Author: Peter Theisen

Embracing change can be challenging for risk-averse accountants and chief financial officers (CFOs). However, with artificial intelligence (AI) and advanced technologies becoming increasingly prevalent, finance leaders must adapt to avoid being left behind.

Because the role of the CFO and finance function has evolved, demanding a delicate balance between stability and transformation. While managing risk remains a priority for CFOs, the rapid pace of technological advancements demands a proactive approach.

To drive value throughout the organization, finance must adopt new approaches, tools, perspectives, organizational structures, and skills, particularly in data management. 

However, CFOs express uncertainty about the effectiveness of their own finance organizations, highlighting the need for improvement. 

This article explores how CFOs can integrate AI into their finance functions, emphasizing the importance of quick wins and the potential for AI to transform budgeting, forecasting, and mundane accounting tasks.

I. The Paradox of Responsibilities: As guardians of stability and agents of transformation, CFOs face elevated expectations and opportunities. To fulfill their duties effectively, finance needs to embrace new approaches and leverage data-driven insights. However, surveys indicate that CFOs are uncertain about how well their finance organizations are meeting these challenges. In the IBV 2022 C-suite CFO Study, two in five CFOs stated that their organizations are not effective in executing traditional finance tasks, highlighting the need for improvement.

I. The Need for Adoption: AI's Impact on the Finance Function: Despite lingering uncertainties about the large-scale adoption of AI in the finance function, doing nothing is not a viable option. According to a Gartner study, by 2026, AI and automation will drive a significant shift in the backgrounds of new employees hired by top-performing corporate finance functions. To keep pace with industry trends, CFOs must embrace digital competency and equip their teams with the necessary skills. Currently, only 18% of finance staff demonstrate digital competency, compared to just 11% of their managers.

II. The Need for Data in Finance: To enhance effectiveness and decision-making, finance must leverage the right data at the right time. According to the IBV 2022 C-suite CFO Study, only 47% of CFOs believe they excel at measuring and managing performance, and only 38% say they are effective in planning and executing strategy. Control and risk management effectiveness has also declined by 31% since 2013. These statistics emphasize the urgency for finance to adopt new tools and approaches.

III. Shifting Perceptions and Investment Focus: Investment firms are recognizing the potential of CFO software and services as a lucrative growth area. Excel's limitations in managing complex tasks have prompted CFOs to seek cutting-edge tools for budgeting and forecasting. AI technology offers the ability to generate multiple scenarios efficiently, providing valuable insights for decision-making. Small wins through AI adoption serve as motivators for further integration, empowering organizations to create the right vision and identify opportunities for transformation.

IV. Realizing Quick Wins and Motivation for Change: Companies are embracing AI in the finance function by starting with small-scale projects that deliver immediate benefits. CFOs, such as Dev Ahuja of Novelis Inc., are developing in-house machine-learning technology for cash flow forecasting, setting the stage for larger initiatives. Quick wins demonstrate the value of AI, motivating organizations to pursue more ambitious projects. Empowering the entire organization and fostering a collaborative team approach are essential for successful implementation.

V. Pandemic-Driven Tech Adoption and Overcoming Inertia: The COVID-19 pandemic has accelerated technology adoption, prompting finance teams to embrace AI solutions. Bank of America's CashPro app witnessed a surge in popularity during the pandemic as remote work became the norm. The app allows corporate finance teams to manage operations, view cash positions, approve payments, and conduct financial scenario forecasting using machine-learning technology. However, inertia remains a significant obstacle to wider adoption, with Excel often seen as a competitor rather than a catalyst for change.

VI. The Power of AI in Driving Finance Transformation: AI presents an opportunity for finance to overcome the challenges it faces in balancing stability and transformation. By leveraging AI for data analysis, automation of routine tasks, and predictive modeling, finance can enhance its ability to measure and manage performance, execute strategic plans, and strengthen control and risk management processes. The adoption of AI technologies can increase efficiency and improve decision-making by providing finance with timely and accurate insights.

VII. Changing Perceptions: Transforming Finance from Cost Center to Strategic Partner: Successful implementation of technology transforms finance teams from cost centers to strategic partners within the organization. Advanced analytics and AI-driven insights empower treasury and finance teams to contribute to core business functions. By leveraging AI, finance teams can play a more proactive role in driving the company's success and influencing key strategic decisions.

The evolving role of the CFO and finance function demands a proactive approach to enhance effectiveness and drive value. While CFOs express ambiguity about their organizations' performance, the IBV 2022 C-suite CFO Study highlights the need for improvement in executing traditional finance tasks, measuring and managing performance, and planning and executing strategy.

By embracing AI technologies and leveraging data-driven insights, finance can make better decisions with speed and efficiency, ensuring that resources are allocated optimally. The integration of AI in finance operations will enable finance to fulfill its responsibilities as both guardian of stability and agent of transformation, propelling the organization towards success in a rapidly evolving business landscape.

For CFOs and finance teams, embracing AI is no longer a choice but a necessity to remain competitive and drive organizational success. Overcoming inertia and integrating AI into the finance function requires a focus on quick wins, empowering the organization, and fostering collaboration.

By harnessing AI's potential, CFOs can transform budgeting, forecasting, and accounting processes, positioning finance as a strategic partner within the company.