SaaS Brief

AI in Nonprofit Finance: Should Your Organization Lead or Follow?

AI in Nonprofit Finance

The nonprofit industry has been going through many changes over the last few years. The COVID-19 pandemic impacted organizational missions and funding. The Great Resignation has increased competition for talent. We are also in the midst of generational succession as Baby Boomers move on to retirement and younger leaders step up.

The nonprofit finance leader’s role also evolved. While you still need to be your organization’s financial historian—studying historical data to find ways to improve tomorrow—you also need to be forward-looking advisors, embracing change and making flexible adjustments when opportunities arise.

All of these trends are being supported and accommodated by advances in technology. Mobile devices, cloud applications, and connected technologies have already transformed the way we work. Artificial Intelligence (AI) will take nonprofit financial management to new levels. Anywhere, anytime, accurate real-time insight is the new normal.

Katie-McCloskey-Sage-IntacctKatie McCloskey, CPA, is the Director of Product Management for Sage Intacct. In her career, Katie applied her practical knowledge of accounting to her passion for delivering customer-focused software solutions for accountants across industries. She has spent 20 years focused on solving accounting challenges with innovations such as cloud computing, AI and machine learning, and data analytics.

She has served the nonprofit industry for many years, drawing upon her tactical experience in financial statement production, reconciliations, budget planning, dashboard and key metric delivery, allocation management, fixed asset stewardship, inventory management, payroll production, HR functions, time capture, project, grant and expense management, revenue management, and integrations at a variety of levels.

Recently, Katie shared her insights and best practices for AI during her session, titled Bringing AI to Life in the Nonprofit Finance Office, at the 2022 Nonprofit Finance Leaders Forum. In this article, we’ll share some big ideas from Katie’s presentation. But be sure to view the entire on-demand session to get the full benefit of Katie’s insights about where AI will take nonprofit finance teams in the future.

Watch a replay of the entire session, and other virtual events at the Nonprofit Finance Leaders Virtual Forum.

What is Artificial Intelligence?

Artificial intelligence is transforming nonprofit accounting and financial management. As a nonprofit finance leader, understand how AI can help your team streamline routine administrative tasks (like data entry and reconciliations) and allow more time to be spent on mission-focused strategic planning and activities.

AI is an umbrella term that encompasses several technologies:

  • Rule-based programs
  • Robotic process automation
  • Machine learning
  • Deep learning

What is AI?

Robotic Process Automation (RPA) automates repetitive tasks to help save time for knowledge workers. RPA can scrape data from the web, extract, and process the content of different types of files, and make calculations. RPA can be found in any application that automatically moves and inserts data into the correct places on forms, contracts, and worksheets. An example of RPA would be a tax preparation software that extracts data from PDFs of W2s and 1099s, places it in the right spots on the 1040, and then performs tax calculations.

Deep learning is a branch of machine learning techniques where artificial neural networks—typically these are thought to be algorithms inspired by the human brain—learn from really large amounts of data. Today, these algorithms power things like facial recognition or voice assistants like Siri and Alexa and even speech translation systems like Google translate.

What will AI do for nonprofit finance leaders?

Instead of thinking of AI as just a technology, try to envision it as a way to augment our intelligence. Every organization should be asking ‘How can we add this type of technology to our processes and use it to further our mission?’

Today’s finance leaders need more time to focus on strategic work. They need active insights ready at the right time to embolden decision-making and inform strategic direction so they can jump on new opportunities to expand mission impact. This requires nonprofit accounting and finance solutions embedded with powerful analytic capabilities.

In nonprofit organizations, AI will help nonprofit finance teams:

  • Ingest documents like receipts, invoices, and time entries automatically and send information where it is needed
  • Automate reconciliations so the accounting staff only needs to deal with exceptions
  • Perform continuous accounting to eliminate the financial close
  • Catch any potential fraud or abuse much earlier
  • Learn from strategic insights trends in funding, costs, cash, and spend variances
  • Find anomalies in transaction data and bring them to your team’s attention for further outlier analysis
  • Audit 100% of your data efficiently

AI transacting and reconciling trends

Katie provided many examples of how AI is currently used and will be used in the future. Watch the full presentation for a deeper understanding.

Nonprofit finance and AI…today, tomorrow, and in the future

Nonprofit leaders don’t have to wait for these transformative benefits; there are a number of technologies already taking advantage of AI. Today, we have plenty of computer processing power to automate all workflows and deal with massive datasets using unconstrained machine learning. We have the connectivity and integration capabilities to empower zero-latency analytics, available on-demand at all times. And cloud computing provides the scalability and elasticity to capture every transaction in real-time in full detail, allowing AI to help drive insights for finance leaders.

In fact, Sage Intacct Intelligent GL™ already makes continuous accounting a reality today. It brings in real-time transactions from across your organization—and even from other applications and finance institutions through open integration—to perform a continuous financial close.

Will most nonprofits benefit from leading the way or following cautiously with AI?

Nonprofit finance leaders have to balance the benefits of transformation versus the costs of technology. How do you know whether to embrace technological change early or later? Should you lead or follow with AI?

Let’s see what the cost/benefit might look like. CIMA estimates manual finance functions mean organizations spend about 50% of their time on transaction processing and about 40% more of their time on controls and reporting. That leaves less than 10% of time spent on strategy. AI represents a transformational opportunity to turn that ratio on its head. Taking advantage of AI can help nonprofit finance leaders spend up to 50% of their time on strategy and utilize their teams in much more strategic roles.

Forecasted finance team transformation with AI

First, try to identify the opportunities for AI transformation to help you drive forward your mission and benefit your community. What options are available to you with a better tech stack? What vendor ecosystem will you need to support you in the future? Even if your cost/benefit analysis for AI doesn’t warrant your organization taking the lead today, you must keep an eye on technology to ensure your organization doesn’t fall behind in the future.

It’s important to remember that AI is not a one-and-done decision; instead, you will revisit these opportunities and benefits many times in the future. Lean in, learn more, and adopt the AI technologies right for your organization at different times in your journey. Watch the full replay presentation to learn more about how to leverage technology to bring the AI advantage into your finance office operations—at the Nonprofit Finance Leaders Forum.

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