7 Benefits of Combining Predictive Analytics with AI for Better Financial Insight

Traditionally, business relied on statistical models and time series analyses to predict and forecast future outcomes. While these techniques are extremely valuable, it is still limited to historical data and often struggles to account for external factors. 

However, the rise of artificial intelligence (AI) has given companies the opportunity to conduct thorough analysis of complex data for better financial insight. 

Read: Understanding the Value of AI in Finance Digital Transformation 

The Benefits of Combining Predictive Analytics with AI 

Here are (7) seven ways in which combining artificial intelligence (AI) with predictive analytics can contribute towards financial insights if done right: 

1. More Accurate Forecasts 

Increasing prediction accuracy is one of the primary advantages of using AI and predictive analytics. As mentioned above, traditional financial forecasting mostly depends on human intuition and historical data, both of which have limitations. 

AI, on the other hand, is capable of processing huge volumes of data—far more than a person could—and identifying patterns or trends that an analyst might not see. It may take into account current data, external market trends, and even unstructured data such as sentiment from social media in addition to historical data. Using this cutting-edge tool can give your company a clearer picture of your current financial situation. 

2. Understand Customer Better 

Revenue growth requires an extensive knowledge of your clients, and AI-powered predictive analytics may provide insightful data on how they behave. By using AI to your advantage, you can accurately forecast what your clients or customers need.  

In fact, an article by the Harvard Business Review affirmed that AI is already helping companies understand their customers better. And many theorize that AI will soon know us better than we know ourselves. By using this tool properly, your organization can concentrate its efforts on building more value to clients and increase their loyalty over time. 

3. Detect Fraud Early 

Any organization can be at risk of fraud, and using AI can be highly beneficial in identifying and preventing it. Traditionally, setting guidelines based on documented fraud trends is the foundation of fraud detection techniques. However, this traditional strategy can no longer be as effective since fraudsters are always inventing new ways to get around the laws. 

However, AI is able to spot irregularities and minor patterns of financial transactions that could suggest fraud. For instance, if a certain employee starts making purchases that don't align with their typical spending habits or if an invoice from a supplier is noticeably inflated, AI algorithms can flag these anomalies for further investigation.  

Unlike traditional methods, AI systems can continuously learn and adapt to new fraudulent behaviors, making them more effective over time. 

4. Better Scenario Planning 

In our recent article, we discussed how generative AI helps CFOs improve scenario planning. Incorporating AI into your scenario planning can significantly enhance your organization's ability in various ways: 

• Better Predictions: AI can analyze past and present data to make more accurate predictions about your organization's finances. 

• Smarter Choices: AI provides different possible outcomes based on various factors, helping you make better decisions. 

• Lowering Risk: AI can identify potential risks and opportunities, allowing your organization to be prepared and minimize negative impacts as much as possible. 

5. Better Risk Management 

Using AI and predictive analytics together gives you a better handle on potential risks. Here are some ways it helps: 

• Avoiding Cashflow Issues: As mentioned above; by looking at past financial data, AI can predict possible cash flow problems. This means you can prepare and avoid surprises. 

• Seeing Market Changes: AI keeps an eye on the market and can guess where it's heading. This allows you to make better decisions by understanding trends before they become apparent. 

• Nipping Issues in the Bud: Whether it's a sudden drop in the market, supply chain hiccups, or customers not paying up, AI can spot these red flags early on. 

When you’re aware of risks early, you can take steps to handle them before they get out of hand: 

• Getting Ahead of Problems: You can put plans in place ahead of time, so issues don’t catch you off guard. This will help minimize disruptions to your business. 

• Keeping Things Financially Steady: By being proactive, you can avoid big financial hits, ensuring your company stays in good shape. 

6. Reduced Cost 

AI and predictive analytics can also help your organization save money. By automating routine tasks like data entry and report generation, AI frees up your team to focus on more strategic activities. Plus, it helps you find areas where you may be overspending, so you can cut unnecessary costs. 

With more efficient processes, you can get more done with less, which is a win for your organization. 

Read Next: Pros and Cons: Is AI Technology a Game Changer for Finance Teams? 

7. Smarter Business Insights 

At the end of the day, combining AI with predictive analytics helps you get better business insights and analyze vast amounts of data. With real-time dashboards and reports that offer a clear view of your company’s performance, you can make smarter and more data-oriented decisions that drive growth. 

Instead of relying on gut feelings, you’ll have the data to back up your decisions, giving you the confidence to move forward with your plans. 

The Bottom Line 

Your organization’s success and competitive advantage depends on how you run and integrate powerful tools such as AI into your processes. By keeping tabs on the latest advances in technology and learning their practical applications, your organization can remain relevant and financially stable.  

Looking for an outsourcing partner to integrate AI into your accounting needs? 

Consider D&V Philippines. We are a trusted finance and accounting outsourcing company with extensive experience and top-notch services. We can help you prepare for your accounting automation journey. Schedule a free consultation with us today to learn more about how we can help you integrate AI into your business.   

You can also visit our website to learn more about how we can help you or you may also download our Business Analytics whitepaper to learn more information on how you can leverage data to drive your business forward.