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Balancing your Balance sheets with Artificial Intelligence and Machine Learning

Balancing your Balance sheets with AI and ML

Shahabuddin
Content Creator

5 min read | Apr 15, 2021

Balance sheets:

A company’s current fiscal strength, valuation, IPO releases, the attraction of Investors, and almost everything depends on its Balance Sheet. How? Years-long, balance sheets have been a key for understanding the income, expenses, SKU numbers, interest rates, asset values of a company.

As time passed, the modern world started requiring Modernized solutions like AI and ML, for a quick prediction of the future expenses, a short prediction of how a company can cut down interest rates, the level to which assets can be monetized in the long run, etc., These are a very few modern expectations arising from the business world when it comes to balance sheets.

With the evolution of Automation and AI, these predictions proved to be effective to a maximum level. However no system is 100% efficient, that is why a prediction is happening instead of accurate outputs. Now let us see some of the important aspects in a balance sheet where ML and AI can help.

An increase in the income structure, optimization of Operation costs, bringing down expenses are some of the must achieve targets in any balance sheet. One target in which businesses fail is ” Repayment of Debts” with “Interest”. Can AI help you pay the interest and debt amounts? No. But AI can help you in predicting the range of interest rates that your company will reach within a particular period, which can prove helpful for your finance manager to understand at what rates debts can be settled to free the balance sheet from interest rates and making the debt rates come down to zero.

Interest Rates over debts:

“When a gift is deserved, it is not a gift but a payment”

An increase in the income structure, optimization of Operation costs, bringing down expenses are some of the must achieve targets in any balance sheet. One target in which businesses fail is ” Repayment of Debts” with “Interest”. Can AI help you pay the interest and debt amounts? No. But AI can help you in predicting the range of interest rates that your company will reach within a particular period, which can prove helpful for your finance manager to understand at what rates debts can be settled to free the balance sheet from interest rates and making the debt rates come down to zero.

Revenue Forecasting in balance sheets:

                Revenue in business terms is the expenditure added to income in the balance sheet. You might find this definition a common one, but the results which we are going to get out of this simple formula are vast. Meaning, Revenue of a company decide almost every aspect of the budget in the upcoming financial year.     

              What if AI can do this prediction for you, for example, say for the next 5 financial years, Insane right? It can do even more. In basic aspects of financial management, we can predict the estimated revenue and other terms by using Financial ratios.

               Ratios can give you a certain level of output, but still, it is manual & time-consuming too. If you want to stay ahead of time and also make your company adapt to modern trends then you can bring AI into the picture, training an AI model with numerous balance sheets of all models and sizes with different data can help predict for the upcoming years, this will help your CFO and stakeholders where to concentrate more so that they can increase their revenue.

Failure of CAPEX:

“Money is always eager and ready to work for anyone ready to employ it”

 

                 The smartness of a business persona is making money work for you. Meaning, the expenditure which you had made on your capital assets, must yield a good percentage of ROI. The source of money for spending on your CAPEX depends on various sources, what if all these go wrong? You get hit by a strong debt, which will eventually lead to the failure of the assets, increasing the depreciation value of the assets which in turn will lead to bankruptcy at a certain point.

                 So how can AI/ML can help in this scenario? Again prediction modeling comes into the picture, your AI model can help analyze how much the depreciation cost might hit after a few years or the next year too, it can also help you understand whether investing in a particular asset is worth it or not. Which can help you preplan your monetary allocation on CAPEX saving your company from numerous pain points.

Conclusion:

                    AI & ML are aspects that can help you give a predictive analysis to make your company prepared to face challenges. Any system isn’t 100% efficient, AI is no different from this. But the results will prove sufficient enough to take care of your challenges and over a while, this can skyrocket to any percent level for that matter, meaning the sufficient results given by AI can increase the strength of your balance sheet year on year.

Hope this helps. Now, tell us in which financial aspect you think AI can help you resolve your challenges.

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