Artificial Intelligence in Accounting [The Top Three Things CFOs and Finance Teams Should Know]
Artificial intelligence (AI) is all around us. It helps identify fraudulent credit card purchases, curates the advertisements we see and even predicts how long our morning commute may take on any given day.
But AI’s impact spans far beyond providing everyday conveniences and providing recommendations of what shows you may want to stream next. It’s also influencing the business ecosystem—including the ways that companies conduct their accounting activities and manage their financial operations.
Definition cited from (Encyclopedia Britannica)
Artificial intelligence will change how businesses manage their accounting and finances forever.
But how can you position your business for successful implementation of a technology that’s still considered a new and emerging field?
Below, we’ve assembled the top three things for CFOs and finance teams to know about artificial intelligence in accounting and finance today so that their businesses can thrive in this developing landscape tomorrow.
#1 Identify a need for artificial intelligence before you take action.
AI can position your finance or accounting team for success, but it’s important to know exactly how AI would impact your operations before you implement anything new.
Companies everywhere are devoting a great deal of time and resources toward AI initiatives, and executives believe that the implementation of AI within their organizations gives them a competitive advantage worthy of the investment. There is also a significant amount of fear of potentially missing out—the thought that not investing in AI will leave you behind.
While all of this may be true, and the hype and advantages may seem lucrative, it’s important to keep in mind that an ineffective application of AI may be more detrimental to your company than inaction.
A common mistake made by CFOs is poor implementation of AI within their organizations. Too often, organizations will focus on the technology itself without taking into account what the business’s needs are. Instead of efficiencies, this commonly results in companies allocating valuable resources toward a new problem caused by poor implementation.
On the other hand, successful implementations often include an identified business need, a thorough planning phase and an implementation plan. It’s important for organizations to fully assess their current processes, needs and the potential impact an AI introduction would have prior to any sort of implementation.
#2 Understand how other companies are using artificial intelligence in accounting.
While many companies may not yet be implementing AI technologies within their own accounting and finance operations, chances are that their vendors are implementing this technology in the software they use.
Larger accounting software companies, such as Intuit (QuickBooks) and Xero, already have embedded artificial intelligence into their products via natural language processing (NLP). NLP is a subspace of artificial intelligence in which a machine can understand and interpret what’s being asked in human language.
For instance, rather than having to look through a guide to determine how to book a monthly recurring journal entry, users can simply type, “How do I record a transaction that repeats every month?” Utilizing the keywords in the sentence, the built-in NLP capabilities can direct a user to those specific instructions and, in some cases, gather additional information to book the entries for the user.
In addition to NLP, machine learning is being introduced within a lot of accounting software. Machine learning is another subspace of artificial intelligence in which the technology builds a library of knowledge based on an initial dataset.
For example, various accounting software are automatically assigning account codes to a bill being input based on a number of factors, including vendor name, amount and invoice date.
An initial subset of bills is needed to be entered and coded preliminarily by a human in order for the software to begin to suggest account codes for subsequent bills entered. As more bills get entered and the suggestions are accepted or corrected, the software will continue to refine its knowledge base and provide more accurate suggestions going forward.
Even if your company isn’t directly employing any artificial intelligence techniques for your in-house accounting, depending on your accounting software company, AI could be even closer than you think.
#3 Think about routines.
When thinking about areas or accounting processes that may benefit from AI, it’s often helpful to think about routines. Inherently, finance is a highly decision-based area, making it a natural fit for AI productivity.
The primary ways that artificial intelligence has been utilized in finance to date are outlined below:
- Automatically suggest accounts when posting transactions to the general ledger to reduce errors
- Efficiently make electronic payments to maximize cash flow without missing a payment
- Quickly recognize text within documents to highlight the key provisions
- Timely detect anomalies to allow for a quick remedy
- Intelligently suggest changes to workflows to allow for more seamless processes
- Accurately predict revenues and cash flows to assist with resource planning
All routines, both basic and advanced, could conceivably be learned by a machine, then replicated.
In addition to those listed, routine period-end procedures, such as accruals and reconciliations, are likely to be done automatically. More likely than not, aspects of AI will be implemented as monitoring functions as well.
With AI, any outliers, whether it be a large amount input or an oddly coded expense, will be flagged in real time as they are entered, and the user will be prompted for confirmation. This immediate detection control will reduce errors by a significant amount and give the reviewer a higher level of confidence upon their review.
The Possibilities are Endless for Artificial Intelligence in Accounting and Finance
As far as the potential for the technological aspect of AI for accounting finance teams, the possibilities truly are endless.
Artificial intelligence is being infused into our lives daily. What business needs can you identify at your organization where AI can help? What can you do to position your company on the cutting edge of this technology?
In terms of AI, it’s not a matter of if or a matter of when. It’s here today.
On the surface, it may be most recognizable in self-driving cars, online shopping recommendations or facial recognition by social media, but soon it will become common for business operations and finance teams.
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This blog was originally published by Warren Averett on October 10, 2018 and was most recently updated with new information and insights on January 18, 2021.