Starting and running a business is no easy feat. It requires founders to take on roles beyond their comfort zones and specialties. There’s no way around that with limited funding and even more limited workforces. As a result, most new ventures face a common set of challenges and stumbling blocks soon after launch. Invariably, many relate to various aspects of finance operations, where a lack of expertise and manpower creates plenty of room for error.
Some of the most common finance problems businesses encounter can even be an existential threat if not overcome. Among these, failure to accurately track cash flow, inaccurate financial modeling, and difficulty meeting reporting and tax obligations are especially problematic. The good news is that AI looks like it’s developing into a perfect solution to all three issues. Here’s why AI is an excellent match for those use cases and what it will mean for businesses going forward.
Solving Cash Flow Difficulties
Without a doubt, maintaining a positive cash flow is a mission-critical endeavor for a business. However, it is a task that most startups fail at, leading to their demise. In 2023, 82% of failed startups cited cash flow problems as the primary cause of their shutdown. Worse still, most of those problems weren’t a result of anemic sales. They resulted from poor visibility into inflows and outflows, which led to inadequate risk management. A common cause is that many nascent businesses lack the personnel to conduct thorough, real-time financial oversight. That’s where artificial intelligence can be a big help. It can be a 24/7 monitoring and analysis solution that eliminates costly errors and oversights. Companies like Panax are already applying it to enable real-time financial data aggregation and analytics.
Their solution provides a unified interface businesses can use to track their financial health. It replaces work typically done via a maze of interconnected Excel spreadsheets. Instead, the system ingests data from a business’s financial institutions as it becomes available. Then, it performs transaction auto-categorization using pattern matching and ERP data, if provided. The result is a detail-rich visualization of where a company’s money is coming from and going to. Decisionmakers can even request data-powered forward-looking forecasts and compare them against real-world results.
Making Modeling More Accurate
Understanding current and near-future capital availability is essential for strategic business decision-making. However, business leaders also need realistic projections of where their company’s fortunes are headed. That requires spot-on sales, revenue, and growth forecasting while accounting for operational challenges and changes. It’s a process collectively referred to as modeling, and it’s typically expensive, time-consuming, and easy to get wrong. Getting it right requires blending and interpreting myriad data sources and applying knowledge gained from historical comparisons. There’s an entire industry dedicated to the work, and expertise is still hard to come by. However, current-generation AI technology can already perform most of the job near-flawlessly.
There are already multiple AI products on the market that offer advanced modeling capabilities to support strategic decision-making. Most provide a point-and-click interface that can model the impact of everything from headcount changes to new marketing efforts and everything in between. Some can enable business leaders to simulate daily strategic decisions to determine likely outcomes. Current solutions can also ingest data from practically any structured or unstructured source a business has. That’s a big deal, particularly for smaller firms that lack dedicated data teams to clean and format their available data.
Meeting Reporting and Tax Obligations
AI may also soon solve one of businesses’ most notorious problems-dealing with taxes and reporting requirements. In the US, the tax code is labyrinthian and opaque. The situation in other developed economies isn’t much better. That forces businesses of all sizes to devote tremendous resources to financial reporting and tax compliance. It’s hard to think of a business process better suited to the strengths of current-generation AI technology.
Artificial intelligence excels at analyzing vast quantities of data and synthesizing information gleaned from it. That allows it to reduce some of the tax code’s most complex applications to simple questions business owners can understand and answer. Providing a simple interrogatory tax filing process can enable smaller firms to take advantage of every tax reduction strategy that larger firms frequently utilize. A system with an all-encompassing view of the tax code should also increase filing accuracy and decrease potential legal liability.
Some of the accounting world’s most well-known names concur that AI is the future of business tax preparation. Heavyweights like Ernst & Young have positioned themselves at the technological forefront of the movement. A raft of startups are betting on tools to empower CPAs to deliver faster and more affordable tax compliance services to businesses. Together, those firms and more are already making the automated future of reporting and tax obligation management a reality today.
AI Will Help More Businesses Survive and Thrive
The bottom line is that today’s AI tools are already making excellent headway in solving longstanding and intractable business problems. Their collective contributions should go a long way toward improving today’s dismal startup survival rates. They should also help business leaders make smarter, more timely strategic decisions and avoid compliance pitfalls. That is a recipe for stronger, healthier businesses with robust growth and lower overhead-all thanks to some unique applications of AI.
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