an accountancy software startup. According to the experts, the finance function of the future will depend on fewer people who have a higher quality skill set that allows them to undertake analysis and insight tasks. Accounting departments might employ fewer people, but those remaining will be able to focus on more strategic initiatives such as process improvement, cost control and capital optimisation.
Audit quality is forecast to be a beneficiary of AI because auditors will be able to ask more questions through the improved efficiency that will provide better insights. Whitmire says that accountants will still need to have an understanding of technical accounting guidance, whether it’s GAAP, IFRS or both. Not surprisingly given the high technical nature of AI, one area of change is likely to be the addition of IT-focused employees directly to accounting departments. They will specialise in implementing and maintaining various pieces of software.
One piece of advice for CFOs when getting up to speed with AI, is to start small. Start with solving a problem that, should it fail, will not upset the business’ strategy. Then build up on this experience. One example of this approach is illustrated by William Buck’s Sydney-based director of audit and assurance, Leo Tutt. Tutt, who works closely with a range of charitable organisations, is currently involved with a charity engagement business that is developing chat-bots to drive engagement, donations and social media profiles. Chat bots use a form of AI known as natural language processing that allows a machine to interpret simple questions posed by humans. And while the venture is still embryonic, the approach is something a CFO could adopt.
AI has yet to reach the stage where accountants can hang up their shingle for good or a CFO can handover the office keys to a robot. While not all roles will disappear, CFOs will need to weigh up the types of employees and skills needed, and match them with the most appropriate roles. And do it sooner rather than later.