What is Autonomous Finance? Evolution, Benefits, Challenges and Business Impact

The finance function is entering a new era where autonomous finance is reshaping financial decision-making. This blog discusses what autonomous finance is, its benefits, evolution and challenges, and why CFOs must shift to autonomous finance to utilise its potential for making strategic decisions.

What is Autonomous Finance?

Autonomous finance is a system that leverages artificial intelligence, big data and machine learning to automate processes with data-backed insights. It streamlines financial processes that historically required significant human intervention and supervision.

Evolution of Autonomous Finance

For years, business heads and CFOs strive to reduce time spent on routine and repetitive tasks. However, many are now exploring more advanced systems that go beyond just automation. Autonomous finance doesn’t merely automate functions of finance and accounting but also analyses trends, suggests recommendations, and, in some cases, makes decisions on its own.

Autonomous finance helps streamline the finance function, thereby saving time to work on tasks that are more important.

• Stage 1 – Before the introduction of digital computing, accounts departments in companies used to perform regular financial activities like transaction reconciliation, budgeting, and reporting manually. Employees used to spend hours in bookkeeping, tracking entries manually, and preparing financial reports. For example, once a vendor raised an invoice an accountant would manually enter the data ledgers. Later, when use of computers started in business processes, accountants used to make ledger entries in digital spreadsheets. This was time-consuming and prone to human errors.
• Stage 2 – At this stage, companies started using basic algorithms to automate repetitive tasks. Some of these tasks were making ledger entries, batch processing of payroll data and handling of invoices and receipts. It reduced human intervention and saved time spent on routine tasks such as transaction reconciliation and bookkeeping. A common example of early finance and accounting process automation was invoice scanning and digitisation and basic report preparation. However, these tools required significant human inputs for monitoring and supervision. 
• Stage 3 – This is the latest phenomena in financial automation. AI technologies have made it possible to automate a large variety of accounting and financial tasks. The need of human supervision has decreased significantly and the quality of the automated decision-making has improved. These tools can make data-backed decisions to streamline many processes without continuous human monitoring.

Example of Autonomous Finance

Assume a business wants to get a clear picture of its cash flow. Earlier, it needed manually going through invoices and ledgers (physical or spreadsheets).  Today, a finance manager can use an AI-enabled accounting application or accounting tools inside an Enterprise Resource Planning (ERP) system. It retrieves data automatically from bank statements, sales records, accounts payables and payroll, and vendor ledgers. 

Once retrieved, the system can process, analyse and project future cash flow. Based on the projection, it generates actionable insights, like vendor KPIs, cash conversion cycle, accounts receivable turnover, etc. It helps avoid potential disruptions and improve process efficiencies. 

The modern AI-enabled accounting and finance tools can even make autonomous data-backed decisions for faster processing of repetitive tasks without human supervision. For example, the system recognises a potential working capital shortage, it can directly intimate stakeholders and suggest delaying accounts payable process for payments beyond pre-defined values. However, a finance manager remains in the loop to review such autonomous suggestions as a safety measure. 

Benefits of Autonomous Finance

Some of the several advantages of autonomous finance include the following:

• Faster Decision-Making and Risk Management - With real-time data analysis, autonomous finance helps make quicker decisions. Whether adjusting budgets or responding to the changes in markets, the system provides the actionable information you need almost instantly.
• Improved Customer Experience - Autonomous finance systems make the experience of customers smoother and more personalised by adapting to the behaviour of customers. By analysing past transactions, it can provide customised payment terms, like flexible invoicing or faster payment discounts.
• Cost Efficiency - It helps reduce the need for extra resources for routine tasks, thereby saving costs. Those savings can then be utilised or invested in important areas.
• Staying Compliant - Autonomous systems automatically stay updated on new regulations, thereby ensuring your accounting and financial functions are always compliant. This takes the burden off your team and helps avoid penalties.

Challenges of Autonomous Finance

Similar to any technology, autonomous finance has challenges, including the following:

• Integration - It can be tricky to get new autonomous finance systems to integrate with current financial systems if you’re using older software.
• Data Quality - For autonomous finance to work well, it needs correct, clean and structured data. The system might give wrong recommendations if the input data is incorrect.
• Judgement - While these systems can analyse multiple data and give suggestions, they still can’t match the judgement and experience of a human. Complex financial decisions like investments or risk management may still require a human touch to make the best choices.

How Do Autonomous Finance Solutions Impact Business?

Autonomous finance solutions change the way businesses manage their financial and accounting workflow. They automate repetitive tasks, such as tracking expenses, bookkeeping, invoicing, or financial reporting. It frees up finance teams bandwidth so that they can focus on strategic activities. Managers get real-time feedback on financial processes for faster data-backed decision making. This approach overall results in fewer errors, better efficiency and cost saving. 

The majority of senior finance managers are relying on autonomous tools for their everyday finance activities. The adoption rate is increasing steadily. 

Autonomous finance is no longer an option. It is a necessity in today’s digital-first business models. It helps businesses to save time, improve reporting accuracy, avoid human errors, and make timely decisions. Although there are multiple challenges to automate financial tasks but it’s benefits outweigh them. Companies adopting financial automation in their business processes can stay ahead of the curve against competition.