There is a productivity problem in the UK, and unfortunately small businesses are not immune. While this is a long-standing problem, low productivity has been exacerbated by below-trend economic growth and one-off events such as Brexit. It’s a tough situation indeed! Xero’s report ‘Small business productivity: Trends, implications and strategies’ reflects these macroeconomic changes and shows that UK small business productivity fell by 7% between August 2022 and December 2023, and is now well below the UK’s pre-pandemic range.
Without improving labor productivity, we risk a domino effect that makes it difficult for small businesses to reinvest capital to drive growth. Business owners cannot sit back and wait for economic conditions to become more favorable, so it is understandable that they are looking for ways to increase the productivity of their operations.
For many, that means turning their attention to technologies like artificial intelligence (AI) to see if they can help solve the productivity problem. AI is increasingly being talked about for its ability to help automate processes and free up business owners from time-consuming tasks that hinder productivity. Time is often the most precious commodity for small businesses, and AI is starting to show how it can give owners some time back so they can focus on more important tasks again.
Of course, AI technology won’t completely solve the productivity problem, nor is it a one-size-fits-all solution for small businesses, particularly when AI itself is a variety of different technologies and capabilities. But there are some key considerations for small business owners looking to effectively leverage and profit from this technology — namely, understanding where it can benefit them, what the limitations are, and finding ways to safely experiment with emerging but relevant tools.
Researching and promoting EGM technology at Xero.
Optimizing tasks, processes and workflows with AI
A good starting point is to analyze key business processes and identify critical activities that are causing productivity blockages due to the need for manual and repetitive interventions. From there, small businesses can design experiments that explore how AI could help automate or scale these tasks, thereby reducing the effort required to complete them at scale.
Some companies can benefit from streamlining tasks such as writing emails and producing documents for stakeholders that can otherwise be time-consuming. Various types of AI can help initiate and, in some cases, complete this work more quickly and accurately, freeing up staff to spend more time on functions that are more urgent or require more creativity.
On top of that, small business owners can also gain critical insights that allow them to make smarter decisions. For example, our research tells us that most small businesses struggle to maintain a healthy cash flow. The AI capabilities that are available today can help address this pressure point by helping to answer deeper questions about an organization’s finances, generate forecasts, and provide analysis on where to begin digging deeper when seeking professional advice. This can lead to busy business owners having greater control over their cash flow and knowing where to focus their efforts, allowing them to prepare for potentially more difficult months ahead.
In addition to streamlining tasks and processes, small business owners can also look for opportunities to optimize their workflows using the new conversational capabilities offered by generative AI. One example of this is using AI-powered tools that adapt to your needs where you’re already working, saving you time and the need to switch applications.
Awareness of the risks when using AI
We are also gaining a better understanding of the limitations of AI technology and some of the risks inherent in its use, such as misinformation, discrimination and bias. For roles such as finance and accounting, the problem of hallucination (where data points are “made up” by the model) can be exacerbated if the data sets being used are not appropriate for the task or are not kept up to date.
And when using up-to-date but sensitive or proprietary data – whether the AI tool is managed directly by a small business or is embedded in products and services they use – it is critical to take steps to prevent LLMs from disclosing this data to unauthorized third parties. This is particularly important when using “free” or public AI tools – taking the time to examine how they are using and protecting the data provided to them is key to managing the risk associated with their use.
It's a marathon, not a sprint.
As with any advanced technology, speculation about the “right” amount and style of AI implementation in small businesses is to be expected, and should indeed be welcomed. Small business owners have a growing interest in how technology is best used to improve productivity in their world, and they need opportunities to assess where it can be of most use to them.
Questions like: where will AI bring the most value to my business? When will it start to yield the best returns for the time I need to invest in exploring and using it? And most importantly, how do I make the best use of the technology given my business goals and objectives? These are important as they can be very useful in helping to focus efforts on exploring a landscape of opportunities. Additionally, speaking with trusted advisors can help business owners feel more confident about their transformation journey and a future with AI at their side.
When it comes to leveraging AI and harnessing its potential to accelerate and improve productivity, small business owners need to be well-informed. Understanding AI’s capabilities, limitations, risks, and rewards will enable them to make better decisions regarding experimentation and implementation of these technologies in their businesses. In this way, productivity can be increased gradually, one AI-driven, improved process at a time.
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