Starting and running a company is no easy feat. It requires founders to take on roles that go beyond their comfort zones and specialties. There is no way around this with limited funds and an even more limited workforce. As a result, most startups face a common set of challenges and hurdles soon after launch. Invariably, many relate to various aspects of financial operations, where lack of experience and manpower creates a lot of room for error.
Some of the most common financial problems faced by businesses can even become an existential threat if not overcome. Among them, lack of accuracy in cash flow tracking, inaccurate financial modeling, and difficulty in meeting tax and reporting obligations are especially problematic. The good news is that AI seems to be emerging as a perfect solution for all three problems. Here’s why AI is a great fit for those use cases and what it will mean for businesses in the future.
Solution to cash flow problems
Maintaining a positive cash flow is undoubtedly a fundamental task for a business. However, it is a task that most startups fail at, leading to their demise. In 2023, 82% of startups fail It cited cash flow issues as the root cause of its closure. Worse, most of those problems weren’t the result of anemic sales. They were the result of poor visibility into inflows and outflows, leading to inadequate risk management. A common cause is that many startups lack the staff to perform thorough financial oversight in real time. That’s where AI can be a big help. It can be a 24/7 monitoring and analytics solution that eliminates costly errors and oversights. Companies like Panax They are already applying it to enable the aggregation and analysis of financial data in real time.
Their solution provides a unified interface that companies can use to track their financial health. It replaces the work typically done through a maze of interconnected Excel spreadsheets. Instead, the system ingests data from a company’s financial institutions as it becomes available. It then performs automatic categorization of transactions 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. Decision makers can even request forward-looking, data-driven forecasts and compare them to real-world results.
Making modeling more accurate
Understanding current and near-future capital availability is essential to strategic business decision makingBut business leaders also need realistic projections of where their company’s fortunes are headed. That requires accurate forecasts of sales, revenue, and growth, taking into account operational challenges and changes. It’s a process collectively called modeling, and it’s often expensive, time-consuming, and easy to get wrong. Getting it right requires combining and interpreting a large number of data sources and applying knowledge gained from historical comparisons. There’s an entire industry devoted to this work, and experts are still hard to find. But current-generation AI technology can already do most of the work almost flawlessly.
There are already multiple AI products on the market that offer advanced modeling capabilities to support strategic decision-making. Most offer a point-and-click interface that can model the impact of everything from workforce changes to new marketing efforts and everything in between. Some can enable business leaders to simulate daily strategic decisions to determine likely outcomes. Today’s solutions can also ingest data from virtually any structured or unstructured source a company has. That’s a big deal, particularly for smaller companies that lack dedicated data teams to clean and format their available data.
Meeting reports and tax obligations
AI could also soon solve one of the most notorious problems facing businesses: managing taxes and reporting requirements. In the United States, the tax code is labyrinthine and opaque. The situation in other developed economies It’s not much betterThis forces businesses of all sizes to devote enormous resources to financial reporting and tax compliance. It’s hard to think of a business process that is better suited to the advantages of current-generation AI technology.
Artificial intelligence excels at analyzing large amounts of data and synthesizing the information gleaned from it. This allows it to reduce some of the more complex applications of the tax code to simple questions that business owners can understand and answer. Offering a simple, question-based tax filing process can allow smaller businesses to take advantage of all the tax-reduction strategies that larger companies frequently use. A system with a comprehensive view of the tax code should also increase filing accuracy and reduce potential legal liability.
Some of the biggest names in accounting agree that AI is the future of business tax preparation. Heavyweights like Ernst & Young have positioned themselves at the forefront of technology vanguard of the movementA number of startups are betting on tools that enable CPAs to offer faster and more affordable tax compliance services to businesses. Together, these companies and more are already making the automated future of tax reporting and compliance a reality.
AI will help more businesses survive and thrive
Ultimately, today’s AI tools are already making excellent strides in solving long-standing and intractable business problems. Their collective contributions should go a long way toward improving the dismal survival rates of today’s startups. They should also help business leaders make smarter, timelier strategic decisions and avoid regulatory compliance issues. That’s a recipe for stronger, healthier companies with solid growth and lower overhead, all thanks to some unique applications of AI.
The post How AI could finally solve some of the biggest existential problems facing businesses first appeared in Floq Data.
