So, how can a business budget effectively? A budget is most effective when all its budget holders work collaboratively alongside the finance function. The more involved budget holders are in creating their budgets, the higher the likelihood they will be engaged in the whole process and indeed be inclined to work harder to ensure budgets are met and exceeded.

Getting started

Although budgets are a forecast of expected income and expenditure, we can use historic performance as a baseline to check assumptions we are making when producing our budgets. It can be difficult to predict future revenue especially for businesses working on a project by project basis. Gross profit margins can vary between projects. Overspending is often inevitable when staff need to meet a brief and just get things done.

Past data can be a great starting point for your new budget. Due to the increase of artificial intelligence and automation within finance, budgeting is more insightful and accurate than ever before. However, there is always an element of uncertainty to consider, especially for new businesses who haven’t yet accumulated any past data for insights on expected performance, or those entering a new market. Even the slightest change within a small business can impact the financial future of the company. For example, government legislation changing minimum wages or pension contributions which are out of your control need careful consideration and planning.

Understanding the risks

It’s crucial to understand your current situation and, so, be able to pre-empt any risks in your business model. There are always unexpected costs that arise throughout the course of operations and having a contingency within your budget can help absorb these risks. Preparing your budget with these unexpected costs in mind, (such as equipment needing to be repaired or replaced) will keep your planned expenditure as realistic as possible. Once a stable yet realistic budget has been agreed, the regular monitoring of progress against this becomes critical for the full process to be effective.

Keeping on track

Producing budget vs actual reporting can highlight variances at an early stage to give a company opportunity to address what has caused any overspend or difficulties meeting the revenue forecasts. This constant check against budget proves to be a valuable piece of management information to monitor financial health and performance for company owners, shareholders, budget holders, the finance team and wider business.

Change is the only constant

Budgets are never static, they evolve and change over time. By re-visiting your budget at regular intervals and adjusting it accordingly, the more accurate your budget becomes. This will enhance the power it gives the business to make those important financial decisions. So, what are you waiting for?

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Coming for our data, coming for our jobs, and (if the more dramatic reports are to be believed) coming for our very existence.

Or are they?

Let’s pick apart the A.I. fact from the hype and see where the real opportunities lie for the future finance function.

They are already here

A.I. is already transforming core functions of a typical accountant. Repeated processes based on structured data are ripe for automation. Things like:

• Invoice chasing
• Matching and reconciling transactions
• Invoice coding
• Anomaly and fraud detection

After all, A.I. is measurably faster and more accurate than us fleshy meat-bags at these repetitive tasks. And besides, this work is pretty boring anyway…

They are getting smarter

Nerves start to jangle when we see the next wave of intelligence starting to be deployed. Recent advancements in natural language processing and machine learning helps A.I. deal with both the nuances of text and the ever-present ambiguity of a business’s finances. This brings a far greater swathe of traditional accountancy work into reach. We are starting to see:

• Fully automated bookkeeping
• Advanced report creation and statutory filings
• Analysis of legal and tax documents
• Deep predictive analytics
• Smart audit assistants

Certainly starting to encroach on some classic value-add activities of a typical finance function.

    [You don't need to see another generic yet ominous picture of a robot using a keyboard]

          (what kind of self-respecting robot needs to use a keyboard anyway...??) 

Expectations are changing

People’s beliefs of what technology can do for us is fundamentally changing. Across almost all industries, there is a growing expectation that automation will be bundled along with core services. As we shop online, we expect to see helpful recommendations; as we get into a car we expect it to direct us to our destination (and soon to take us there altogether); as we bank we expect to get smart alerts and reminders.

Accounting is no different. There will, of course, be adjustments needed as traditional tasks are commoditised and old revenue streams dry up, but this also raises huge opportunities. This is not a zero-sum game.

A prosperous co-existence

In a business context, A.I. is nothing without people.

While A.I. unlocks accounting superpowers, finance professionals are needed to put them to good use. Tool selection and setup, ongoing interpretation and tuning, and – of course – accountability are all roles which will need a human touch for the foreseeable future. After all, with great power comes great responsibility.

More importantly, as accountants’ time is freed up from menial tasks, they can shift their focus to a higher level, the strategic objectives of the company. Advisory services will become a fertile and lucrative hunting ground. Goodbye business policeman, hello business partner.

Power to the people

Vendors will often say you just need a smart new machine learning tool or shiny dashboard to gain a magical insight into a business. However, as any good A.I. engineer will tell you, an algorithm is only as good as the data it has access to.

This means, when trying to truly understand the workings of a business, you have to engage the real driving force – its people. Their knowledge, understanding of risks and plans for the future are always essential for true insights.

Here, A.I. can be an enabler – removing bottlenecks and giving people superpowers.

And ultimately it is a tool of empowerment – helping information flow more freely and enlightening decision-making.

Not so scary after all.

Bringing this to life

In order to build this deep partnership, it’s essential that your systems:

1. Truly understand the business at its most granular level – its people and the context of all activities across the organisation.
2. Always contain the most up-to-date data, link with all your tools, and can quickly flag issues, anomalies and opportunities as – or before! – they arise.
3. Enable the company to quickly act on the decisions that can be made from this data.

We’ve created Beyond around these exact demands, deploying A.I. in a way that puts people – not robots – at the centre.

This post originally appeared as an article on AccountingWeb

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