How will AI impact brand finance?
Brand founders and leaders hate spending money on accounting and finance, so AI will being smiles to founder faces by lowering costs.
Lowering of payroll
Brands will need less people in accounting and finance. Here are five ways:
- Direct uses of AI i.e. vibe coded customized apps directly accessing the company’s data and linking systems will free up time. Think manual updates of dashboards and analyses or time consuming drudge work too small to get replaced by software, but still chewing up hours of some people’s time.
- AI enabled software from vendors will be easier to use, easier to manage and can do more, ultimately freeing up more time.
- AI will improve the systems and processes of external parties heavily used by finance and accounting. If you have ever waded through PO’s, PO changes, invoices, shipping documentation, customs documentation and 3PL reports to track inventory, you know what I mean. There are a lot of areas where improvements by AI of the third parties’ systems will make less work for the brands thus freeing up time.
- Internal systems will become much easier to coordinate thus requiring less people. Going back to inventory, there are internal processes which will get more efficient for example the coordination of PO changes. For example, at one company I worked with, changes to PO’s were communicated to accounting by cc-ing the accounting email address. It was thus up to the accounting person to check through long strings of back and forth emails to identify the latest changes and note them. It was also incumbent on all people in the thread (multiple people at the supplier and multiple people at the company) to remember to cc accounting. Obviously not an efficient system. And when things went wrong, a day or more could be chewed up trying to track down the deltas and correct them.
- As more of the low level work is outsourced to AI, the financing and accounting org hires less people. Instead of managing a small team, the more senior person will be managing agents. The net result being lower headcount.
Lowering software costs
I think this can cut both ways. Some software will be able to charge more e.g. ‘we replace this type of role, so we charge you a quarter the cost of that role’. But AI has turned the software market into a free for all. Everything is being rewritten with AI. Companies are doing it in-house and software companies are doing it to each other.
Also, because brands are complex with lots of interaction between orgs, accounting and finance covers a lot of moving parts. Point solutions will feel they have to expand to a broader surface area to compete as software providers seek to solve the Whole Problem. Everyone will be doing everything. And that includes the big model companies themselves like OpenAI. The FUD, already dense, will become massive. And one of the universal market laws will kick in which is that increased competition drives down pricing.
While people will continue buying software they don’t need, never fully implement and never really use, the ruthless operators will be able to do far more for less. Which will bring even more smiles because the second most hated expense in brand world is SaaS.
Inventory planning and buying will improve
Brands die when they run out of cash. They almost always run out of cash because they can’t convert their inventory to cash quickly enough. They misjudge demand, misjudge required ad budgets, misjudge supply chain timing and overbuy. Inventory planning and buying is ripe for AI improvements.
Customer Acquisition and Marketing will improve
We are already seeing tons of AI offerings in marketing and advertising. And I think some efficiency gains and margin improvements are achievable. But the core problem remains. Meta is the lion’s share of the budget.
Best practices will become table stakes
There has been a huge change in what is considered financial best practices in omni-channel over the past decade. This mindset change and the best practices have been passed founder to founder, person to person. Forums, Slack channels, podcasts and X have helped spread these lessons faster. But the diffusion has still taken years.
AI will speed the diffusion by enforcing it through software. Your platforms of the future are going to make it harder to do dumb things by not only putting in guardrails but also being proactive in suggesting improvements.
Margins will become weapons
The flip side of that is that upcoming brands will use AI to create and run brands at margins unthinkable today. Thousands of mini-Bezos’ believing “your margin is my opportunity” will flood in stealing share and dollars from fatter incumbents.
Capital options will improve
MCA’s and short term lenders have started this. The promise of send us your data and get funded in 24 hours is already out there. AI will not only improve the underwriting it will also improve the forward risk assessment and ability to take corrective actions. And AI will help companies be better run and have better financial processes and outcomes, thus making them better risks.