AI and Accounting: How AI Is Revolutionising the Industry

Advances in artificial intelligence (AI) are bringing significant changes to the accounting industry. AI has the potential to streamline and automate many existing processes, as well as unlock new types of financial analysis and approaches that human accountants can’t do on their own.

The changes on the horizon are likely to impact not only professional accountants but also business owners who rely on accounting tools to maintain compliance with financial regulations and make data-driven decisions. To help you prepare, we’ll cover everything you need to know about AI and accounting.

Key Takeaways

• AI can be used in accounting for bookkeeping, financial analysis, auditing, and compliance.
• Potential applications of AI in accounting include automating workflows, helping with audits, building financial forecasts, and centralising financial data.
• AI can help eliminate human accounting errors, increase productivity, and reduce burnout.
• Businesses may face challenges in implementing AI because of high upfront costs or integration issues. There are also data privacy concerns around using AI.

What Is AI in Accounting?

AI in accounting refers to any use of AI technologies, like natural language processing, deep learning, and generative AI, to help with bookkeeping, financial analysis, auditing, or compliance.

Already, AI is embedded into many accounting software tools. For example, there are bookkeeping platforms for small businesses that incorporate AI to automate financial data entry. However, AI can also be used on its own to help with accounting tasks. For example, you can use ChatGPT to ask accounting-related questions or conduct research without connecting it to your business’ books.

As AI technology continues to advance and more accountants and business owners experiment with it, expect to find even more AI-powered features in accounting software. The future of accounting is also likely to include a rise in chatbots that specialise in answering financial questions and AI agents that can complete specific accounting tasks.

Applications of AI in Accounting

The field of accounting relies on digital processes that are ripe for AI-powered assistance or automation. Let’s take a look at some examples of how AI can be used in the accounting industry and by individual businesses.

Automating approval workflows

One of the best use cases for AI in accounting is increasing the degree of automation in approval workflows for expenses, large purchases, invoice processing, and other transactions. AI can review data about what types of transactions or requests have been approved or denied in the past and identify patterns based on transaction size or purpose. It can then use these discovered patterns to approve or deny requests automatically going forward.

Importantly, it’s possible to keep a human in the loop by having AI assign a confidence score to its decisions. Any approval decisions with a low confidence score can automatically be flagged for human review. You can also automatically route any transactions over a certain size to a human reviewer.

Streamlining audits

AI can also play an integral role in auditing financial data. For example, it can automatically double-check financial statements to ensure all entries add up and review all transactions in a company’s books in seconds.

In contrast, human auditors typically review only a sampling of transactions because of the time involved. Therefore, AI increases the likelihood of spotting errors and reduces financial risk. In addition, auditors can use AI for fraud detection, as it can automatically flag unusual transaction patterns for further investigation.

Financial forecasting

Another way AI is already being put to work by accountants and business owners is by creating highly accurate financial forecasts. AI tools can analyse past financial data and make inferences about future revenue at a much more granular level than human analysts.

For example, a retail company using AI can analyse past sales at the level of individual products rather than categories. This predictive analytics approach enables a much more detailed sales forecast for the next quarter, which is important for decisions about inventory and business growth opportunities.

Even better, AI can analyse data much faster than humans. So, financial forecasts can be updated in real time based on a business’ latest data.

Building software integrations

Most accountants don’t have experience as developers, but having the ability to write basic code is key for integrating data across multiple financial platforms. For example, you can use custom code to automatically share data from a sales platform with your accounting software for revenue tracking and analysis.

AI helps by turning plain English commands into code. This enables accountants to build basic integrations and data-sharing tools without relying on developers, who can be expensive or have long waiting times.

Centralising financial data

Another application of AI for accounting is to ingest data from across a company and organise it into a centralised database. For example, AI can automatically scan emails, invoices, messages, and documents for key financial details that need to be reported. All of this information is instantly available to your accounting team, saving time and ensuring they have access to the most up-to-date data.

AI can also be used to provide additional information about transactions under scrutiny by accountants. For example, if there are questions about a particular expense, an AI system can quickly find the relevant invoice or receipt by matching the price or other details.

Research

AI can also serve as a powerful research assistant for accountants. A chatbot can be used to summarise relevant accounting rules for a company or industry or retrieve information about tax regulations. It can also be given information about a new client and used to summarise the company’s financial situation, saving hours on an initial assessment. Furthermore, an auditor could use AI to build a checklist of compliance requirements to review for a specific industry.

Benefits of Using AI in Accounting

Leveraging AI for accounting can have significant benefits not only for accountants and auditors but also for businesses that rely on accounting for financial reporting and compliance. We’ll highlight some of the key benefits that AI offers.

Eliminate human errors

Human errors are unfortunately all too common even with the automations available in most popular accounting platforms. A mistyped entry or misclassification of transactions can lead to incorrect reporting and leave companies at risk of non-compliance or tax penalties.

AI solves this by fully automating data handling and eliminating the need for humans to enter data manually. AI can also automatically detect and flag potential errors that are hard for humans to notice, like transposed numbers. This ensures a company’s books are fully accurate and reduces financial risks.

Enhance productivity

AI promises huge productivity increases for accountants and auditors. Fully automated workflows, centralised data streams, and digital research tools make keeping books or running financial analyses faster and easier. They also reduce time-consuming routine tasks, freeing up accountants to focus on tasks that AI can’t do.

Reduce burnout

17% of the US’ entire accounting and auditing workforce left the profession between 2020 and 2022, in large part due to burnout. This poses a huge challenge for accounting firms and small businesses that employ accountants. If your accounting employees leave because of burnout, they may be very difficult to replace.

AI can reduce burnout by taking repetitive tasks off accountants’ plates. In addition, the productivity enhancements that AI brings can make employees’ workloads feel more manageable and reduce stress.

Improve decision-making

Another important benefit of AI is that it can help improve financial decision-making at companies of all sizes. This is partly thanks to AI’s ability to centralise data and build more accurate forecasts. When business owners have full visibility into their company’s finances, they can make better decisions.

However, the potential benefits of AI for decision-making go beyond just bringing data together. AI can also be used to conduct research on peer companies or market trends, adding external data that can influence business strategy. AI can even be used to model the different trajectories a business might take in response to major decisions and unlock valuable insights.

Minimise compliance risk

AI can also play a key role in helping companies remain compliant and avoid costly penalties. For example, AI can be used to conduct a wide-ranging analysis of a business’ accounting practices, effectively working like a compliance officer to help companies identify and reduce risks. This is especially important for small businesses, which often don’t have dedicated compliance employees or financial auditors.

AI can also be used to track changes in accounting standards or industry-specific regulations automatically. This ensures businesses are aware of all their compliance requirements. AI systems could even suggest process changes to adapt to any new financial requirements they identify.

Challenges Facing AI Use for Accounting

While AI has potentially revolutionary benefits for accounting and financial management, implementing AI solutions isn’t completely seamless. There are several major challenges that business owners, accountants, and auditors need to be aware of.

Upfront costs

The first challenge facing business owners and accounting firms is that AI-enabled applications can be pricey. Accounting software that incorporates AI is often significantly more expensive than software that doesn’t. That gap might close in the future as more companies embed AI in their products, but for now, businesses should expect to pay a premium for AI-powered features.

On top of that, businesses face extra costs for training staff on how to use these new tools. There may also be implementation costs, especially if you use standalone AI tools (like a chatbot) that must be integrated into existing software systems.

Data privacy

Another major concern around AI in accounting is data privacy. Keeping financial information private is crucial for companies in competitive industries, where other businesses could benefit from knowing how much a peer pays its employees or spends on specific product lines.

Right now, most AI systems process data on the software provider’s servers, not on your company’s internal computer network. That means any data you feed to an AI system could be shared with your software provider and used to train new AI models. There’s a chance this could lead to future AI models leaking sensitive financial information.

Integration challenges

In order to centralise and analyse data effectively, AI systems must be integrated with all of the accounting, expense management, and financial reporting software your business currently uses. Integrating AI tools with existing software can require a lengthy development process—and some outdated software may not be able to integrate with AI systems at all.