Understanding How AI Works
To properly leverage AI within your organization’s financial operations, it’s important to have a basic understanding of how AI functions. AI works by combining large amounts of data with fast, iterative processing and intelligent algorithms, allowing the software to recognize patterns or trends in data and learn automatically from them. It runs on neural networks, which are networks set up to behave similarly to a human brain. Imagine teaching a child to throw a ball, learn a new language or complete a puzzle, AI isn’t much different. When you provide it with data, it learns from patterns and trends to make predictions on how to behave in a variety of situations.What This Means for Utilizing AI in Construction
By and large, the biggest opportunities to integrate AI across the construction industry’s accounting practices are in the areas of budget estimation, automating financial reporting and detecting fraud. Utilizing AI’s speed and accuracy to complete these tasks allows companies to unlock a revolutionary level of efficiency.- Budget estimation — For many contractors, preventing cost overruns is crucial to maintaining revenue. Construction companies have a lot to consider when estimating the cost of a project, including labor, materials and overhead costs (office space rent, salaries of office workers, marketing and advertising, taxes, insurance, etc.). AI’s unique ability to analyze years’ worth of data sets in minutes means two things for companies: Unprecedented access to meticulous budget projections and project timelines, and highlights of areas within the budget projection with potential for improvement — either by recommendations to obtain materials elsewhere or swapping out a material for something more cost effective.
- Automated financial reporting — Much of the discourse around implementing AI into daily tasks comes from a place of concern over AI replacing jobs normally done by humans. Most early adopters of AI tools have agreed, though, that a sweet spot exists. By utilizing AI to perform daunting clerical work (think of highly repetitive tasks, like data entry, organizing and managing lengthy spreadsheets, replying to basic customer service emails, etc.), construction companies can maximize their human capital, empowering workers to learn how to harness AI and spend more time interpreting the extensive financial data. In an industry struggling with attracting and retaining top talent, automated financial reporting might prove to be a valuable tool for more than just speedy and accurate data reporting.
- Detecting fraud — Construction companies often find themselves susceptible to fraudulent billing practices. While dishonest business practices are prevalent in all industries, the complicated web of supply chains within construction has proven it especially difficult to mitigate fraud. However, AI’s algorithms have an opportunity to cross-check invoices and change orders, acting as a watchdog for suspicious activity. As a result, companies can quickly flag anything outside the norm when it comes to the cost of materials, project timelines or hours of labor, and proactively halt any double-billing practices.