Role of AI in accounting and bookkeeping

What is AI in accounting and bookkeeping?

AI in accounting and bookkeeping refers to the use of artificial intelligence in automating and enhancing various accounting processes. Tasks such as data entry, fraud detection, audit and compliance, financial reporting, etc. are automated using AI software. 

Evolution of AI in accounting and bookkeeping

Most accounting activities were performed manually in the past and this required detail-oriented individuals to prepare financial statements. 

With time, spreadsheets were created to help in basic accounting tasks such as data entry, expense tracking, and generation of simple financial statements thus demonstrating the impact of technology on the accounting profession. 

In the 1980s, due to the introduction of optical character recognition (OCR), technology sped up data entry, making the extraction of data from invoices and storing that information much easier. 

As the benefits of AI became more evident, its usage increased dramatically in the 2000s. Accounting professionals were able to do predictive analysis, forecasting, and risk assessment much faster and accurately.

Applications of AI in accounting and bookkeeping

Expense management: 

The expense tracking, categorisation, and reporting process is automated, therefore managing and monitoring expenses becomes easier for businesses. Expense management practices are optimised by the identification of cost-saving opportunities and analysis of spending patterns. 

Forecasting and predictive analysis: 

AI enables businesses to make predictions about financial outcomes by analyzing historical data and identifying trends and patterns. Businesses can forecast cash flow, revenue, and expenses due to predictive analytics which further helps in facilitating better decision making. 

Audit and compliance: 

Compliance issues, potential risks, and discrepancies can be identified by AI tools by analyzing financial data. This enables auditors to conduct more thorough and efficient audits as irregularities and anomalies in financial transactions can be flagged by AI algorithms. 

Financial reporting and analysis: 

AI tools generate customized dashboards, financial reports, and visualizations, providing actionable insights into financial health and business performance. Businesses get a comprehensive view of their financial status due to AI and this helps in making informed decisions.

AI tools for accounting 

There are many AI tools for accounting and bookkeeping in the market. Some of these tools have made things very easy for accountants and businesses are enjoying various benefits due to these tools.

Here are 5 tools for accounting and bookkeeping that you can try to automate repetitive and time-consuming tasks so that you can focus on other aspects of business that require your attention more.

Vic.ai: It is one of the best accounting software as it automates billing tasks without custom rules or templates. The essential details are derived from invoices and the approval process is on autopilot mode.

Bill: Bill automates accounts receivable and payable processes and it is one of the free AI tools that will help in keeping the budget under control. This tool is used by accounting firms to streamline invoice and billing processes. 

Docyt: Docyt gives real-time reports and is one of the top-rated AI accounting tools. The main purpose of the tool is to automate repetitive back office and many other accounting tasks.

Indy: This tool is designed for freelancer accounting professionals who work for companies with features such as a writing assistant used to prepare proposals and contracts. It can be easily integrated with applications such as Google Calendar and Zapier.

ClickUp: It is a cloud-based tool designed to simplify the entire accounting process. ClickUp offers multiple automation features too such as project time tracking.

Benefits of using AI in accounting and bookkeeping

Automation of repetitive tasks: 

Automation of repetitive and time-consuming tasks is one of the primary advantages of AI. Some of these tasks are data entry, transaction categorization, invoice processing, etc. By leveraging AI-powered software, manual effort, and errors can be significantly reduced, thereby enhancing the accuracy of financial reporting. 

Cost savings: 

Due to the automation of routine accounting tasks, operational costs associated with resource-intensive processes are reduced. Moreover, the implementation of AI, in the long run, will lead to significant cost savings due to minimized overhead expenses and optimized resource allocation.

Real-time financial insights: 

AI tools provide real-time data that can be used to analyze business performance, trends, and anomalies. This data can be leveraged to identify potential risks, anticipate future financial outcomes, and make informed decisions in the direction of growth, stability, and profitability. 

Enhanced data accuracy: 

The capability of processing vast amounts of data with accuracy is much more compared to humans and thus room for human error associated with manual data entry and processing is eliminated in the process. This ensures reliable financial reporting and compliance leading to enhanced trust among stakeholders.

Fraud detection and prevention: 

Fraudulent activities such as duplicate payments, unauthorized transactions, etc. can be detected early by AI algorithms. Due to the proactive identification of fraudulent activities, organizations can mitigate financial risks and safeguard their assets.  

Can AI replace accountants and bookkeepers?

Now let’s address this big question that is creating buzz all around the industry. Will AI replace accountants completely, and the answer is no.

The potential of AI in automating repetitive tasks such as data entry and reconciliation cannot be denied but judgment, strategic thinking, and interpretation of financial data done by human beings cannot be replaced. A crucial role is played by accountants in analyzing financial data, advising clients, and ensuring compliance with regulations. 

While efficiency and accuracy are enhanced by AI in various tasks, critical thinking skills, ethical judgment, and valuable insights that are brought by accountants to the table cannot be replaced by AI.

Case studies: AI adoption in accounting

Deloitte:

Deloitte uses AI in expense tracking, invoice processing, and financial reporting. It also utilizes AI in filing taxes and ensuring compliance with regulations. It has helped Deloitte deliver better services to its clients and improve the efficiency and effectiveness of its operating systems.

Deloitte US innovation’s document-review platform went live in 2014 and the company claims that it has automated the process of reviewing and extracting relevant information from contracts thereby reducing laborious human effort. 

The technology has reportedly cut the time spent on reviewing legal contracts, invoices, financial statements, and board meeting minutes by up to 50 percent or more, according to the company.

Deloitte Catalyst is another AI initiative by the company. It's a collaborative network of startups aiming to translate AI technologies into practical business solutions for client firms.

PwC:

PwC uses AI in consulting by offering experience and expertise with natural language processing, deep learning, model operations, generative AI, digital twins, responsible AI, and more.

PwC’s technology GL.ai was awarded the “Audit Innovation of the Year” by the International Accounting Bulletin in October 2017. GL.ai was developed through a partnership with H2O.ai, a Silicon Valley firm specializing in AI technology. This collaborative effort resulted in an AI-driven system capable of analyzing documents and generating reports efficiently.

PwC claims to have made a significant investment in Natural Language Processing (NLP) that makes sense of complex revenue contracts, and lease agreements, and forms meaningful insights from board meeting minutes for clients. 

KPMG:

KPMG has developed its portfolio of AI tools called KPMG Ignite designed to improve business decisions and processes digitally. Key features include AI tools, prototype development, guidance for client terms, and AI integrators to ensure compatibility of these tools with existing IT infrastructure.

Apart from that, KPMG is also using AI for analyzing and extracting information from investment or leasing agreements. 

A few business processes where KPMG has claimed to apply AI-enable technology are:

1. Call center analytics engine

2. Document compliance assessment engine

3. AI anomalous event predicting tool

EY:

EY has recently applied AI in the analysis of lease contracts and it claims that capturing relevant information such as the amount to be paid, lease commencement date, renewal or termination options, etc. has become much easier 

EY is working to automate the auditing process and it claims that it will reduce the administrative time that is spent on reviewing audit documents and allows employees to devote more time to the judgment and analytical part of the process. 

EY Australia has embraced this digital auditing technology, with 50% of its bank audit confirmations processed using the AI-enabled system. The system can receive and validate audit requests, and then provide auditors with the necessary documentation for analysis and assessment.

Conclusion

In conclusion, the accounting and bookkeeping industry is being revolutionized due to artificial intelligence and various benefits such as real-time insights, cost savings, automation, enhanced data accuracy, and fraud detection are pretty evident. Businesses can streamline financial processes, drive growth, and optimize resource allocation.  Embracing AI in accounting and bookkeeping is not just a competitive advantage but a necessity in today's digital era.

Article Sources

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3. Bradley, L. (2023, December 14). Unlocking the opportunities of AI as Audit enters a new age. KPMG. https://kpmg.com/xx/en/blogs/home/posts/2023/12/unlocking-the-opportunities-of-ai-as-audit-enters-a-new-age.html

4. Faggella, D. (2020, April 3). AI in the Accounting Big Four – Comparing Deloitte, PwC, KPMG, and EY. Emerj Artificial Intelligence Research. https://emerj.com/ai-sector-overviews/ai-in-the-accounting-big-four-comparing-deloitte-pwc-kpmg-and-ey/

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