Sponsored by Ramp

AI has played a starring role in most functions over the past year, with countless products hitting the market promising to revolutionize how things are done. The finance department is no different; from automated fraud detection to intelligent chatbots providing real-time spend analysis, the technology certainly has the potential to relieve repetitive tasks from personnel.

However, while AI certainly has promise in finance teams, so far, the tangible impact of these products has been minimal. Eric Glyman, the co-founder and CEO of Ramp, told Bloomberg: “I think far more companies are marketing the use of AI, how their chatbot’s going to revolutionize the industry, than are truly trying to solve problems.

“I’ve never met a customer who said, ‘I just wish I could chat with my bank account, I would ask it questions and learn things.’ Instead, they tend to ask things like, ‘I’d like to pay less for this service I’m paying for, I’d like to automate my accounting and close my books quicker.’

“I think, often, if you see companies claiming AI but you can’t find real customers behind it, they’re not talking about how they’re integrating AI truly into the workflow, their software is probably ‘AI washing’.”

AI products that don’t solve actual pain points are examples of AI washing. In these solutions, automation might be too complex to set up or not fit for purpose, so accounting teams remain bogged down by basic operational tasks like chasing employees for receipts and coding transactions manually, while finance leaders are still tethered to stale data for important business decisions.

Many companies market AI without genuinely integrating it into their products’ workflows, and finance leaders may not become aware of this until after investing in it. As a result, they become skeptical over whether they’ll actually see any payback from their investment. In 2020, a BCG and MIT study found that only 10 percent of organizations saw “significant financial benefits” through increased revenue or cost savings after implementing an AI solution.

So how can finance teams select AI that’s actually worth their while? Before investing in a new AI-powered solution, it is wise to audit the organization’s needs. This way, decision-makers can be sure that the solution aligns with actual pain points and workflow requirements, preventing costly missteps and disappointment.

Auditing AI software for your finance team

1. Will it speed up work?

A good place to start is thinking about how it can speed up work. AI has the potential to take on demand/revenue forecasting, anomaly and error detection, and financial reporting, to name just a few of its abilities. As a result, finance professionals can shift their focus to more value-added activities, such as strategic analysis and decision-making.

Mark D. McDonald, senior director of research at the Gartner Finance Practice, said: “Forecasting is a popular use case in finance departments because legacy processes are manually intensive and notoriously unreliable. AI excels at automation and improving accuracy.

“Many pre-configured software packages address common finance processes such as accounts receivable and accounts payable but be aware that use cases which address unique business needs, such as forecasting, will require some internal skills to build.”

Reporting is another common time-consuming area for finance teams. Generic chatbots can be marginally useful, but those actually trained on a company’s data can perform deeper analysis to provide valuable and actionable insights. Access to such insights will also be accelerated if the bot responds to natural language commands.

2. Will it increase accuracy?
   

As Mr McDonald highlighted, another aspect to look out for in AI-enhanced finance products is how it can make things more accurate. Machine learning algorithms can identify and organize data from various sources in a single place, reducing the scope for human errors. In finance, this encompasses coding expenses, checking for inconsistencies in financial statements, and ensuring compliance with regulations. However, as before, a product that offers these features will only be a worthwhile investment if it aligns with the organization’s specific needs and challenges.

Source: Shutterstock

For example, if finance teams are suffering from long close processes, look for finance software that offers accounting AI. These days, expense coding can be automated with an algorithm trained on coding data from tens of thousands of accountants. Human errors in expense reporting could be eliminated with AI-scanned receipts that are instantly matched to transactions and suggested memos from each receipt’s context.

“Automating back-office workflows is a key to achieving efficiency gains across a number of areas, including accounts payable, accounts receivable, and internal IT services, such as helpdesk support,” said Randeep Rathindran, vice president of research in the Gartner Finance Practice. “In a cash-constrained environment, where margins are under pressure, the urgency to improve productivity in these areas is heightened.”

3. Will it save money?

Finally, when auditing the company’s needs for an AI-enhanced solution, business leaders must consider where it could save money. Productivity increases could present savings indirectly, but there are potential direct benefits to be accrued, too.

AI has the potential to make vendor price comparisons for accounts teams, for example. Ramp’s finance AI offers price intelligence that helps finance leaders get the best deal by bringing the wisdom of the crowd to software pricing. Finance teams can upload software contracts and, powered by GPT-4, Ramp extracts pricing details and benchmarks them against millions of Ramp transactions. This provides visibility into software pricing down to individual SKUs and cost per seat, so finance teams instantly understand whether they’re getting a fair price.

AI can also catch out-of-policy spending by analyzing expenses against established guidelines and alerting finance teams in real-time, potentially saving the organization from resource-intensive compliance issues.

The demand for well-integrated, useful products in accounting and finance is there. A report from Accenture found that 84 percent of C-suite executives believe they must leverage AI to achieve their growth objectives. Ramp’s finance platform has been built with AI as a core component from day one to ensure that all its features address real challenges for finance professionals and help organizations scale successfully. To explore the AI capabilities of Ramp and witness the impact it can make on your business, schedule a demo with the team today.

The post Practical ways to use AI to improve your organization’s finances appeared first on TechHQ.

By Edwine Alphonse, Senior Controller at Ramp

The accounting month-end close process can be a routine that many finance teams dislike. Siloed data, unreconcilable reconciliations, inefficient tools, and clunky approval workflows turn what should be a smooth journey into a frustrating ordeal.

When I joined Ramp in 2021 as the first controller, our month-end close took 30 days. We were using an outsourced accounting firm that struggled to meet our timelines because they did not have proper access to all the required information. Financial statements were prepared manually. There were no controls or reviews. From day one, I set out to improve our close time to achieve one of my professional goals of a continuous close process or daily close. Through a combination of tooling, process, and resourcing improvements over the last two years, we’ve cut Ramp’s close time down to five days.

My experience at Ramp and similar companies demonstrates how automation can transform the relationship that controllers and accountants have with their close. By offloading some of the most repetitive and time-consuming tasks to technology, my team members no longer feel chained to the close calendar and spend more time on strategic projects and cross-functional initiatives. They have a better work-life balance too.

Our company management has benefited as well from faster insights. After all, the accounting mandate is to deliver timely and accurate information to management so they act promptly. A study from Ventana Research shows only 39% of finance departments with month-end close periods longer than six days say they can provide timely information to the business. This increases to 62% if the close takes six days or less.

Despite these findings, some CFOs and finance leaders remain reluctant to invest in new tools. While they understand the benefits of automation in theory, they often feel their operations are unique and implementing new technology would require significant financial and time investment.

However, wholesale change simply isn’t necessary. There are a few strategies that businesses can take to speed up the month-end close with minimal disruption to operations; here are my top recommendations:

1. Start by auditing your close

Run a comprehensive audit to identify where you can formalize roles and processes, and reduce unnecessary work. Create a detailed checklist that outlines all the steps involved in the close. How are you reviewing cash transactions and prepaid account reconciliations? Who’s responsible for verifying that invoices are categorized to the correct accounts? How are you reconciling your account receivables? How often do you review your provision? Assign an owner and due date to each of these tasks. Here’s an example close checklist we use at Ramp.

Set up service-level agreements with your internal and third-party partners to enforce accountability and timeliness. Finally, consider adopting specialized close management software, such as FloQast, to streamline the entire workflow.

2. Frontload your credit card and accounts payable reconciliation 

The close process doesn’t have to start at the end of the month. With automation, you can frontload much of the reconciliation work needed for card transactions and vendor invoices.

Issue  to control employees’ spending and automatically collect their receipts, eliminating the need for manual expense reports. The best card providers offer this kind of software for free. Expense management software can also guide employees to code their own transactions, alleviating more work for your team.

Source: Ramp

Similarly, use AP automation tools to scan your invoices, route them for approval, and two-way match purchase orders to minimize the risk of fraud and payment errors. Sophisticated tools can even extract line items from your invoices and automate coding. This proactive approach not only accelerates the month-end close but also cultivates a more controlled and efficient financial operation.

3. Integrate your tools

As companies grow, they tend to collect a set of disparate systems and tools for processing card transactions, reimbursements, and AP invoices. Assess your tech stack and see if it’s time to clean up technical debt and invest in integrations. Examples of useful integrations include:

• Connect your organization’s email tools, such as Gmail or Outlook, to your expense management platform to automatically collect employee receipts.
• Link your expense management and AP tools with your ERP to enable real-time data sync and eliminate the need for manual data entry.

Source: Ramp

Consider consolidating tools wherever possible to streamline your workflow and save costs. For instance, spend management platforms can now help you track and process card payments, invoices, and reimbursements all in one place in real-time and sync data directly to the ERP. This allows for smoother data flow and more accurate reporting.

4. Migrate to enterprise ERP software

Speaking of ERPs, if you struggle to prepare consolidated financial statements and need better audit controls across entities, it’s time to upgrade your ERP. Enterprise accounting ERP software, like NetSuite, Sage Intacct, and Xero, are purpose-built to enhance month-end closing efficiency. Our transition from QuickBooks to NetSuite was critical in helping us reduce our close time from ten to five days.

Migrating to a new ERP requires careful planning and executive commitment. Before beginning the transition, it is a good idea to craft a comprehensive project plan. Securing executive support, building a capable team, setting realistic timelines, and monitoring progress through regular updates are all crucial for success. I recommend working with an ERP implementation partner to help you properly assess your current and future needs and choose a solution that aligns with your company’s growth trajectory and financial objectives.

5. Automate internal reporting

Ventana Research says 88% of companies that apply a substantial amount of automation to their close can close their monthly books within six business days, compared to only 40% of those that don’t. After small, repetitive tasks have been automated—for instance, receipt collection or matching and transaction coding—you can work up to larger workflows, like product accounting and other internal reporting.

At Ramp, I worked with the engineering team and our finance partners to automate reports like revenue transaction ledgers, accounts receivable listing, and cashback reports. This streamlined our accounting, reduced our reliance on third parties, and was another key factor in shortening our month-end close time to five days. Leveraging automation allows your team to focus on high-value tasks that require human expertise while routine tasks are executed accurately and swiftly by the software.

Set your finance team free: Start automating your close

These are a few proven strategies to help you shorten your close. Ultimately, the changes that will have the most impact depend on the current state of your close. Here’s a useful framework to help you assess what changes to consider next.

Source: Ramp

If you’d like to learn more about Ramp’s journey to a five-day close, check out my recent webinar on the topic. For more information about Ramp’s accounting automation, visit ramp.com.

The post 5 solutions to help you speed up your month-end close appeared first on TechHQ.