2024 is here, and now is the best time to look back at 2023 and see what we learned to better prepare for the year ahead.
From volatile markets to bank failures, mass adoption of generative AI, and beyond, 2023 has had its ups and downs. Being able to tackle those seismic shifts and continuing to push forward and grow displays immense resilience and adaptability, all while still carving out a new normal in a post-pandemic landscape.
The Year of Efficiency
Following the trend in 2022, the continued rise in interest and inflation rates has forced many companies to mark 2023 as the year of efficiency and cost savings.
One of the biggest challenges businesses are facing is investment and lending tightening. With economic uncertainty and market volatility on the rise, securing funding has become impossible for many, leaving them to make some unfortunate and uncomfortable decisions to continue operations.
Banks and other financial institutions have become more cautious in their lending practices, making it much harder for businesses to obtain loans or credit lines. This has left many businesses struggling to find the capital they need to expand, invest in new technologies and products, and even meet basic operating expenses.
Additionally, investors are becoming more selective about where they put their money. With so many businesses vying for investment dollars, it’s vital for companies to have a solid business plan and a clear vision for the future to stand out. This can seem daunting and overwhelming for many entrepreneurs and fast-growing business owners who may not have the resources or expertise to create a compelling pitch.
In the current landscape, investors are always looking for companies that display efficiency in their operations more than ever. Companies that consistently deliver results with minimal resource wastage are considered attractive investments, as they generally have lower overheads and can generate higher profits.
Companies that prioritize efficiency are more likely to be able to weather economic downturns and market volatility. By investing in efficient businesses, investors can potentially earn higher returns on their investments and benefit from long-term growth prospects.
An Uncertain Financial Environment
Adding even more fuel to the investment fire, the failure of Silicon Valley Bank, quickly followed by Signature Bank, hindered many businesses’ ability to garner debt funding, leaving many established and fast-growing companies not directly affected by inflation or interest rates to scale back and reevaluate their next steps, officially signaling the end to the growth at all costs era of the past decade.
While the FDIC was able to protect both insured and non-insured SVB deposits, this most likely won’t be the case following the next bank collapse.
High-profile failings of financial institutions also invite fraudulent activity and nefarious parties to take advantage of the situation, increasing the importance of having granular controls and safeguards in place to protect your company from the unexpected.
This should be a lesson on the importance of safeguarding funds and having redundancies in place for any potential challenges that may arise in the future. By staying informed and having a plan, companies can ensure they can navigate any financial difficulties they may encounter.
Adopting Generative AI Models
2023 will also be known as the year AI went mainstream. The introduction and mass adoption of generative AI models, with ChatGPT in particular, have led the technology to seep into almost every aspect of our lives.
For those unfamiliar, ChatGPT is a generative AI model developed by OpenAI that exploded in popularity at the beginning of 2023 due to its ability to understand complex natural language-based queries and return relatively fast and accurate results. Content creation, creative ideation, website building, travel arrangements, image generation, and coding are just some of the ways people interact with large language generative AI models.
As mentioned, efficiency and accuracy are essential to corporate success, especially when managing complicated financial processes and workflows like accounts payable, procurement, and employee expenses. As a result, Innovative and forward-thinking finance and payments leaders are looking at generative AI models to enhance their finance function.
With practically limitless possibilities, finance teams are learning that they can use generative AI models to perform, automate, and assist with a bevy of processes like:
- Financial Analysis and Reporting
- Fraud Detection
- Expense Management
- Taxes and Compliance
- Financial Planning
By leveraging the power of generative AI and finance automation software, companies can make better and more informed decisions, improve accuracy and forecasting, and substantially reduce the risk of errors and compliance issues.
Of course, there are limitations and dangers to using generative AI models. ChatGPT, for example, takes the learnings and data from its interactions and uses them for future versions. This means that if you input a lot of sensitive information, like finances and competitive analysis, into ChatGPT, that same information may be a part of its future datasets.
Suppose your finance function is looking at ways to incorporate generative AI models within its workflows and processes. In that case, seeking a licensed or privately hosted solution or looking at reputable providers that have already implemented natural large-language AI models within their hosted solutions is recommended. This will help ensure that other parties cannot access sensitive information due to engaging with the AI.
Expect the Unexpected
Looking ahead to 2024, there are several key lessons that finance departments and CFOs can take away from the past year’s events. First and foremost, it’s important to stay updated on the latest market conditions so your company can react as quickly and efficiently as possible.
Additionally, CFOs should be prepared to adapt to new technologies and financial products, like AI, as they become more mainstream. This may require investing in new tools and training staff to perform better in these areas.
Overall, while 2023 was a challenging year for finance departments and CFOs, it also provided valuable lessons and opportunities for growth. By staying proactive and adapting to change, finance professionals can prepare themselves for the challenges and opportunities in 2024 and beyond.
