By Ray Welsh, Head of Product Marketing, FISCAL Technologies
Since the beginning of the COVID-19 pandemic a year ago, finance departments in all industries have experienced immense pressure, with their financial priorities rapidly changing, operational challenges becoming more common, and the need to tighten the purse strings. While successful businesses have always placed a firm focus on ensuring their finances are in order, this has never been more of a focus than over the past year, while also being more of a challenge.
The pandemic has put further pressure on departments to ensure their controls are as strong as possible during a vulnerable period that has seen existing checks effected by the move to remote working and an increase in fraudulent activity. But even with heightened controls in place, things still slip through the system.
Finance ERP and Accounts Payable systems, which are often described as the heart and lungs of a company, are known to have vulnerabilities and can be open to risks and fraud. According to fraud experts, each company has around a one in three chance of experiencing internal fraud, with enterprise organisations averaging losses of $1⁄2m. These attacks typically claim payments which are under the financial risk review threshold, hiding within the hundreds of small invoice transactions until found by AP Audit software or internal audit routines.
On top of this, some organisations are also having issues with supplier master files and invoice processing, experiencing a range of errors through existing, outdated control processes. This includes having a significant number of duplicate invoices in their ERP, having unmanaged Master Supply Files, accepting retrospective purchase orders and no-PO invoices, and having mediocre invoice image capture.
To overcome these vulnerabilities, companies must begin to ensure they have the correct control systems in place protect their cashflow – but how can this be achieved when headcount is not increasing, and the checks required are getting more numerous and complex? This is where artificial intelligence (AI) can lend a helping hand.
For those working in the finance department, AI provides a necessary function to help support workers with daily task of checking for exceptions and errors. Having a tool that performs at a consistent rate throughout the day means no matter how complex or repetitive a task maybe, it will be completed in time and to a high standard. This allows those working in the finance department to focus on other areas of their role that will generate more value.
But it’s worth noting that AI should not be heralded as the tool to transform processes – instead, it should be used in conjunction with other tools and control methods in order to get the most out of it. So, when used in this way alongside other tools, how does AI specifically help?
Having an end-to-end risk management solution allows customers to forensically analyse 100% of supplier transactions before payment. This is done by applying hundreds of checks using financial logic and sophisticated algorithms to achieve a complex analysis, with AI playing a significant role in making this process more effective. On top of analysing transactions before payment, AI can be used in conjunction with forensic analysis to help:
- Improve efficiency – Using AI for testing can speed up control processes from hours to minutes, while also providing detailed insights into anomalies found. This use of AI, to increase speed and accuracy of controls does not replace those working in the finance department, rather it supports both people and processes by helping prioritise issues for staff members.
- Protect supply chains – managing your own liquidity is vital, supporting that of your suppliers is often overlooked, but is critical if you are to protect against risks of interruption to supply. AI powered analysis uncovers patterns in your payment processing that indicate unnecessarily fast or slow payments to suppliers, deviations from terms and overpayments that place strain of the cashflow of your suppliers. Once aware of the exceptions, your finance team can fine-tune processes to reduce these risks and increase supply chain dependability.
- Reduce fraud – Adopting an AI based solution can highlight suspicious patterns in supplier transactions that are hidden in vast quantities of data from human eyes. Deploying machine learning and other AI techniques alongside proven statistical models detects the small number of unusual and potentially fraudulent transactions that are passed to the human team for further investigation.
By incorporating AI to help workers to uncover complex Procure-to-Pay and Accounts Payable exceptions, the company will protect its working capital more effectively and more cost efficiently.
Embracing AI to work in harmony with finance teams
The current environment has heightened financial risks for organisations around the globe. As a result, it is important for organisations to turn their attention to better enabling their staff with AI-powered risk management.
Providing staff with appropriate AI solutions to support their roles will better protect a company’s finances, helping them move forward during these uncertain times with confidence. The role AI plays in detecting risks is undisputed, although AI should not be the centrepiece of your risk management strategy. Instead, AI helps finance teams make focused and well-informed decisions. Protecting working capital, reducing fraud risk, and strengthening supply chains are what your Accounts Payable team do better when AI is embraced as a supportive tool rather than fearing it is going to take their jobs.