Could CFOs Axe AI Investment Without an ROI?

Basware's AI to ROI Report, conducted by independent research firm Financial Times Longitude, found that while four out of five Chief Financial Officers (78%) have expressed a desire to increase their investment in AI over the next 12 to 18 months, recognising its value in transforming financial operations, but admit they 'don't know where to start'.

While this may appear as a vote in favour of the tech and growing confidence in it, it does come with a fairly big clause. 50% of CFOs are saying that they will axe AI investments if it fails to deliver measurable ROI within a year, highlighting a narrow window for proving its impact.

Basware's report surveyed 400 global CFOs and finance leaders on their attitude, priorities and challenges when it comes to AI in the finance department.

Uncertainty is restricting investment

For financial leaders, the top priority when undertaking a finance transformation project is cost efficiency, with one-third (32%) listing it as their primary focus.

Financial confidence will remaining on uncertain ground with macroeconomic and geopolitical uncertainties continuing to swirl up until the end of the year and beyond.

This uncertainty is directly impacting AI adoption within finance functions, making it challenging for 41% of finance leaders to prioritise AI investment.

No one is exempt from the fallout of uncertainty. Even Meta's latest earnings saw a reduced stock-price revision worth US$5.1bn to reflect concerns over the company's capacity to mobilise AI investments and sustain growth.

Meta has invested in a "significant acceleration" in AI-related infrastructure, but analysts warn that they need to prove they can continue to cover its rising AI costs and deliver ROI. For companies like Meta, a bounce-back is likely, but recoverability in the short-term isn't achievable for all.

Unclear AI strategy

The report also found that finance leaders want to invest more in AI to reduce manual tasks and allow their teams to focus on priorities in their business.

70% of finance leaders said that staff want AI support for administrative tasks, while 75% report that AI has enabled their workforce to focus on more strategic activities such as e-invoicing compliance.

The biggest blockade to transforming finances is change management and an unclear AI strategy. 40% of finance leaders state that their organisation lacks change management capabilities, while 31% highlight a lack of clear strategic vision for the future of the finance function.

These all contribute to hinder ROI for AI projects, resulting in questions over investments without tangible financial benefits.

Perttu Nihti, Chief Product Officer at Basware, says: "The office of the CFO is tasked with overseeing a complex range of functions from regulatory compliance through to cash flow management and financial reporting. All of which are areas where AI-powered automation can help to reduce hours and relieve pressure.

"But the success of AI investment hangs on knowing where to start and proving impact. We're at the AI tipping point. Focusing on high-value wins, such as AI-powered efficiency that demonstrate quantifiable ROI quickly, in areas such as compliance, error reduction and fraud detection, will help justify investment across a company's organisation."

Turning investment into results

Accounts payable is a starting point which has already seen a greater level of ROI and seen huge rewards. In Basware's cohort of leaders, the average organization has invested around US$1m in such tools and generated a ROI of 36%. In other words, each US$1m investment has generated US$1.36m worth of benefit.

CFOs are prioritising AI innovation and applying it to processes in account payable, reducing errors, faster fraud detection, reduced operational costs and improved regulatory compliance were found to be the greatest benefits.

How one company realised AI's ROI

Paper and packaging manufacturers Billerud have used AI to drive ROI for an enterprise. Its accounts payable team was troubled with time-consuming manual invoice processing, which cost them several hours each day. To address this inefficiency, they implemented Basware's SmartPDF AI Instant Learning solution, which uses AI and text extraction to convert PDF invoices into authentic e-invoices.

Billerud has seen a substantial reduction of invoices needing validation, dropping from 15% to 9% due to AI Instant Learning and saving AP staff several hours each day.

Now, powered by AI, more than 90% of their invoices are validated automatically due to faster, more accurate data extraction.

Jesper Persson, Business Developer at Billerud, adds: "Since day one, we've perceived the desired values from the project.

"The quality of invoices has improved considerably and the AI continues to evolve and improve with each passing day. The efficiency gains we achieved translated directly into tangible cost savings, paving the way for a rapid return on investment within just a few months."

The findings reveal a tipping point for AI in finance. While 50% of CFOs may cut AI investments without clear ROI, those that identify specific starting points for AI implementation - such as invoice processing automation - can achieve measurable returns within months rather than years.

These successes are creating a blueprint for broader AI adoption across finance functions.

Make sure you check out the latest edition of Procurement Magazine and also sign up to our global conference series - Procurement & Supply Chain

Procurement Magazine is a BizClik brand