The Future of Accounting: Leveraging AI
| 13 Min Read
Artificial intelligence (AI), machine learning, and automation will be a huge part of the future in every industry, and accounting is no exception. Indeed, many companies are already using some degree of automation in their accounting processes. The potential applications of AI to contracts, transactions, audits, and reconciliation are infinite, and aspiring accountants will need the appropriate technical skills to work in an evolving industry.
It is increasingly clear that AI technology will support professional accountants, so aspiring accountants, and especially aspiring leaders in the field, need to be prepared for the future. That means both knowing how to work with AI tools and how to apply the unique creative problem-solving skills of the human brain to tasks that AI can’t handle.
What is AI with respect to accounting?
Broadly speaking, artificial intelligence is the branch of computer science tasked with creating machines that can perform tasks that typically require human intelligence, such as analyzing data, reacting to changing circumstances, or making predictions.
AI is often used in automation; that is, programming a machine to perform a task, usually of a repetitive or routine nature, with minimal human input. In the accounting world, some tasks that may be automated include sorting transactions, inputting and matching data, and reconciling accounts.
Machine learning is a type of artificial intelligence that concerns algorithms that can improve over time with experience and the use of data. Machine learning technology allows computers to analyze financial data, identify errors, and make more accurate predictions and forecasts.
Big data refers to the use of AI to analyze and extract information from data sets that are too large or too complicated for traditional data processing tools. Big data can help accountants track expenditures in real time, predict and manage future risks, and advise on growth-oriented decisions.
Applications of AI in the accounting world
Nearly every accounting process can be enhanced in some way by the application of AI tools. As of 2020, many professionals in the financial services industries were already using AI to detect fraud, perform analysis, personalize services, maintain assets, and more. As an article in Forbes states, “AI is ideal for mundane, repetitive tasks like uploading files, payroll, auditing and others.”
Some of the ways accounting firms might use AI to improve their processes include:
Invoice processing: Extracting information from invoices can be a tedious and time-consuming process. AI can allow accountants to automate much of this process, from data entry to approval, saving on accounts payable (AP) costs. AI-powered invoice processing tools can even learn to flag variances and discrepancies that require manual review.
Bank reconciliation: AI tools enable accountants to see the flow of bank transactions, quickly reconcile transactions that match, and focus their attention on non-matching transactions.
Timesheet work: AI-powered tools can automate the process of pulling time from calendar apps and similar systems for accurate billing and reconciliation.
Auditing: Audits often require accountants to review and analyze large amounts of data, and in addition to being time-consuming, this introduces the possibility of human error in the audit process. Machine learning tools can make audits more efficient by “reading” and categorizing documents, identifying trends, and flagging potentially problematic areas. This leads to faster and more accurate audits by focusing auditors’ attention on high-risk areas.
Financial planning and analysis (FP&A): A financial plan is only as good as the data it is built on, so bad data can lead to bad predictions and ultimately bad client outcomes. Accountants can use AI to flag inaccuracies and improve data quality, which in turn improves the efficiency and accuracy of the FP&A process.
Reporting and data visualization: AI provides new ways for accountants to review and visualize financial data in real time. When leveraged properly, this allows financial decision-makers to make informed decisions right away, instead of waiting until the end of the month or end of the quarter to get the reports they need.
The role of AI in accounting today
Artificial intelligence isn’t just the future of accounting. It’s a huge part of the present of accounting. Most accounting firms are already leveraging AI to at least some extent. By automating routine, repetitive tasks and eliminating human error, AI improves efficiency and security while freeing up accountants to focus on the aspects of the job that require a human touch.
In particular, AI has had an impact on employee retention and satisfaction in an industry notorious for burnout and high turnover. Lakshmi Raj, co-founder and co-CEO of Replicon, a time intelligence company, stated, “Self-driving technology powered by AI has great potential to improve the employee experience by automating routine tasks, eliminating human errors, delivering advanced business analytics, and helping create a better work-life balance.”
This isn’t just better for accountants; it’s better for accounting firms because they have an easier time retaining good people, and it’s better for their clients because they can establish long-term relationships with their accountants and financial advisors.
Whether it’s auditing, invoice processing, bank reconciliation, or any other routine accounting task, AI does the “grunt work” while flagging the exceptions, edge cases, and significant problems that require an accountant’s direct attention. In short, AI frees up accountants to think strategically and focus on high-level tasks such as preparing assets and capital account entries.
AI’s current impact on the world of accounting is already significant, but it’s just scratching the surface. As AI technology continues to progress, the future of accounting will change as well.
The impact of AI on accounting’s future
Some applications of AI are beyond current technology, but if the answer to “can AI do this?” isn’t “yes,” then it’s “not yet.” Some emerging technologies accountants should keep an eye on include:
Speech recognition and facial recognition: Auditing doesn’t just require a review of documents; it often involves executive interviews aimed at finding fraud. Powered by machine learning technology, speech recognition software may be able to systematically identify evasive answers or delayed responses that are red flags for deception. Likewise, facial recognition technology could be deployed to find signs of deceit or nervousness in fraud interviews. While it’s not likely that AI will be able to definitively tell whether someone is lying, it certainly could flag suspicious behavior for auditors to further investigate.
Predicting financial behavior and risk: As machine learning tools grow more sophisticated, they may be able to identify non-intuitive correlations that can have a significant effect on finances. AI-powered models may be able to predict the effects of weather conditions, seasonal changes, traffic, and other variables on revenue and expenses, which would empower accountants to create more accurate risk assessments by taking those factors into account.
Virtual reality and financial reporting: Virtual reality, augmented reality, and mixed reality tools have significant potential to help accountants explore data, test process optimizations, and present their findings to stakeholders. Creative accountants may be able to leverage VR to make the somewhat dry work of financial accounting come to life with concrete business applications.
Blockchain and distributed ledger technology: Blockchain technology is most strongly associated with cryptocurrency, but it has more general applications to tracking transfers of assets, communicating financial information, and securely and efficiently maintaining ledgers. Accountants who can use distributed ledger technology will have an advantage in tasks like auditing and records management.
Integration between accounting and other business disciplines: It’s important for accounts to remember that AI isn’t just changing accounting itself; it’s changing nearly every aspect of business across industries. As companies depend more on AI to manage their operations and budgets, accounting services will become more efficient as they are integrated with those AI tools.
To some extent, of course, the future is uncertain. Every new technology comes with challenges and setbacks. However, experts in the field are confident that AI and machine learning will not replace human accountants and bookkeepers anytime soon. Rather, the overall impact of AI will be to automate many routine tasks, freeing up human accountants to focus more on strategic decisions, and to provide them with more powerful tools to inform those decisions.
What AI won’t change in the future of accounting
As of yet, there’s no form of artificial intelligence that can replace the creativity, adaptability, and emotional intelligence of a capable human accountant. Indeed, in a world where machines take on much of the “grunt work” that was previously required of accountants and bookkeepers, those very human skills will become significantly more important.
Tomorrow’s accountants will likely serve in advisory roles, weighing in on the financial impact and risk associated with business decisions. They will need to think creatively and strategically, identifying risks and opportunities, and using financial data to influence business leaders. Effective accountants will identify which data is important, what it means, and which leaders need to be aware of in order to make sound decisions.
To work in that capacity, accountants will need to build strong professional relationships, both within their teams and with their clients or senior management. It’s worth noting as well that remote work will likely be the norm for a large number of accountants in the coming decades. That means building and maintaining those relationships online, which carries significant additional challenges compared to building them in person.
“Soft skills” such as communication and emotional intelligence will thus be key for future accountants, but so will technical skills. Even if AI does the “heavy lifting” of data entry, analysis, reconciliation, and reporting, a human accountant will need to explain what the machines are doing, why it matters, and what the business should do with that information. In other words, tomorrow’s accountant needs to be both a skilled communicator and a technical expert who understands the tools that complete accounting tasks.
Tomorrow’s accountant’s toolkit
Data science and business analytics
Future accountants will need a strong grasp of business analytics to dig into the data and uncover insights that add value to business decisions. There are four levels of business analytics that should be familiar to accountants:
- Descriptive analytics that show what is currently happening, such as current cash flow, inventory, taxes, and so on. Descriptive analytics are key to comprehensive and accurate reporting.
- Diagnostic analytics that explain why something happened, which is important to understand historical performance and make future recommendations.
- Predictive analytics that seek to understand what will happen, or what is likely to happen. Accountants can help build models that predict future financial performance.
- Prescriptive analytics that identify what should happen. Insights drawn from data can inform business decisions, identify opportunities, and flag high-risk choices.
For example, tax accountants can use data science and analytics to quickly determine the complex tax implications of a particular investment scenario, which in turn leads to better investment decisions. On a larger scale, accountants can use big data analytics to uncover patterns of consumer behavior or market shifts to identify high-value opportunities.
Machine learning
While accountants may not need to master the complex mathematical foundations of machine learning, they absolutely need to know the applications of machine learning to business and financial questions. Accountants should understand both supervised learning, which requires human intervention and labeled data (that is, data that includes a name or description for each entry in the dataset); and unsupervised learning, which allows algorithms to analyze and cluster unlabeled data with minimal human intervention.
As a simple example, accountants who understand machine learning can use appropriate techniques to train a “bot” to complete data entry tasks accurately within their accounting software and organizational standards. Once the machine is trained to do the job, the accountant is free to focus on non-routine tasks. Future accountants will use machine learning algorithms for everything from comprehensive audits to far-reaching financial forecasts.
Data visualization and communication
Diving into the data is of limited value if that data cannot be presented and communicated in a manner that effects change. As the role of artificial intelligence in the accounting industry grows, accountants will be working with much more data, and they will need to present that data to clients, business leaders, and stakeholders in a clear and compelling manner.
The key is not just to show the numbers, but the trends, ideas, and insights that come out of the data. To that end, accountants will need a strong grasp of digital and graphic design as well as techniques to organize and present data. As graphics and virtual reality technology advance, a strong grasp of data visualization will help accountants prepare even more compelling reports and recommendations.
Data visualization isn’t just a reporting tool. It’s also a way for accountants to explore data and quickly recognize issues that might otherwise fly under the radar. When performing an audit, for example, a sophisticated visualization makes it easier to see outliers that require further attention from the auditor. Accountants also need to be able to spot misleading or inadequate visualizations.
Managerial accounting
Again, as the increased role of AI in accounting takes much of the heavy lifting off accountants’ plates, the managerial and leadership functions of accountants will only grow. Algorithms can analyze data and potentially even provide recommendations, but a human accountant is needed to evaluate those recommendations and apply them to high-level business planning.
Accountants will need the right skills and training to identify opportunities, quantify risks, and provide clear, accurate, actionable information to managers. An accountant with training in managerial accounting, who also understands both the technical tools that analyze data and the limitations of those tools, is best positioned to improve the quality of financial information provided to business leaders and, ultimately, maximize profits.
Prepare for the future of accounting with the right degree
Part of the impact of artificial intelligence on accounting is an increasing need for accountants with artificial intelligence analytics skills. In the Master of Science in Accounting: Accounting Analytics program at the University of New Haven, you’ll get the enhanced accounting and analytics skills you need to stay on the cutting edge of the field while preparing for the CPA exam. In addition to core coursework in accounting theory, managerial accounting, financial accounting, auditing, and reporting, the program includes comprehensive coursework in business analytics, machine learning, data visualization, and database management.
In a collaborative, hands-on, career-focused environment led by industry experts, you’ll gain the specialized knowledge you need to be a sought-after accountant as the industry changes. All courses are offered in an accelerated seven-week fully online format designed with built-in flexibility for working adults. Keep your education moving forward while continuing to gain work experience and meet your other personal and professional obligations.
AI is changing the future of accounting, and it’s raising the bar for accountants. Get the right education to keep up with trends and become a leader in the field. Talk with an enrollment counselor about the online Master of Science in Accounting: Accounting Analytics program at the University of New Haven.