Getting the basics right before rushing into AI
One has witnessed a shift recently in the conversation around digital transformation. It’s been sparked by a new arrival to the tech scene. It begins with A and it ends with I.
Charities up and down the country are being bombarded with mixed messages about artificial intelligence (AI). One moment, AI is bad, cannot be trusted, and is going to replace humans in the workplace. The next, it’s the best thing since sliced bread, will save endless amounts of time and money, and will enhance our human potential beyond what we can even imagine.
As it stands today, the reality falls somewhere in the middle of these two extremes. AI can offer many benefits to organisations when used correctly, for things like enhanced searches and summarising meeting notes. But this is only scratching the surface. The tech is still in its infancy, and its use for more complex tasks such as analytics and decision-making is still largely unexplored.
What’s not helped are the mixed messages and sensationalised headlines we’re seeing about AI. They’re creating great confusion, and even anxiety, amongst organisations. Not to mention the onslaught of tech vendors that want to be seen as the company with the “flashiest new AI solution that you absolutely need”.
Fear of missing out
It’s causing AI FOMO. That’s “Fear of Missing Out on AI”. Charity leaders can be forgiven for now worrying: "Should we be using AI? How can we use AI?" When/ where should we start using AI?!"
And it’s midmarket organisations, including charities, which are feeling this FOMO the most. Smaller in size, with fewer staff, lower budgets and limited resources to go around, the promising messaging around AI and its cost-saving efficiencies has resonated and created curiosity.
But it’s usually the same midmarket organisations, particularly charities, which are priced out of the enterprise-level, AI-driven tools we see on the market today. Or which lack the staff resource or skills in-house to operate them. As such, recent statistics from Charity Excellence found that “most charities” feel unprepared for AI.
Budget and staff resources aside, when we look at finance functions specifically, we can see that digital transformation in general is well behind where it needs to be. It’s estimated that there are around 100,000 midmarket sites in the UK still reliant on legacy, on-premises finance systems.
These systems have simply become too cumbersome for finance teams to keep using. They are unable to integrate with other cloud-based systems within the organisation. These legacy systems acting as mere “data repositories”, with time-consuming Excel sheets and data consolidation needed on both ends to make the month-end reports stack up.
With so many midmarket finance teams still reliant on outdated systems, without a clear path to cloud, I can’t help but feel that this AI FOMO is premature. Core finance must be upgraded, and brought to the cloud, first. But why the reluctance to change up until now?
A daunting decision
Modernising a charity’s finance system is not a decision that’s taken lightly. Much like moving house, it can be a daunting process. It’s disruptive to routines and can be a big change for teams who have become used the old system, no matter how cumbersome, over the years. This is why so many finance directors (FDs) delay the change for as long as possible.
The fear of failure can also be major blocker. A failed implementation could see an FD remembered for years, not for their successes, but for a bad decision that caused chaos. Many FDs carry past scars of stressful implementations.
It’s this “pain factor” that’s causing the hesitancy. Past experiences highlight how easily a poorly planned or ill-timed system change can derail operations. The stress of leading a struggling implementation while managing day-to-day operations makes it easy to see why finance leaders would rather endure their current systems than risk the upheaval of change.
However, while perseverance with outdated systems might feel safe in the short term, it’s holding finance teams back. Prolonged reliance on legacy systems creates inefficiencies and hinders innovation, which ultimately contradicts the desire to become more agile with AI.
No system upgrade in a charity is without its challenges, but there is a right way to approach it without cutting corners. With careful planning, a well-structured implementation process, and realistic timeframes, finance leaders can modernise at pace, without the horror stories. And when done correctly, the rewards far outweigh the pains of transition.
When to modernise
Core finance transformation should begin with the basics, laying a solid foundation before entertaining the more advanced integrations. But when do you know it’s time to update your systems? There are clear signs when your current software is holding your charity back. Many FDs start to experience creeping inefficiencies, with core systems feeling stretched and increasingly causing frustration.
Processes reliant on manual interventions or spreadsheets are a red flag, and usually a sign that you’ve outgrown your old system. Inability to produce real-time, actionable information is another indicator that the current system is reducing the effectiveness of the Leadership Team, which in turn damages the charity as a whole.
New leadership often plays a major role in instigating change. A fresh set of eyes in the finance team can quickly spot inefficiencies that long-term employees may have grown desensitised to. For smaller organisations, such as charities and nonprofits, there may be pressure to “make do” with outdated systems due to constrained budgets. However, there’s often a tipping point where external factors, such as increasing licensing fees or yet another burdensome manual process, push the organisation to make a change.
Ultimately, the decision to upgrade comes down to a cost-benefit analysis. The switch only makes sense if implementing a new system is less painful than continuing with the old one. When the current system actively hinders growth, deters efficiency, or runs the risk of harming the charity’s ability to scale, the decision becomes abundantly clear. Asking the following key questions will help:
- How good is our reporting? If your system isn’t providing the reporting, you need without a lot of manual intervention, it’s time to look at something else.
- How long is month-end taking? You should be closing the last month within a week. Anything outside that is probably sub-par.
- Where does our time go? If it’s wasted managing unwieldy processes - with workarounds upon workarounds and a lot of spreadsheet work - it’s time to upgrade.
- Do we have a highly customised system? There comes a tipping point where you’ve created a system with so many components bolted together that it’s no longer sustainable to continue with.
- Will our system keep up with growth? If your systems are already under strain and your charity is aiming to grow, things are unlikely to get easier.
Looking to the future
AI is the new kid on the block, and it’s attracted a lot of interest from charities. But for midmarket finance teams, its benefits cannot be realised until digital finance transformation has been kickstarted first. Using AI tools with a legacy, on-premises solution is akin to putting a Band-Aid onto a broken leg.
Assessing when it’s time to transition from traditional on-premises finance systems to a modern, cloud-based solution is a crucial first step for any midmarket organisation striving to stay competitive and adopt the latest tech.
Legacy systems lack the scalability and flexibility required to meet the evolving needs of finance teams. By adopting a cloud solution that is purpose-built for midmarket organisations, charity FDs can empower their team with the tools to streamline workflows and enhance efficiency. It’s a forward-thinking move that lays the groundwork for future innovations, including the incorporation of AI tools down the line.
Once your cloud-based system is fully adopted and your charity’s finance function is running efficiently, only then it’s time to start considering a well-structured AI adoption plan. The aim should be to move forward cautiously, ensuring any new AI tools are incorporated thoughtfully and strategically, rather than rushing into trends out of pressure or FOMO.
This thought process covers the downsides as well as the functional benefits – topics like data protection and security. With a stable, true cloud technology foundation in place, you can make informed decisions about how best to integrate AI. To deliver long-term value, not short-term band-wagoning.
