Title of Invention

Flexible and smart financial analysis based on industry type using artificial intelligence.

Technical Field

This invention created a flexible and smart financial analysis based on industry type using artificial intelligence in the field of financial software. It uses data from several period of financial statements and uses the key indicators of the financial evaluation standards to analysis and provide a dynamic, flexible and smart report and management dashboard that adopt the International Financial Reporting Standards (IFRS).

Nowadays, as businesses become more sophisticated, the use of benchmark analysis has become increasingly popular with advanced business operators. The Flexible and Smart Financial Report based on industry type is a useful management tool that will improve your understanding of financial results and trends over time, and provide key indicators for organizational performance analysis more efficiently.

The output of this program, using visual signs and smart comments, provides clear analytical reports to a professional and non-professional user who can easily understand the financial situation and make the right decisions. Additionally, this tool is useful to an investor wishing to gain a deeper understanding of the company’s performance.

Background Art (Literature review)

Businesses over the past decades have been using more advanced software to their financial and accounting performance more easily and with unparalleled accuracy and speed compared to the past generation. Depending on the size and type of company's activity, these software are sometimes designed as ready-made packages (push-systems) or tailor-made and prepared based on the customer requirements (pull-systems).

If accounting software is a tool for recording accounting events and preparing financial statements of a company, its financial analysis software is complementary and can provide the correct picture of weaknesses and strengths of the company to its users, including financial managers, suppliers, creditors, shareholders, etc. In other words, from the output section of systems that have recorded accounting events, various financial reports can be extracted by these financial analysis software. The evolutionary trend of these software available in the market over the recent years allows for the features listed below for different financial periods:

• Preparing analytical reports on the calculation of company financial ratios;

• Comparison of financial ratios with the industry standard average of same industry;

• Provide horizontal and vertical analysis of financial statements items;

• Provide management dashboards.

Such features are provided in a variety of software based on the needs of users in variety of aspects. Of course, in recent years most reports are dynamically generated according to the user's needs.

The common feature of all financial analysis software available in the market is to use standard models and fundamental indicators such as financial ratios for evaluating financial statements in different periods.

Some of the software reviewed include:

1. FYIsoft software

Features of this program in terms of management reporting and report distribution:

- FYIsoft enables fast and accurate financial reporting and also the ability to remain proactive and competitive amidst changing business and market.

- Increases the relevancy and value of financial reports and enables staff to gain the insight needed to run business more efficiently.

- FYIsoft understands your crucial role in providing management with the useful data they need to make well-informed and timely decisions to achieve business goal.

- Automated distribution process saves hours of time and ensures that users receive only those reports they are authorized to view.

- Collect financial data from multiple sources into one location for more efficient report distribution.

- Reports can be provided as PDFs and spreadsheets with formulas, or access reports online.

- Deliver reports via URL, email attachment, hardcopy, or save them to folders on secure network. - Distribute reports based on permissions, interests, departments, and locations at designated dates and times.

- Use automated processes to slice reports and package them by relevancy, and preferred delivery format.

2. OpenReporting software

Features of this program in terms of management reporting and report distribution:

- OpenReporting is a web based reporting and analytics tool that helps organizations bring transparency to their financial information and share it to very large audience.

- Governments, Universities, Schools, Charities, Non-profits or any organization whoe funding comes from general public in the form of taxes, fees, donations, investments, etc. who wants to bring transparency into their financial information can benefit from this tool.

- OpenReporting converts financial information to an easy to use web based summary report which the users can drill down to the very lowest detail, exploring and analyzing the information presented, with a user friendly web interface taking advantage of advanced charts and data visualizations. This will give an end user, greater understanding of what is going on, and thus will help improve confidence and trust in your organization.

3. DrillPoint Reports software

Features of this program in terms of creating management reports:

- With an easy-to-use interface, DrillPoint Reports offers the scalability to create simple or complex financial reports.

- DrillPoint Reports allows you to easily access your financial data and create presentation-quality financial statements using a familiar, user-friendly spreadsheet application.

- Creating any number of pre-formatted financial statement templates, DrillPoint Reports enables you to produce custom, high-quality financial statements for delivery to board and advisors.

- In addition, DrillPoint Reports allows you to manipulate your data, add formulas, graphs, and other more advanced Excel features to maximize the value of the information you’re presenting to others. 4. Appforfinance software

Features of this program in terms of creating management reports:

- Appforfinance is a software application designed for companies who adopt the IFRS and GAAP accounting standards.

- This provides an in-depth performance evaluation of the business through a screening of the last available financial reports.

- Upon entering the company’s financial data, the system assesses the business’ Profitability, Solvency, Capital Structure and Liquidity, generating a financial report complete with ratios, charts, graphs, and comments discussing the company’s performance and the related rating score.

- Users are able to enter up to five years of data.

- Calculate 35 ratios, broken-up in several areas of performance.

- Highlights input errors and indicates appropriate corrections.

- Automatically generates a financial report, rich in charts, graphs, ratios, and comments obtained through complex business intelligence algorithms.

- The system, through complex business intelligence algorithms, generates automatic comments discussing the company’s performance and rating.

- The report can be downloaded on your own device and edited according to your needs.

- The report can be downloaded in: Word file, Excel spreadsheet and Pdf.

- It is a vital application for: Economic and financial analysis of companies; effective financial communication to stakeholders, through a professional and fine report; credit worthiness assessment and company rating; financial health assessment; Investment and financing decisions by managers or stakeholders.

Technical Problem

Professional analytical reports that are available in various scientific domains such as financial field are generally understood by professionals in the same field, while non professional individuals cannot use it. In other words, financial analytical reports can be used and understood by experts in the same field. These individuals are generally accountants or financial managers. Because the common indicators used as a tool for measuring the financial position of any enterprise, these reports are understandable merely for professional purposes. However, senior executives of the same company, contractors, suppliers, and investors who do not have familiarity with financial concepts, will always rely on the general interpretations of experts and financial managers.

Therefore, the language and concepts used in financial analytical reports need to be better interpreted for more general understanding and audience. In other words, a clear and the same time professional description of the financial situation of a company increases the transparency of information about performance, and creates more credibility for the company and more confidence for investors.

Solution to Problem

Since the available software provides financial analytical reports that uses the evaluation indicators and can be used merely by financial experts, in order to solve this problem, the introduced program generate a professional and innovative report that has the general features of other software by providing a dynamic and smart analytical comments based on industry type using artificial intelligence to great understanding for financial managers as well as non-financial managers.

This platform provide the following options to better assess the financial condition of the company.

• The platform capable to generate financial report for companies based on industry type (more than 30 types of industrial activities).

• Analytical texts separation by calculating the financial ratios of items in different periods and comparing them with the standard average of the same ratios in the industry in which the company is active. This separation identifies three levels of weak, moderate, and strong status by calculating three different domains of the standard average, and in each case, smart description that has been prepared in advance is used in the comments of the flexible and smart report.

• Use color signs to better visualize the different situations resulting from the analytical calculations of the company's financial statements. Each color sign transfers its own concept to the user that pre-planned by platform.

• To prepare the analytical comments for report, in the first stage, the financial ratios extracted from the group of liquidity, debt, efficiency and profitability are calculated, and in the second stage, these ratios compare to the standard average of same industry that proportion was already placed in the platform or imported by user. After comparing them, three states including strong, median and weak can be distinguished through certain defined domains.

Advantageous Effects of Invention

The Flexible and Smart Financial Analysis, which uses the key indicators of the financial evaluation standards, has some innovations that include:

• Creating analytical and smart comments using artificial intelligence tailored to any financial situation based on industry type that are calculated based on key criteria of assessment and non-repetitive. Also written comments for non-professional individuals are easy to understand.

• This program provide a flexible analysis and use different techniques, models and approach to generate financial report and offer a good view of business. In other word, a professional report that consider different key indicators and ultimately provide an intelligent comment about the financial performance of company.

• This smart financial analytical program is not common for all industries and capable to analyze more than 30 types of industrial activities (including: Agriculture Production; Aluminum; Auto Manufacturers; Auto Parts; Biotechnology & Drugs; Cement, Lime & Plaster; Chemical Manufacturing; Coal Mining; Computer Hardware; Computer Peripherals & Office Equipment; Containers & Packaging; Electric & Wining Equipment; Electronic Instrument & Control; Food Processing; Industrial Machinery & Components; Iron & Steel; Marine Transportation; Metal Mining; Nonalcoholic Beverages; Oil & Gas Production; Oil Refineries; Paper & Paper Products; Real Estate Investment Trusts; Real Estate Operations; Restaurants; Rubber & Plastics; Textiles; Tile & Ceramic; Tires; Tobacco; Transport & Logistics; Water Supply; Wood Products.) and provide smart reports as well as dedicated dynamic management dashboards separately for any kind of industry.

• For the speed of transmission of analyzed concepts, visual signs have been used in preparing flexible and smart reports and dynamic management dashboards.

• This platform allows user to enter the key indicators of financial ratios according to their acceptable standard.

• The type of manufacturer or service activities can be selected by user.

• Innovations in the configuration of the smart analytical report components and the aggregation and integration of various financial analysis sections in a report are among the other advantages of this program. For example, the analysis of the average financial ratios of the industry surveyed, the analysis of the structure of assets and liabilities of the company, and measuring the probability of bankruptcy is carried out simultaneously and displayed.

Figure

Illustrate the work flow in flow chart.

Description of Embodiments

A flexible and smart financial analysis is a useful management tool that will improve your understanding of financial results and trends over time, and provide key indicators of organizational performance. This invention created flexible and smart reports based on industry type using artificial intelligence in the field of financial software.

The evolutionary trend of financial analysis software available in the market over the recent years allows for the features for different financial periods such as: creating reports on the calculation of company financial ratios, comparison them with the industry standard average, provide horizontal and vertical analysis of financial statements items, and create dynamic management dashboards. Such features are make based on the users’ needs.

The operational process of this program consists of two main sections. (For user and platform.)

The first stage of the process consists of three sections, which are completed by the user with the registration (see fig. No.l), the initial data entry (see fig. No.2) and making order (see fig. No.3).

The process of initial data entry including:

- Enter the balance sheets and profit and loss statements accounts from the four financial periods (monthly, quarterly or annually);

- Select industry type from more than 30 industrial categories (mention earlier in the section of Advantageous Effects of Invention);

- Determine the type of manufacturer or service activity;

- Select period of the report in the base of monthly, quarterly or annually;

- Select currency. - Enter the desired financial ratios of user (optional). If user does not fill this section, the platform automatically using the standard average related to same industry that prepared in advance;

In the following, the user's order (see fig. No.3) can be provided in the form of the following reports:

- Flexible and Smart Financial Report;

- Summary of Financial Performance;

- Management dashboard.

The second stage of the process consists of five sections, which are fully implemented automatically by the platform and the sequence of operations:

- Automatic control of input data (see fig. No.4) based on the standard and matter of balance sheet and profit and loss statements accounts in seven steps. If any error are found in the input data, immediately send a message to user to correct them. This process decrease probability of error in the initial data entered by the user to zero.

- The next section is the platform computing center (see fig. No.5). First, financial ratios are calculated on the basis of financial statements (see fig. No.5-1).

- Then the calculated ratios are recorded for building report.

- At the same time, calculations are made for the horizontal and vertical analysis of financial statements in this section (see fig. No.5-2).

In the next section (see fig. No.6), the financial ratios of the groups of liquidity, debt, efficiency, and profitability that are provided in the computing center (see fig. No.5-1) compare to the standard average of the industry that is already in platform or imported by the user to determine their positive or negative deviations. After comparing them, three strong, moderate, and weak states can be distinguished through certain defined domains.

It is necessary to mention that in interpreting ratios, the strongest value is not always the largest numerical value, nor is the weakest always the lowest numerical value.

Use green, yellow, and red colored signs to better illustrate the different situations resulting from the analytical calculations of the company's financial statements. For example: The green sign indicates positive deviation and it is due to being in a better status than the industry standard average.

The yellow sign shows the mid-point in terms of the utility of the company's financial condition.

The red sign indicates the negative deviation of the calculated financial ratio compared to the industry standard average and indicates the company's critical status of the indicator to be evaluated.

The next part of the process is converting the report prepared in the platform into PDF, Word or Html formats as requested by the user (see fig. No.7).

Eventually, the latest function of the platform is to deliver Flexible and Smart Reports electronically via email attachment for user (see fig. No.8).

For generation the flexible and smart report, after providing over 68 intelligent comments from 270 status of review and calculation, the formatting of the comments and charts is made in accordance with the standardized reporting and dynamic management dashboards. In this section, the platform, through complex business smart algorithms, generates automatic comments discussing the company’s financial situation.

Example

The ratio of debt to equity calculated from the debt ratios group shows an amount of 2.83. While the standard average for this ratio in the same industry is 0.42. In this case, for the analysis of the financial situation, the three domains are defined as deviation from the standard average as follows:

• Domain less than 0.42%;

• The range between 0.42 and 1.22 percent;

• And the range is greater than 1.22%.

Which, depending on the type of ratio, show the strong to weak status, respectively.

At this time, the calculated numbers are the criteria for the preparation of analytical comments for reporting, and at the time of preparation and completion of the report, the preset text is retrieval in the main comment.

For instance, in the case of this example, this smart comment will be displayed. “ The debt-to-equity was equal to 2.83 that is more than its industry ratio (0.42) that indicate too much debt can put your business at risk and also it shows the greater the risk being assumed by creditors.”

Industrial Applicability

In a competitive business environment, having the right information, processed, and credible for a quick and accurate decision is inevitable. Since various factors are involved in the financial position of a company, business executives need advanced and innovative performance analysis tools to be able to make the right decisions in a competitive environment with a comprehensive view.

The Flexible and Smart Financial Reports based on industry type and Dynamic Management Dashboards can respond to these managerial information needs. This platform in more than 30 types of industrial activities, using key indicators of financial evaluation and their analysis from a variety of dimensions, provide a tool for more efficient decision making for senior and middle managers.

Smart comments of these reports, other than company directors, can be used for contract parties, suppliers, banks and credit institutions, financial suppliers, auditors, and individual investors.