Non-profits and the Power of AI in Finance
Can non-profits harness the power of AI to boost efficiency? Aziz Benmalek from Sage Intacct shares some ways that can make a big difference to financial operations, even with smaller budgets and lean staffing.
In a short span of time, artificial intelligence (AI) has transitioned from a niche technology to a widely applicable solution that is making its way into almost every sector of the economy, including the realm of non-profit accounting and finance. Given that non-profits often operate with limited budgets and staff, they frequently lack the resources needed to enhance financial management. However, AI-powered financial management software has the potential to be a game-changer in both practical and strategic ways.
It comes as no surprise that the Brookings Institute discovered that non-profits are turning to AI to expedite operational tasks such as auditing transactions to identify anomalies. Additionally, AI can help uncover insights, identify opportunities and threats earlier, and enhance stewardship. Here are some significant ways that non-profits can leverage the power of AI in their financial operations.
Eliminating the Grunt Work and Boosting Staff Morale
In today’s competitive job market, recruiting and retaining talented individuals, especially in finance, is a major challenge. A recent study by Deloitte confirmed that major employers struggle to fill accounting and financing roles. One of the reasons for this is the unappealing manual work that falls on finance professionals, particularly at the entry level, who find themselves grappling with complex 50-tab spreadsheets, lengthy audits, and the unique challenges of fund accounting.
AI tools can significantly reduce or even eliminate much of this tedious work. For example, AI chatbots and digital assistants can continuously monitor data feeds to track program performance, identify irregular transactions, detect unusual activity, or unauthorized access. They can also provide meeting reminders, analyse and summarise changes in tax laws, or take notes. AI can even be integrated into tools that assist other employees in the organisation and streamline processes such as purchase-order approvals or expense-report submissions. AI can also automatically match purchase orders and invoices, perform reconciliations almost instantly, allocate expenses to cost centres, and extract relevant data from documents.
The outcome: accountants can devote more of their time, energy, and skills to higher-value tasks such as managing donor relationships, devising strategies, sharing fundraising stories, engaging with peer organisations, and strengthening the mission. For instance, at Pavillon Treatment Center, this approach has had a significant impact. The organisation estimates that automation has halved the time the finance department previously spent on transaction details. Instead, they are using that time to collaborate with executives, clinical staff, and the board on strategic planning. They are examining cost impacts, accreditation policies, and employee benefits, and making changes to support the broader mission.
Speeding Up the Financial Close
In many non-profits, the period-close involves laborious clerical repetition that can extend for days to weeks, impeding the ability to access real-time information to comprehend performance and respond swiftly to changing circumstances. The “closing time” triggers a flurry of activity as data is extracted from other enterprise applications, accounts are tested, audited, and trial-closed, and the general ledger is scrutinised for errors. While we all appreciate good teamwork among finance professionals, it is evident that these are tasks that AI is increasingly capable of handling.
As Sage’s research confirms, an automated “continuous close” (as opposed to the manually driven episodic close) means the time to close the books can shrink to mere hours, freeing up more time for strategic finance, rather than tactical finance. The result: donors gain more confidence in the organisation’s stewardship, and your finance team can collaborate on higher-value activities.
At Koret Foundation, strategic finance, driven by sophisticated automation, is yielding significant improvements. Previously, the non-profit endured lengthy reporting and budgeting cycles, and creating estimates and forecasts for grantmaking was time-consuming. Today, the organisation can predict year-end numbers months in advance, enabling it to adequately plan cash flows to ensure it fulfils all grant commitments. This is particularly important, as grantees require funds in a timely manner and the board needs timely information to manage market volatility.
Enhancing Fund Accounting
Accurate and timely fund accounting relies on time and expense capture and allocation. AI technology can automatically generate timesheets for employees based on their calendar, productivity application usage, and categorise their work into time blocks. AI can also automatically allocate these time blocks to funds, projects, or tasks. Alternatively, employees can manually allocate time blocks to the appropriate allocation. Over time, AI learns these rules for future time block allocations.
Remote employees can use any device to record time and submit timesheets to the accounting system for billing with just one click. AI minimises manual data entry by providing suggestions for time allocations and enables employees to review each entry for accuracy before submitting the final timesheet.
By continuously capturing all types of transactions, AI enables continuous accounting. Your non-profit’s books are always up-to-date with real-time transaction recording, reconciliation, and adjustments. Potential issues are flagged along the way for action and correction.
In Conclusion
Non-profits need new ways to reduce time spent verifying the past and increase time spent on envisioning a better future for their constituents, clients, and donors. With AI-powered financial management, non-profits are poised to focus less on the past and more on the future.
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