Artificial Intelligence: What To Expect in Accounting & Financial Reporting
Artificial Intelligence (AI) is leaving its footprint throughout the business world. And already making its mark in our world of accounting and finance. While many in our industry are fearing the prospect of machines taking over jobs done by humans, experts suggest we finance professionals should exhale and embrace technological transformations. So before we dig deeper, let’s all pause, breathe in for 3 seconds, hold for 4, and then breathe out for another 3 seconds. You can check off your breathing exercises for the day now.
Back to our topic at hand: there are already many proven benefits of AI in the accounting realm. As data handling and processing are being completely automated, one of the benefits centers around compliance. Soon every tax report will have greater accuracy because bots can instantly categorize data from various sources into the correct buckets, and auditors can now push entire ledgers through automated analysis and then have the machine learn exceptions.
Moreover, AI can identify transaction patterns and understand what “normal transactions” look like. With this, it can quickly identify abnormal data. One of the most crucial problems accountants deal with is frequent discrepancies between internal accounts and bank statements. AI has made it possible to automate the reading of both to spot inconsistencies, so not only can reconciliations be done more quickly, but fraudulent transactions can be detected early.
Many accounting packages, including Xero and Intuit, are incorporating AI into their software to handle basic accounting tasks, such as bank reconciliations, invoice categorization, risk assessment, and audit processes like submissions and invoice payments. Focus on these areas is understandable because, as we all know far too well, accountants often have to sift through bucket loads of data, and AI eliminates the mundane tasks associated with all this manual research.
Changes in how companies complete their financial reporting process will have a similar impact. Our profession is focused on performing two primary activities centered around financials. The first involves creating and maintaining reports. The majority of which are manually completed in spreadsheets. As you may have read in one of our previous blogs, spreadsheets are inherent with errors. AI will transform this process and eliminate those alarming mistakes found in many audited financial statements. Machines will reduce significant data entry hours.
The second activity involves analyzing the data once it’s there. A primary reason management needs reports is to look for trends in revenues and expenses. It’s common for a manager to go straight to certain balances in search for anomalies. If one is found, accounting then researches what transactions are causing the problem. This all takes time, because we humans aren’t great at slogging through mounds of data to find a needle in a haystack. However, machines can rifle through thousands of account numbers and transactions almost instantly, leaving humans to make the more important decisions of what should be done based on those reports.
Beyond the writing and analyzation of reports, you can expect future reporting solutions to continuously evaluate account numbers in the background, even though no reports have been written, and have accountants alerted when anomalies occur. Having this information early could be critical, because it could predict future opportunities or be a warning that the company has veered off course. Products like Synoptix are building AI technology to predict not only where you can expect accounts to be in coming months, but also tag current balances and source transactions that are trending outside of historical patterns. This type of innovation will give companies important insight not previously possible. For most, it will be like finally being able to flip the light switch on in a dark room.
With all this said, despite the fact that machines do certain things faster than humans, we won’t see our field being replaced by AI anytime soon. Reports of machines replacing accountants by the thousands are overblown, as accountants will still be needed to oversee and use the advanced technology to monitor results. Because machines don’t think, AI will similarly increase the value of human judgment, particularly associated with the accountant’s role of advisor. When machines take over repetitive, time-consuming and redundant tasks, it’ll free us up to do the higher level and more lucrative analysis and counseling for our clients.
Spending more time on these higher level activities will be more possible because AI will improve data entry accuracy and lower risk; it’ll also be able to analyze large data sets and evaluate past successes and failures for better predictions.
To find out how accountants can best prepare for Artificial Intelligence, read our entire white paper, “AI: How It’s Impacting Accountants and Financial Reporting.”
Jeana has been in the software industry for 13+ years specializing in ERP reporting solutions. She has decades of experience in creative content development and marketing and enjoys exercising, traveling & spending time with her husband & twin boys.