Why Artificial Intelligence Will Never Replace Your Back Office

As AI becomes increasingly integrated into the business landscape, you need to realize its inherent limitations and where humans are superior.

Written by Matt Gardner
Published on Feb. 20, 2024
Why Artificial Intelligence Will Never Replace Your Back Office
Image: Shutterstock / Built In
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The rise of artificial intelligence (AI) has sparked debates about its potential to replace various human-centric tasks. Although AI has brought about transformative changes in numerous industries, tech-savvy entrepreneurs need to recognize thatAI will never fully replace certain aspects of a business — especially when it comes to your back office.

Your back office handles the internal operations and administrative functions of the business that are essential for its day-to-day functioning, including things like payroll processing, HR, and accounting. The advent of AI and other digital tools present ample opportunities to automate these functions. Though technology is undeniably important for the future of business, the pressure to find the right resources for in-house functions or scale offerings and automate processes encounters fundamental barriers in fully replacing the back office with tech. 

Businesses, particularly startups and emerging growth companies, merit a modern and efficient accounting function that considers these challenges. To bridge these gaps, a successful and contemporary back office for the next generation of business owners should combine tech with a people-led approach.  After all, people remain indispensable for the nuanced, day-to-day decision-making inherent in any financial role, and, more significantly, for determining the strategic direction of the accounting function.

  

You Cant Ignore AI

The promise of AI is huge. Focusing on its back office impact, 75 percent of corporate tax professionals suggested that AI can “help with productivity, reducing internal inefficiency, and reducing external spend,” according to a Reuters Future of Professionals Report.

An accounting industry survey found that 24 percent of top-performing client accounting services (CAS) practices used AI in 2022, and those numbers have likely increased since then. After all, machine learning and AI allow back offices to automate tasks that might otherwise be repetitive and manual and to process large amounts of data, which could be especially beneficial in identifying risk or forecasting. 

 

Technology Isn’t a Silver Bullet 

Although these technologies offer exciting promise, you have to be mindful of their inherent limitations, however, especially when it comes to the nuanced and complex nature of back office operations. 

5 Things AI Can’t Automate in a Back Office

  • Nuanced judgment
  • Adaptability.
  • Creativity and innovation.
  • Effective communication.
  • Adherence to regulation, policies, and ethics.

 

Nuanced Judgment

These functions often require decision-making that involves empathy, judgment, and an understanding of human nuances. AI lacks the emotional intelligence and contextual understanding that human employees bring to the table. Tasks like employee conflict resolution, performance evaluations, and strategic planning involve a level of complexity that AI struggles to comprehend. 

ChatGPT was found to hallucinateor make things up — about 3 percent of the time in a recent investigation. So, the technology has a long way to go in terms of gaining a semantic understanding of text and interpreting nuanced language. This means we still need a human to get involved when, say, a business needs tailored guidance and advice based on a few legal documents. Consider the multitude of contracts and terms involved in raising capital, whether it’s from a bank, venture firm, grant provider, or other sources. These documents lack a standardized format, making navigating their complexities to determine the optimal path a challenge. Assessing these terms and figuring out what’s best for the business extends beyond the capabilities of AI.

 

Adaptability 

Every business is unique, and their back office operations are no exception. The intricacies of industry-specific regulations and needs demand adaptability, an area where AI systems currently fall short. For example, my company’s experience with various nonprofit organizations has highlighted this challenge, particularly in managing funding from grants, donors, and foundations, each with specific reporting requirements. This complexity necessitates separate workflows to manage reporting on payments, receipts, and other financial inputs. Though technology aids in streamlining these processes, the fragmented nature of these workflows remains a hurdle for AI. Ultimately, human intervention bridges these gaps, ensuring that processes are engineered to accommodate the diverse needs of each provider, from formatting to timing and beyond.

 

Creativity and Innovation 

Increasingly, the value financial professionals bring to their profession is through predictive analytics. AI excels at executing predefined tasks and collating data, but it falls short in terms of creativity and innovation. What good is data if a business fails isnt able to analyze it in a way that drives actionable decisions? Back-office functions often require creative problem-solving, strategic thinking, and the ability to come up with innovative solutions to challenges. Humans bring a level of ingenuity and intuition to the table that AI, with its algorithmic nature, cannot replicate.  

 

Effective Communication  

Human employees thrive in interpersonal skills, adept at fostering transparent communication and cultivating meaningful relationships. In the realm of successful back office operations, seamless communication within the organization is paramount. The question arises: How can a technology-driven back office preemptively address potential misunderstandings and misinterpretations? This is especially important both to drive greater accountability and reliance on the finance function as the company scales and also to ensure KPI and forecasting metrics are tracked and refined on an ongoing basis to improve business operations and results.

For example, in working with a healthtech company with fewer than 50 employees, we saw the importance of clear and precise financial reporting delivered in a timely and consistent manner. As technology stepped in to efficiently handle the recurring demand for weekly financial reports, the solo in-house financial lead now had the bandwidth to impart informed insights for strategic business decisions and considerations across various departments, all grounded in data-driven perspectives.

 

Adherence to Regulation, Policies, and Ethics

AI can follow established rules, but it lacks the ability to navigate the ethical and regulatory nuances that human employees effortlessly handle. Upholding company values, fostering a positive work culture, and making morally sound decisions are areas where human intuition and judgment remain irreplaceable. To that end, the EU has put forward legislation that will greatly impact the way businesses use AI. Businesses must remain vigilant and not become overly reliant on these technologies as it’s only a matter of time before guidance or a regulatory framework from financial oversight organizations, industry groups, or even governments that establishes how they must be used.  

 

Striking a Balance Between Tech and Humans

As the AI landscape is evolving rapidly, identifying where available technology necessitates that employees adapt and embrace new solutions will also be critical. Technological advancements, especially in AI, are transforming various aspects of accounting, spanning bookkeeping, tax filing, forecasting, payroll, and more. The pace and magnitude of these changes can be overwhelming, but with the right personnel and a sustained focus on technological opportunities, accountants and the businesses they serve can reap the rewards of the undeniable growth of AI. 

Tech-savvy entrepreneurs must grasp the indispensable role played by human employees in the back office, while also concurrently incorporating AI to enhance efficiency and automate routine tasks. Recognizing the areas where AI cannot replicate the human touch is essential for making informed decisions regarding hiring and building a robust back office team. As entrepreneurs embrace technological advancements, achieving a balance between capitalizing on AIs capabilities and maintaining a human-centric culture is crucial for the effectiveness of back office functions.

The advantages of adopting a tech-forward approach are evident. Technology can simplify processes, identify trends, and aid in forecasting, making it an invaluable asset. Once technology streamlines financial activities, it enables employees to elevate their roles, contributing to clear and informed business decisions. As mundane tasks are automated and processes streamlined, accounting professionals can transition into more strategic roles, actively positioning the company for success.

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