Have you ever thought about how artificial intelligence (AI) could transform your business operations or wondered whether AI tools are right for your small business? 

With large language models and other AI technology being adopted by industries across Australia, understanding how to adopt it responsibly – and what the risks are - could give your small business a competitive edge.

What is AI and why it does it matter for small business?

Understanding AI

Artificial intelligence is a term used to describe technologies that enable computers to perform tasks that usually require human intelligence. AI systems use real world data to learn patterns, make decisions, and generate responses. Much like how humans learn from experience, different AI systems can develop better responses for your needs based on training and information they are given.

Recent developments, particularly with tools like ChatGPT, Claude, Gemini and Microsoft Co-Pilot, have brought AI to the mainstream. These tools are accessible to small businesses without requiring technical expertise or large budgets. They offer opportunities to improve efficiency, enhance customer service, analyse data and unlock new growth potential.

Types of AI tools

There are different categories of AI tools that can have a variety of business applications:

  • Narrow AI Systems are developed to perform specific tasks, such as email spam filters, customer service chatbots and inventory management tools.
  • General Purpose AI Systems can handle a broad range of tasks and are more flexible, for example large language models (LLM) like ChatGPT or Claude or AI systems that can write, analyse, create images, and perform various tasks. 

Understanding the difference matters because general-purpose AI systems typically require more careful governance and monitoring than narrow AI tools.

How AI can help your business

There are several ways you can consider using AI tools in your business, with the following benefits:

Boosting productivity

You can use AI to automate time consuming routine tasks, such as managing emails and processing invoices which frees up time for you to focus on higher value strategic activities and building customer relationships. Other practical time saving applications include:

  • summarising research and developing action steps based on the information
  • creating spreadsheet formulas and performing calculations
  • analysing customer survey data and identifying themes
  • drafting and proofreading business documents
  • managing inventory and automating reordering processes

Streamlining marketing and content creation

AI and LLM can be very useful to speed up the creation of marketing, communications and content outputs including:

  • blog posts and articles (or outlines for them)
  • social media content ideas and captions
  • email marketing campaigns
  • product descriptions and advertising copy
  • marketing strategies based on competitor analysis
  • business proposals and professional emails

Improving customer experience

AI tools can answer simple questions over email or through a chatbot on your website, giving your customers instant help after hours or when it suits them. This 24/7 availability can significantly improve customer satisfaction. Benefits include:

  • around the clock support without additional staffing costs
  • instant responses to frequently asked questions
  • personalised product recommendations based on customer behaviour
  • analysing customer feedback to identify common issues

Supporting better business decisions and processes

AI tools are excellent at analysing large amounts of data to help you develop actionable insights. This can assist you in making more informed decisions about:

  • market trends and opportunities
  • customer preferences and behaviour
  • pricing strategies
  • forecasting demand and managing inventory
  • risk management 

You can also ask AI to evaluate some of your business processes and recommend faster, more efficient ones. It can even develop step by step instructions to implement your new workflow.

Strengthening your cyber security

AI can analyse large amounts of data for patterns that indicate a security breach or threat to your business. Some cyber security tools use AI to predict, detect, and respond to cyber threats in real time, including flagging suspicious emails and malware.

Tip: Be cautious if you use AI for information in an area outside your usual area of expertise, particularly if you are seeking legal or financial advice. If you're not experienced in a certain area, you might not pick up mistakes. You should still seek expert guidance before making any major business decisions, rather than relying on AI.

Choosing the right AI tool

When selecting an AI tool, you can use the following areas to guide your decision:

What are your business needs?

Before adopting AI, work out how it could streamline your processes. Every business is different, so explore how AI could help you free up time and energy.

  • What repetitive tasks take up most of your time?
  • Where do you need better data analysis or insights?
  • Which customer service areas could benefit from automation?
  • What processes could be more efficient?
  • What tasks do you or your team find most tedious?

What is your risk appetite?

It’s a good idea to begin with simple, low stakes applications before moving to more complex uses. 

Low risk applications for AI include:

  • Drafting marketing emails and social media posts
  • Creating first drafts of documents that you'll review and edit
  • Generating ideas and brainstorming
  • Summarising meeting notes or research
  • Creating to do lists and schedules
  • Getting code to use, such as Excel or html code 

Higher risk applications, requiring more oversight, include:

  • Providing financial advice or making financial decisions
  • Providing legal advice or creating legally binding documents
  • Making decisions that significantly affect people
  • Making hiring decisions or screening candidates
  • Handling sensitive customer data

How can you use AI tools to their fullest potential?

It’s one thing to implement AI but another to use the various tools to their best. It can be helpful to think of AI like any other physical tool: For example, buying a drop saw.

Purchasing a drop saw doesn’t instantly make you a skilled carpenter. However, if you put the time and practice into learning how to use one correctly, you will find it is much more efficient to use than a hand saw and you will be able to get better and faster results in your woodworking. On the other hand, if you start using the drop saw indiscriminately, without adequate training, you can damage a lot of materials and even do yourself a serious injury!

Use prompt engineering

One of the ways to get more effective results from generalist AI tools including LLMs, is to learn to engineer prompts. Prompt engineering is a technical term getting the best results from AI by asking the right questions. The process involves carefully crafting instructions (prompts) to guide an AI to produce a specific, high quality output. The better the instructions, using natural language, the better the result can be.

Consider including the following aspects in your prompts:

  • Role: Define who the AI should be, for example "You are an expert marketing consultant for small businesses"
  • Task: Specify what you want done, for example "Create a social media content calendar for November"
  • Context: Provide relevant background, for example "Our business is a café in Perth specialising in organic, locally sourced food"
  • Format: Describe the desired output, for example "Present this as a table with dates, platforms, post ideas, and optimal posting times"
  • Examples: Show it what good looks like, such as "Similar to this post we did last month that got great engagement..."
  • Iterate: Refine the result you get by giving the AI feedback, for example “write more posts like [example from output] and remove posts like [example]”. 

TIP: You can ask your AI to ask YOU questions about a project. You can ask it for the kind of prompt it needs to give you the results you're looking for.

Always check the outputs

A big mistake people can make with AI is to use it 'out of the box'. Whenever you use AI to provide information you'll be relying on or sharing, always check it carefully, particularly if you are using the free version of a tool.

AI can make mistakes, use sources you wouldn't normally use, take ideas out of context, or use language which might not be relevant or appropriate to your business or industry. It can even make up information which is incorrect, but sounds right!

What to watch for

  • 'Hallucinations': AI systems can generate false information that sounds correct. Large language models predict appropriate responses based on patterns, which can sometimes result in factually incorrect content. 
  • Outdated information: AI models are trained on data up to a certain date and may not have current information, especially the free versions of many tools.
  • Bias: If an AI is trained on biased data, such as the American market or from a particular industry group, it will produce biased answers.
  • Inappropriate tone or language: AI might not match your brand voice or know your industry standards.
  • Copyright concerns: AI might reproduce copyrighted content or use someone’s intellectual property without attribution. 

Tip: Although the results sound formal and authoritative, be especially cautious or avoid using AI for any legal or financial information, as relying on incorrect information in these areas will can seriously harm your business.

Keep privacy in mind

Before you share any personal details or information about your business with any kind of artificial intelligence, or use it to collect data from your customers, it’s important to know exactly where this information could end up.

Read the terms and conditions of any AI tool you use carefully. Stay up-to-date from reliable sources about your chosen tool and check sites you trust for reviews and recommendations. Don’t agree to any terms you’re not comfortable with and make sure you have a good understanding of what you’ll be using.

It’s important to understand the potential risks of using AI, such as software glitches, internet outages and security risks. Always take appropriate steps to keep your customers’ details and information about your business secure. 

Tip: Read our cyber security information for tips on keeping business and customer information safe.

Conclusion

The development of AI tools holds huge potential for small businesses to boost productivity and save time. It’s important to remember that AI is a tool to enhance your business, not to replace human judgement and connection. When using AI you should start with small and low risk experiments, learn as you go, and always prioritise responsible use.

More information

AI offers potential as well as concern for small businesses, and there are several great resources to help you make the most of its potential, while avoiding potential pitfalls.

About this guide

This guide was prepared using information from Australian and WA Government sources, industry resources, and best practice guidance, with assistance from Claude AI. It is current as of December 2025.