The FT reported that big accountancy firms are spending on AI to improve their audit work, but their regulator the FRC said in January the firms are overemphasising the use of data analytics to win tenders. Bandying words such as improved accuracy, speed, efficiency, quality could all be just hype compared to what the reality of artificial intelligence (AI) might be. It might also be open to being gamed by unscrupulous parties. Current regulations and standards might be left behind owing to the pace of AI change.
What is likely is that AI it will cost a lot of money. That outflow could be replenished to some extent by the firms making use of invoice finance, especially of single invoice finance used by Cash for Invoices Limited.
What is an invoice?
Invoices are a form of trade receivable, i.e., they are an asset on a company's balance sheet representing money to be received by that company at some future date - at the time the debtor pays the invoice. At that time, the debtor (payer of the invoice) will no longer appear on the company's balance sheet and instead it will be replaced by an equal amount of cash (which is also an asset). There is no net increase or decrease in assets, merely conversion from one to another.
If that debtor does not pay, then the asset will be written off as a bad debt (a cost in the profit & loss account) and assets will then reduce (no cash came in). Granting time (credit) to buyers to pay for their purchases is therefore an example of credit risk for the company giving time.
If later - perhaps through credit collection procedures - the debtor pays the invoice, then the bad debt is added to the p&l as a profit (income) and cash increased by the amount received. The assets increase and are offset by an increase in profit (equity on the balance sheet). All is well again.
What is single invoice finance?
Cash for Invoices Limited offers single invoice finance (sometimes called spot factoring or selective invoice finance) - a type of debt factoring that has key advantages over conventional debt factoring and invoice finance: