It’s no secret that artificial intelligence (AI) is making a huge impact in every industry including accounting. It presents founders and business owners with several benefits including:
- Provision of insights
- Real-time data and reporting
- Saving money, time, and effort
One of the easiest ways for businesses to stay competitive is to make use of automated programs, including Artificial Intelligence (AI), Machine Learning (ML) and Robotic Process Automation (RPA)— in their financial system.
Accenture Consulting predicts that employing robotic process automation (just one example of automation) should reduce costs and time by 80 to 90 percent. This means that accounting firms can deliver at a quicker pace while spending far less.
Note: There are intricacies when discussing automation, and AI, ML, and/or RPA are not necessarily synonymous. That said, all three are similar, in nature, typically using algorithms for data-related tasks.
Of course, AI is not without potential drawbacks. For example, it’s impossible for AI to replace human intelligence, particularly common sense and experience.
Also, AI doesn’t have the capacity to provide professional advice the way human accounting experts do. Sometimes, a business owner needs to draw on the human side of knowledge — not exclusively data.
Nonetheless, AI is already playing a huge role in making accounting and finance, for businesses, a lot more efficient. In this guide, we will show you all you need to know about AI and accounting.
AI is an aspect of computer science that empowers machines to handle tasks and make certain decisions. It does this by mimicking human actions. Below are some of the repetitive tasks that accounting software and virtual bookkeeping services automate using AI:
- Ensure that data is recorded in the correct formats
- Account reconciliation against bank statements
- Matching invoices or receipts to relevant transactions
- Comparing company expense management policies against employee expense reports
- Recognition of data from scanned invoices or receipts to identify the cost and vendor
Let’s get started.
Benefits of AI
Aside from changing the way accounting firms operate, AI changes how companies see their finances at a very fast pace. This influence is rapid in industries already relying heavily on software, machine learning and even AI (for non-financial solutions). Fast-moving tech founders understand the power of algorithms and want to implement them in every possible area of business that will increase efficiency.
Three specific benefits include:
Most of the time, AI and ML (machine learning) are used side-by-side. This way, the latter helps the former to make better decisions for future transactions. Here are some of the benefits that AI presents in terms of real-time bookkeeping:
- Better record accuracy
- Improved focus for finance teams to improve expertise
- Advanced financial insights
- Saves cost, time, and effort
Even though AI cannot replace your human accounting service completely, it brings a lot to the table. It seems evident that the future of accounting lies in the relationship between human accountants and AI.
Founders that work with financial partners who understand this relationship have an edge over those who don’t.
Two big reasons companies hire accountants — time and accuracy.
Owners and executives want to focus efforts on growth and efficiency, not books. Plus, a dedicated accounting solution often saves money, improves cash flow and brings enhanced accuracy to the table.
Because of these benefits, accounting is a science developed and surviving for several centuries.
Even still, 100% accuracy is a difficult task for humans. Quality AI software handles data with incredible precision. It doesn’t just save time and money, it also ensures that the correct entries are made. This means your accountant focuses on providing more rounded advisory services, while AI assists with bookkeeping accuracy.
According to Blake Oliver of Cloud Accounting Weekly, we are fast-moving into the era of “no-code accounting.” This means that human accountants will soon get to the point where they enter zero data to achieve their results. The relationship between AI and ML doesn’t just improve data accuracy, it provides unprecedented insights.
What does this mean for founders?
That your accounting service must have the ability to utilize AI, while providing additional value to you, the client.
Fast, Useful Reports
Traditional accounting requires someone to sift through huge amounts of data and then draw up reports — boiling it down to the most useful figures for you and your team.
AI, on the other hand, digests and analyzes data at a pace that is far quicker than any human brain can match. This means that it can deal with large data volumes that will take a human several days in just a few seconds or minutes. The data gotten from such reports is used in making financial decisions that determine the direction of whole corporations.
The human touch comes in via the inputs and tracking. For example, an accounting service that sets up and chooses metrics that matter to your specific business. If you’re a B2B SaaS company, these trackable metrics include:
- Churn (number of paying customers who discontinue service in a given period of time)
- Marketing and sales leads
- Closed-won/lost (number of leads who went through the entire buying process and said “yes” or “no”)
- Return on ad spend (finding the best-performing ads/platforms via detailed tracking)
- Headcount (using investment dollars to hire the right people, quickly)
The list goes on and on. AI quickly compiles data and generates the reports, but someone who understands how it affects your finances sets it up, tracks results and gives advice based on performance.
While AI is developing and spreading its tentacles at a magical pace, it is not void of potential issues. According to researchers, it is possible for AI to get to a point that humans will find it difficult to control. However, certain pressing issues are already evident which make AI seem like a threat. We will address some of them in this section.
Not an accountant
As the article alludes, AI can deal with large amounts of data, enter it into the appropriate accounts, and analyze them — But it’s still quite limited. AI still doesn’t have the ability to make reliable financial decisions and provide advice like human accountants.
Fast-moving startups and small businesses still benefit from finance professionals.
In addition to the “human touch,” AI isn’t capable of setting up a fully functional accounting system. An incredibly helpful part of the system, but not able to build out a full finance department.
- Managing payroll
- Accounts payable, receivable
- CFO roles and responsibilities
There are tools that make each of these functions quicker and more efficient, but not a complete system. Building this requires accounting expertise.
It is no secret that the finance world is prone to changes in policies on a regular basis. From policies guiding corporate tax to those covering PPP loans and even taxes and cryptocurrency. These policies are changing at a very fast pace that even human accountants are finding it difficult to keep up with.
Remember that while AI is quick to compute and analyze data, it doesn’t have a mind of its own. This means that it cannot offer advice in line with the changing policies. It is a garbage-in-garbage-out system that depends on what is fed to it.
A typical example of such changes is the way the IRS handles cryptocurrency and taxes. This is why it is imperative for you to employ the services of a knowledgeable accounting firm. Doing this creates a balance between the human mind and AI to achieve the best results.
It is one thing to have AI accounting tools at your disposal, but understanding how to use them is a different ball game. You need some expertise to implement and fully utilize AI-enabled accounting systems.
It takes time to gather such expertise which may affect your decision-making in the long run. Instead of waiting, it is best to seek help from an established firm with such knowledge.
Keys To Successfully Using AI Accounting Tools
In this section, we will take a look at how you can successfully implement and utilize AI accounting tools as a business. This is very important as it becomes impossible to fully tap into the benefits that these tools present.
Understand and manage risks
The truth is that while AI-enabled accounting tools present us with amazing benefits, they also come with risks. We have enumerated a few of these potential issues above. It is imperative that you understand such risks and adopt measures to manage them effectively.
We must let you know that these risks are dependent on individual applications and different finance functions. To mitigate these risks, you must first assess the position of your firm against the possible risks.
Manage data quality
One of the keys to adopting AI accounting tools successfully is transforming your data into strategic assets. Put in the effort as an organization to build trust into different facets of the AI system. Ensure that you channel such efforts at the beginning of your journey to make it easier to adopt.
While doing this, extend your efforts to the integrity of your data collection processes, data management, and the system’s purpose. This will also reflect in the techniques you adopt, your algorithm, and the governance of your model training.
Security is vital
One of the biggest challenges with AI systems is data security. This is why you must take security into consideration when setting up your AI accounting system. Ensure that you develop proper system separation. Also, understand how your system handles sensitive data in volume.
Evaluate the ability of your AI accounting system to make critical decisions in different areas. Some of these areas include education, credit, healthcare, and employment. All of these are integral in managing possible risks related to the use of these tools.
Legal risks and liability
It is necessary for your organization to have a clear understanding of the reasoning and decisions of AI accounting tools. Beyond this, you should also invest in a mechanism that ensures a trial of the system before you deploy it. This is a very important aspect of risk mitigation.
In some cases, the costs of making errors are very high. It is important for your organization to appoint a human supervisor to validate output first to manage potential risks. The more the technology matures, the more adjustments can be made to deal with legal risks and liabilities.
An aide to the human touch
Human accounting expertise is necessary for complex accounting. There are several things that software tools can’t accomplish. At best, they are only an aide to the human touch, not a complete replacement for human accountants.
There are certain soft human skills like experience and creativity that AI accounting skills simply don’t possess. These skills are necessary to address risks and also proffer solutions to financial problems. AI systems only help to provide and analyze data that human accountants use to achieve these objectives.
Founder’s CPA Uses Tech with Human Expertise
We have outlined some of the amazing benefits (and risks) of employing AI in your business finances. Founder’s CPA possesses both accounting, startup and tech expertise. Want to fully experience what AI and sound accounting have to offer? See our full list of services and get in touch with us today.