In short order, artificial intelligence (AI) – particularly generative AI – has crossed the chasm from niche technology to a broadly applicable solution that’s reaching almost all corners of the economy – including the world of non-profit accounting and finance. Since non-profits typically face smaller budgets and lean staffing, they often lack the necessary resources to enhance financial management. However, AI-powered financial management software can be a transformative change-agent in both tactical and strategic ways.
Unsurprisingly, the Brookings Institute found that non-profits are turning to AI to accelerate operational tasks such as auditing transactions to spot anomalies. And AI can also help uncover insights, identify opportunities and threats sooner, and improve stewardship. Here are some significant ways that non-profits can apply the power of AI to their financial operations.
Eliminate the drudgery and increase the appeal to your staff
In today’s tight labor market, it’s a major struggle to recruit and retain talented people – particularly in finance. A recent Deloitte study confirmed that major employers have great difficulty in filling accounting and financing roles. One reason? The unappealing manual work that falls to finance professionals – particularly at the entry level – who find themselves wrestling with inscrutable 50-tab spreadsheets, lengthy audits, and the unique challenges of fund accounting.
AI tools can reduce or even eliminate much of this grunt work. For instance, AI chatbots and digital assistants can continuously monitor data feeds to track program performance, spot irregular transactions, watch for unusual activity, or detect unauthorized access. They can provide meeting reminders, analyze and summarize changes in tax laws, or take notes. AI can even be embedded in tools that help other employees in the organization and speed processes such as purchase-order approvals or expense-report submissions. AI can also automatically match POs and invoices, perform reconciliations almost instantly, allocate expenses to cost centers, and extract relevant data from documents.
The result: accountants focus more of their time, energy, and talent on higher-value tasks like managing donor relationships, devising strategies, sharing fundraising stories, engaging with peer organizations, and strengthening the mission. For instance, at Pavillon Treatment Center, the impact of this approach has been significant. The organization estimates that automation has halved the time the finance department previously spent on transaction details. Instead, they’re using that time to work with executives, clinical staff, and the board on strategic planning. They’re looking at cost impacts, accreditation policies, and employee benefits, and making changes to support the broader mission.
Accelerate the close
In many non-profits, the period-close revolves around painstaking clerical repetition that can stretch on for many days to weeks, hindering the ability to access real-time information to understand performance and react quickly to changing circumstances. “Closing time” sets off a flurry of activity as you pull data from other enterprise applications, test-audit and trial-close accounts, scour the GL for errors, and more. While we all appreciate good teamwork among finance pros, it’s clear that these are tasks that AI is increasingly able to take on.
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 into mere hours, unlocking more time for strategic finance, not tactical finance. The result: donors gain more confidence in the organization’s stewardship, and your finance team can collaborate on higher-value activities.
At Koret Foundation, strategic finance – driven by sophisticated automation – is unlocking meaningful improvements. Previously, the non-profit endured lengthy reporting and budgeting cycles, and creating estimates and forecasts for grantmaking was time-consuming. Today, the organization can predict year-end numbers months in advance, enabling it to adequately plan cash flows to ensure it fulfills all grant commitments. This is particularly important, since grantees need funds in a timely manner and the board needs timely information to manage market volatility.
Improve fund accounting
Time and expense capture and allocation are vital to accurate and timely fund accounting. AI technology can automatically create timesheets for employees as they work simply by looking at your calendar, gauging your use of productivity applications, and grouping that work into blocks of time. AI can automatically allocate those blocks of time to a funds, projects, or tasks. Alternatively, an employee can manually drag and drop blocks of time to the appropriate allocation. Over time, AI learns that rule 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 minimizes manual data entry by providing suggestions for time allocations and enables employees to review each entry for accuracy before submitting the final timesheet.
By continually 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.
Non-profits need new ways to reduce time spent verifying the past and increase time spent on envisioning a better future for its constituents, clients, and donors. With AI-powered financial management, non-profits are poised to think less about the past and more about the future.