AI and Accounting: An Integration That’s Here to Stay
ChatGPT revolutionised the technological world almost overnight. Its potential to do great harm and great good was quickly recognised and Artificial Intelligence (AI) quickly became a topic of discussion and debate. Many industries, throughout the world, began to consider the implication of AI for their practice and the field of accounting was no exception.
Accountants worldwide began to consider both the positive and negative implications of AI for the accounting industry. Accountants, payroll processors, and bookkeepers work with a significant amount of data daily, making many accounting duties time-consuming and repetitive. The financial sector realised that the field’s heavy reliance on data and numbers meant that AI could be used to streamline many operations, including audit work, data entry, business activity statements (BAS), and tax returns.
However, concerns were voiced regarding how AI would affect jobs in accounting and the career prospects for tax professionals in general. This article will consider the role of AI in accountancy, including why AI might improve results for accounting clients.
Will AI Replace Accountants?
Accountants and bookkeepers often express the worry that AI could replace their jobs. While this concern is valid, there is no indication that AI will replace accountants, or that it will occur at all. The World Economic Forum’s 2023 ‘Future of Jobs Report’ indicates that the jobs unlikely to be replaced by AI included jobs that demand “human skills such as judgment, creativity, physical dexterity, and emotional intelligence.”
Accountants need to think critically, make learned decisions, and develop creative solutions for their clients. They also need to communicate clearly with clients and other people in their professional field.
There remains no specific evidence that accountants are, or will, lose jobs to Artificial Intelligence. However, hiring for back-office jobs might be impacted as more tasks are automated.
How is AI Impacting Accounting?
An increasing curiosity about Artificial Intelligence is driving more accounting firms to invest in its potential. A survey conducted by Thomson Reuters discovered that 1 in 10 tax and financial professionals are already adopting generative AI or ChatGPT or plan to incorporate such technologies into their work processes. AI is reforming how this industry operates.
Accounting professionals can use AI to improve their efficacy and pace. During periods like public holidays or events, there is a sharp increase in the amount of low-level work, such as data-entry tasks. This influx of mundane tasks can take time and focus away from more complex jobs, such as handling repayment tasks or dealing with pay queries. AI offers effective solutions for streamlining these everyday jobs.
Here are the notable impacts of AI technologies:
1. Invoice Processing and Data Entry Automation
AI can assist these accounting processes by using data entry automation technologies such as Natural Language Processing (NLP) and Optical Character Recognition (OCR) technologies. Such systems ‘read’ documents, invoices, and contracts, and accurately and automatically enter in the dollar figures.
By automating invoice and data entry processes, using AI, accounting firms can reduce the likelihood of human error seen in manual data entry tasks. AI might also remove the need for accountants to complete repetitive and mundane tasks so they can spend more time focusing on the complex aspects of their jobs.
2. Bookkeeping Automation
Some accounting platforms, including MYOB and Xero, already incorporate AI into their programs. For example, Xero acquired HubDoc, so now when you take a photograph of your receipt and upload it to Xero, AI ‘reads’ the information on the receipt and automatically matches the receipt to the corresponding transaction on your bank data feed. This process saves accountants and bookkeepers notable time and money.
3. Additional Uses of AI Technologies for Accountants
Here are additional ways AI technologies can be used by accountants:
- Data collection and analysis
- Tax optimisation and research
- Strategic plans and forecasts
- Simplifying back-end operations
4. AI Will Improve Results for Accounting Clients
As seen, AI has the potential to streamline many accounting processes. This makes many accounting practices faster, which gives accountants and finance workers more time to complete tasks that require the interpersonal and social skills of human beings, such as client-facing duties.
What Are Some Challenges of AI in the Accounting Field?
Here are three potential barriers to using AI in accounting:
1. Staff Resistance
A financial firm can make the advantages of AI for accounting very clear to their staff members. However, implementing AI technologies in their organisation’s financial processes and ensuring all staff are on board can be challenging for business managers.
2. Data Limitations
Some small to medium-sized accounting businesses might find they don’t collect enough data to build models for analysis. Collecting and storing data can be an expensive process and one that demands the integration of novel systems and the implementation of complex processes. These elements might be beyond the scope and capabilities of many small to medium-sized firms.
3. Data and Cybersecurity Risks
Some accounting firms are worried about the cybersecurity of AI technologies. They fear that by adopting AI technology as part of their accounting practices, they might risk inadvertently exposing sensitive company data. Hackers might exploit companies with slack internal practices, stealing confidential personal or client data.
AI technologies could provide malicious actors with a ‘way in’ to the systems of an accounting firm. Furthermore, these hackers are often interested in data stored by the finance or accounting sectors, making such firms likely targets.
The Advantages and Projected Expansion of AI Accounting
Accounting firms who want to remain competitive over the coming years must start integrating AI into their accounting processes. AI within the accounting field is predicted to grow at a CAGR (compound annual growth rate) of 30%, over a period spanning from 2020 – 2027.
The advantages of efficiency, accuracy, and speed that AI can offer accounting teams are unrivalled. AI provides faster and more efficient data management, streamlining staff tasks. AI in accounting also provides the potential for scaling and company growth.
Research by EY (part of Ernst & Young Global Limited) discovered that 84% of CEOs and business managers in the U.S., view AI as an essential component driving their business’s achievements. Yet, AI is not without its limitations and risks, particularly for accounting firms in Australia. Certain Australian firms tend to adopt AI technologies without fully understanding the possible consequences.
Yet, equipped with the appropriate understanding, Australian finance and accounting specialists can embrace the rapid growth of AI technologies and meet changing roles and responsibilities, within their firm, with flexibility. However, the mindset of accountants and the like must shift from one of ‘routine work’ to that of ‘strategic thinking.’
Accountants might need to develop more robust and critical data skills, an appreciation of how to decipher disparate data streams, and the capacity to analyse data for deeper decision-making.
To Sum Up
Tax preparation programs and accounting software are increasingly including more AI features and functions. However, to date, accounting primarily remains reliant on human beings and their skills. Currently, accounting professionals are using AI to automate sections of their tax workflow, such as manual data entry.
The future path and direction of AI, in accounting, remains to be seen. However, one can speculate that AI technology will help free up time for accountants and finance workers to complete most of their mundane and low-level tasks.
This extra time will allow accountants to dedicate larger intervals to corresponding with their clients. Once AI automates many low-level financial tasks, accountants will also have more time to find creative answers and innovative solutions for their clients.