In Pursuit of Profit
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It is situations like these that proponents of AI in accounting are hoping to reduce (or eliminate entirely) by using AI applications like automation and machine learning.
As our team explains when discussing the future of accounting,
Technology can be used to augment accountants’ responsibilities, increasing efficiency and improving job satisfaction. AI is currently the most transformative force in the accounting industry, and with good reason! AI allows accountants to do better work faster, improving accuracy, scalability, data availability, and collaboration to drastically improve business outcomes.
But increased accuracy and efficiency are not the only benefits that AI has to offer. AI use in accounting can also improve job satisfaction, providing more fulfillment in the work that accountants do. Reducing the amount of busywork accountants are responsible for frees them up for more strategic activities, allowing them to act in more of an advisor role instead of just a number crunching capacity. This shift can greatly help to retain accountants amid the current labor shortage.
For those reasons, understanding where AI and accounting meet is going to be incredibly important for not only top accounting firms and accounting service providers but also for organizations of all sizes looking to retain their accountants.
Find out what you need to know about the current state of AI and get predictions for the future in this comprehensive guide to AI use in accounting:
Where do Accounting and AI Intersect?
AI is in use all around us constantly! It is in everything from personalized ads to traffic cameras to that email you just received from a colleague. (Yes, when you open an email and your email client suggests a response for you to use like, “Thank you!” or “See you then!” that’s an example of AI in use!) And yet, when it comes to accounting, using it necessitates a far more deliberate decision to do so – we must go out of our way to utilize it instead of just passively letting a traffic camera take our picture and invoice us for our toll road usage or clicking on an ad for an item we’ve been thinking about buying as a gift for a loved one. In accounting, we need to actively decide where we’re going to use AI to supplement our human efforts. To do this we need to have a firm understanding of what AI is and where it meets accounting.
While AI has a sprawling list of subfields including, automated planning, machine learning, robotics, expert systems, speech recognition, cognitive computing, and probably 20 more, there are three main areas that intersect with accounting most naturally: automation, machine learning, and natural language processing. Now, within each of those there are even more sub-subfields, but to keep this discussion focused and relevant we are just going to provide a high-level overview.
Automation is pretty easy to understand – it is the use of a program or algorithm to do something that otherwise would need to be done manually. Every time you access the “reports” area of your accounting software and a current income statement appears, that is automation at work. That platform has a built-in tool that pulls the most current data to propagate a chart template instantly. These types of uses make automation highly valuable across a wide range of day-to-day bookkeeping and accounting activities, especially those that involve multi-step precision.
Machine Learning uses a created algorithm to take some inputs and generate an output of some kind. What kind of inputs go in will depend on the use case and what kind of outcome is generated will depend on what you tell it to do. For example, using machine learning a retail company can flag potentially fraudulent customer orders to require manual review before they are processed. Analyzing the specifics of every order that a business receives would consume hours of work and possibly even require a dedicated team depending on the order volume-level, making it a wasteful use of resources. However, anti-fraud software can do the same thing in real-time, likely with even greater accuracy. Today’s AI capabilities make this kind of business decision a no-brainer. Machine learning can uncover hidden patterns in data as well, even when the data sets are extremely large. Some areas of accounting, like forensic accounting, lean heavily on this characteristic of machine learning to improve the accuracy of their work.
Natural Language Processing deals with the interaction between computing and human language. It uses complex algorithms to enable computers to interpret, generate, and respond to human language in a way that is beneficial to real humans. Natural language processing is used in chat bots, text classification (like flagging spam), and text generation. In accounting it can be used to create formal policies and other helpful documents to provide support across the organization.
As you can see, AI is not simply the new buzzword in accounting, it has important real-world applications!
AI Uses in Accounting
One of the easiest ways to support your accounting and finance staff is to implement automation strategically to address their pain points. Determine where your accounting team is spending the bulk of their time and which activities they dislike the most, and then find ways to automate tasks that can lessen the burden on them in those areas. The most common places to automate your accounting functions are:
Additionally, AI machine learning can be used to analyze large data sets with accounting applications across:
These kinds of AI use case scenarios can clearly offer significant benefits, and yet they still do not encompass the breadth of key uses for AI in accounting. Accounting teams can also benefit from the natural language processing component of AI usage to generate text for use in:
As AI usage becomes more common, the extent of its capabilities will likely grow as well, offering additional benefits for accounting departments that have not yet been realized.
Understanding the Future of Accounting AI
It’s impossible to predict where the future of AI is heading exactly, but what we do know is that every day improvements are being made to this kind of technology to expand its capabilities. Technology we once thought was impossible has now become commonplace, and AI is going to continue to evolve in response to business needs.
There has already been speculation about AI making a zero-day close a reality in the somewhat near future. And if automation can be used to make the single more prevalent pain point for accountants a thing of the past, there’s surely nothing it can’t do in the world of accounting!
It would be irresponsible to have a conversation around AI without also mentioning the ways in which AI is limited. While there are a variety of ways that AI can benefit the accounting industry, we must also acknowledge that is not objective in nature. AI cannot think on its own, which means that incorrect data or biased information will lead to inaccurate outcomes. For this reason, AI should be used with oversight and AI outputs should be regularly audited. Do not carelessly rely on AI to do the work for your team and never allow it to replace the well-trained staff entirely. Remember, the human element is still profoundly important!
When you want outsourced accounting help that can keep up with the times, please reach out to us! Our team of highly qualified accountants is ready to come alongside your business as soon as you need us. Using our fractional accountant model, we can offer you as much or as little support as you would like based on your needs. Whether you want to have ongoing accounting and bookkeeping work done or need one-time help to set up accounting automation (or anything in between), we have the expertise needed to support your team!