Can AI revolutionise CFO decision-making?

In today’s fast-paced business landscape, CFOs are constantly seeking avenues to optimise operations, maximise efficiency, and ultimately, save costs. As AI continues to shake up processes across industries, some may be wondering: Could AI deliver the insights CFOs need?

To put the theory to the test, Steve Paul, deputy CFO at Equals Money asked a chatbot the following question:

How can I save my business money in the next twelve months as a global CFO?

From supply chain optimisation to tech investment, Steve dissects the top 5 strategies generated, and shares his insight on their validity and effectiveness for saving businesses money in 2024.

1. Strategic Procurement and Supplier Management:

• AI says: Review your procurement processes and supplier relationships to drive cost savings. Consolidate purchases with preferred vendors to leverage volume discounts. Negotiate favourable terms and contracts with suppliers, including pricing, payment terms, and service level agreements. Explore alternative sourcing options, such as global sourcing or strategic partnerships, to reduce costs.

It’s got this one right, reviewing procurement processes and supplier relationships is an essential part of the CFO toolbox when looking to identify inefficiencies and areas for improvement.

By looking at how we buy things, we can spot where things get stuck and fix them, making the process run smoother, and hopefully more cost effectively. Once processes have been reviewed, it’s crucial that CFOs maintain a close eye on supply chains to ensure their ongoing health and effectiveness.

2. Risk Management:

• AI says: Evaluate and mitigate risks that could impact your business financially, such as currency exchange rate fluctuations, interest rate changes, and supply chain disruptions. Implement risk management strategies to protect your bottom line.

All businesses that make transactions, payments, or purchases in foreign currencies are exposed to foreign exchange (FX) risk. Whether it’s through selling on an international site like Amazon or importing from abroad, FX exposure is an unavoidable part of international trade. Therefore, as the bot suggests, currency risk management should be a top priority for reducing unnecessary loses.

Depending on their goals and margins, different businesses will have different degrees of appetite for FX risk. For example, some businesses may wish to play it safe and mitigate as much exposure to market fluctuations as possible, others may wish to gamble on FX rates in the hopes of facilitating growth.

CFOs looking to minimise FX exposure should forecast currency needs and use forward contracts to lock in exchange rates, mitigating the markets highs and lows. Additionally, seeking advice from FX experts and staying informed about global economic trends is key for effective risk management. Daily digestible market insights, such as the ones available on the Equals Money blog, are a great place to start.

3. Travel and Expense Management:

• AI says: Implement strict policies and procedures for travel and expense management to control costs associated with business travel, entertainment, and other discretionary spending. Encourage virtual meetings and utilise video conferencing to reduce the need for travel.

While travel does make up a significant (and growing) proportion of businesses budgets this isn’t necessarily something which needs to or should be curbed in efforts to cut costs. Research from 2022 found that for on average, for every $1 spent on business travel arrangements, there was an estimated $12.50 return on investment in revenue. What’s more, the research found that half of prospective customers onboarded to a new business after an in-person meeting, as opposed to just 31% without.

Instead of curbing business travel spend, CFOs should be investing in it. Expensing platforms and virtual cards can empower employees to continue building these key networks while CFOs gain real time spending visibility, streamlined invoicing processes and more flexible budget controls. From our own customer data, we’ve seen a whopping 247.5% increase in travel spend between 2022 and 2023, and expect this trajectory to continue into 2024

4. Centralized Financial Operations:

• AI says: Consider centralising financial operations and services to achieve economies of scale.
• Streamline financial reporting and accounting processes globally to improve efficiency.

Having all your finances in one place isn’t the right move for every business. It depends on how big you are, how you’re set up, and what rules you have to follow in your industry. In fact, centralized functions can actually be counter intuitive to cost saving.

Typically, there is the misconception that bringing all your processes under one roof, often head office, can avoid duplication and in turn save cost, however streamlining processes based on location can forfeit invaluable subject matter expertise. Here at Equals Money, we operate Centres of Excellence, using our best people for the job, regardless of their geographical location.

5. Technology Investments:

• Invest in technology solutions that can automate tasks, improve productivity, and reduce operational costs. This could include implementing enterprise resource planning (ERP) systems, adopting cloud-based services, and leveraging data analytics for better decision-making.

As UK businesses continue to slash costs to weather the current economic climate, tech investment is an area which has remained unscathed. In fact, Equals Money saw a 30.5% increase in customer tech spend between 2022-2023. Gartner’s latest report on the topic expects this to increase even more rapidly this year, with 82% of CFOs intending to increase their tech budgets from last year – and for good reason.

Switching from old-school systems to fintech solutions brings an array of benefits including automation, smoother operations, and better data insights. In turn, this can boost efficiency, cut down on manual labour, and ultimately save your business money.

However, it’s rare that a one size fits all solution exists for businesses. What works for your competitor may not offer the same benefits to your organisation.

Good suppliers should always take the time to give an honest appraisal of whether their product is right for you and should leave you feeling empowered to devote time to what matters most – growing your business.

The results are in

So how did the bot do?

Overall, the strategies provided are good tactics for CFOs looking to save money over the next 12 months, however, none are particularly revolutionary. The strategies provide a solid starting point but overall lack the nuance and understanding of individual business goals and needs.

That’s not to say CFOs shouldn’t be utilising AI in their processes. As mentioned, automation is great for data analysis and streamlining processes, which can cut costs and lead to improved decision making. AI can even be used as a kicking off point when looking to review processes as is done here. However, for now, it’s best to leave the big decisions with those who know their businesses the best.

If you’re looking for advice on how to make savings, and optimise your business payments speaking to a real person who can understand the unique elements of your business and provide tailored solutions is the place to start. The experts at Equals Money are always here to help.

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