AI in Finance: A Tool or a Replacement?

Paul | Graphite - Startup Accounting Services

Paul Bianco, Founder and CEO at Graphite

AI technologies have had a banner year in 2023. ChatGPT burst onto the market in full force at the beginning of the year, kicking off a string of high-profile AI debuts. With so much hype around this new and intriguing technology, founders need to decide if they should start integrating AI into their financial operations. 

AI tools promise speed and efficiency, but they also present limitations. Since AI technology is currently in its infancy, we can confidently say that it won’t replace an entire human finance department any time soon. 

But, there are certainly compelling use cases and opportunities for AI in finance as we journey into the future. 

Keeping Up With the AI Boom

The last thing any founder wants is to be behind the curve. Right now, it feels like AI is everywhere you look. AI has been the subject of countless think pieces and LinkedIn posts, while tech companies have been quick to market AI-powered features. 

The AI boom is creating a huge amount of pressure for high-growth startups. You may be receiving questions from investors about when you’re going to switch to an AI accountant. It likely appears that all of your competitors are implementing AI left and right, and you don’t want to lose the race. 

Conceptually, AI promises speed, efficiency, and accuracy. Many organizations have implemented automation tools for tasks like online customer service, data analysis, and cybersecurity monitoring. However, in the finance sector, there aren’t many viable use cases for AI in its current state. 

You won’t fall behind by continuing to rely on human finance professionals, because comprehensive AI accounting tools don’t exist yet. So instead of rushing to keep up with the latest AI trends, think about what pain points you’re hoping to solve with this technology. 

For example, many startups are working with limited financial resources and hope that AI will be a cost-efficient solution. The promise of instant gratification and time savings are also big draws for AI technologies. However, the surface-level time savings may be offset by the lack of strategic perspective that technology presents. 

Once you’ve identified your key pain points, look for financial solutions that meet your needs. Partnering with an expert finance and accounting firm will offer more robust support than any individual AI tool could. 

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AI Limitations and Opportunities for Startups

AI tools are trained on a limited set of data, so they aren’t familiar with the nuances of your business. If you’re using AI to manage your accounting strategy without human oversight, you run the risk of having inaccurate books, which negatively impacts your overall business strategy. 

In particular, AI isn’t accurate enough to meet strict GAAP compliance standards for accounting. Compliance is non-negotiable for growing startups and is essential to securing future funding rounds. 

AI also isn’t yet flexible enough to adapt to every startup’s unique business models and provide dependable financial thought leadership. 

Another common misconception is that AI tools are cheaper than human-powered finance services. Right now, pricing for AI-supported finance tools is very similar to tools that are “old-fashioned.” These tools also still require extensive human oversight to implement successfully, so they don’t provide significant time savings. 

However, this doesn’t mean that you should write off AI technology altogether. 

If your startup already has a full in-house finance department, there are ways to implement AI in your workflow to make things efficient. For example, AI tools could categorize transactions, reconcile your books, or review contracts for GAAP rules. 

The key here is to spend your time and energy making sure AI works with your existing team to complete these tasks, rather than trying to figure out how to replace your employees with this technology. 

Where’s the Line—Accountants That Use AI, or AI Accountants?

While AI technology isn’t ready to fully replace accountants, it certainly isn’t going away. The technology will continue to develop from here, and people across industries and roles are excited about the possibilities. 

A recent study indicates that two-thirds of consumers want their accountants to be supported by AI in some fashion. This could be AI work verified by humans, or AI supporting human work to make processes more efficient.  

As we move into the future of AI in finance, it’s important to find a balance between technological efficiency and human expertise. As your organization grows, you’ll need financial thought leaders and strategy partners in addition to bookkeepers. 

No matter how advanced AI becomes, a living person to lean on is crucial. Financial experts provide important context, which will help you get more out of any insights you glean from an AI tool. 

Get Industry-Leading Financial Support From Graphite

The prospect of AI technology is certainly exciting, but without human expertise, any tool is just that—a tool. 

Partnering with the financial experts at Graphite helps you make the most of your technology and offers long-term strategic guidance. When groundbreaking financial technology does hit the market, we’ll be the first to know about it and help you implement it accordingly in your operations. 

Graphite’s team of fractional CFOs and accountants specializes in financial support for high-growth startups. We’ll help you navigate everything from bookkeeping to taxes to successful fundraising rounds, all with your unique business model in mind.

Reach out today to see how we’ll transform your financial operations.

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