Small businesses are facing many changes in the current climate. For instance, lots of firms are locked into high energy bills that impact their bottom line, high inflation is pushing the cost of new stock up, and the majority are struggling to hire the staff they need to grow.

Small businesses are starting to look for solutions to help them navigate this difficult environment and manage costs. One solution to finding business efficiencies that has received a lot of hype this year is artificial intelligence (AI), after the launch of ChatGPT which is a tool that uses generative AI (GenAI).

According to our own research, 64% of UK small businesses anticipate that AI will have an impact on their business within the next five years and a quarter (24%) are planning to experiment with AI tools in the next 12 months.

While GenAI can be a great benefit when used correctly, it can also be risky. So is it right for your small business? Like all good questions in life, the answer is it depends. But if you’ve been considering this, here are my top four tips for small businesses on using AI.

Tip #1: Know its strengths Do you know what GenAI is good at? There are many types of AI and GenAI is used to support content creation (such as text, images and audio) by learning from an existing set of content. It learns the complex relationships contained within content (for example, word to word, or colour to colour) and uses this information to generate new content.

It’s important to note, that unlike more "traditional" forms of AI that are optimised to perform well on specific tasks, GenAI is optimised to generate human-like content be it images or text.

That means the performance of GenAI on a specific task in your business is hard to know ahead of time. Doing some hands-on experiments is incredibly valuable – giving you the opportunity to understand first-hand whether it will meet your needs.

As a general rule, the more a task requires specialised knowledge and experience to complete, the more testing you'll need to make sure GenAI is suitable.

Tip #2: Know the task

Can you express what you want the AI to do in plain and simple terms? With GenAI, you must be able to describe the task well for the AI to do a good job.

Practically speaking, if you're thinking of using a GenAI tool to summarise a meeting from a transcript, the question to be asking is "how well can I describe what's worth summarising?"

The better you can describe to the tool what you want the summary to include, like names, dates, or action items, the more likely it is to do just that. But if you ask the GenAI tool really broad, poorly defined tasks like "describe how the meeting went" or "did the meeting go well?" - the less likely you are to get a good outcome.

The same goes for tasks like generating marketing content. Can you describe the style you're after? How long should the content be? It’s quite similar to how you’d get the best out of a collaborator or colleague - do they know what you need them to do for you?

Tip # 3: Know the data

When using GenAI, or any AI, it's important to think about what additional information the AI needs to give you the right answer. GenAI tools tend to do really well with general knowledge. But when you start asking questions that need specialised experience or knowledge to answer, the risk of incorrect results increases.

For example, if you were using GenAI to write an ad that celebrates what makes your small business unique - perhaps it's the customer service, or unrivalled product knowledge. Without providing that information to the tool it's not going to produce content that captures what makes your small business uniquely yours.

Knowing the data also means thinking about privacy and security. We know 48% of UK businesses said they would trust AI with their personally identifiable customer information. It's vital that when using any AI tool, or Gen AI tool, that you're keeping front of mind whether any information you're providing the tool is personal or confidential.

Because while providing data is one way to improve the quality of AI generated content, it needs to be data that you know you're allowed to provide. Is it sensitive or personal information? Do you have consent to provide that data if it isn't yours? How will the data be kept secure? And what about intellectual property ownership and copyright?

Tip #4: Know the stakes

My third and final tip for you is to know the stakes. Not all tasks are created the same. It's one thing to use GenAI to help your brainstorm content for your next newsletter, it's another thing entirely to have it answer customer emails for you.

Always remember that GenAI is designed to sound like a human, not be right - those are two different things. And that means that it's bound to make a mistake - not an if, but when.

When choosing where to use GenAI tools, think about whether mistakes might carry any consequences for you - be it reputational damage with your customers, or wasted time and effort fixing mistakes. One of the easiest ways to lower the stakes when using GenAI is to have someone check the accuracy of the content before use.

The more aware you are of whether a task is high or low stakes, the better you'll be able to design how you use the GenAI tool safely.

By staying one step ahead of technology like AI, you can better understand how this technology can be harnessed to make a positive difference to your small business. With focus and diligence, the power of AI can be harnessed to help, not replace, the people that  make small businesses great.

Soon-Ee Cheah is GM of AI at Xero.