How has AI impacted the Accounting and Finance Sector?

“The last 10 years have been about building a world that is mobile-first. In the next 10 years, we will shift to a world that is AI-first.”

-Sundar Pichai, CEO of Google

 

We have witnessed how AI has grown over the decade and is still evolving. There is only one reason for it- Data. Firstly, the amount of data that is generated in today’s time is huge in volume. We need AI tools to segregate this data.

 

Secondly, we always face issues in generating relevant results and analyses of the information we find. Thus, AI enabled deep learning methods, tools and softwares are of great use to us.

 

There is hardly any field left which is not influenced by AI. One such deeply influenced field is accounting and finance. When we hear accounting what is the first thing that comes to our mind?

 

The answer is numbers and data. Huge volume of data is present in accounting that needs to be processed. In this blog we will see how AI has impacted Accounting and Finance.

 

Also Read | AI in Finance

 

How AI is applied to Accounting and Finance?

 

AI has the power to influence and transform the Accounting and Finance segment of every business. With the powerful inventions and advancements in AI we can reduce the tedious tasks and waste movements of the professionals. Better and a lucrative analysis of the information can be done. 

 

Clients can be given better satisfaction and output with the help of AI tools. Moreover, AI will help accountants and finance professionals reach their full potential. But still there are many organizations that do not employ AI systems. 

 

Why do they hesitate so much? The only reasons that come to mind are: Cost and Awareness.

 

Cost is one of the main reasons why businesses fail to use AI systems. Small businesses cannot bear such high costs. They can neither outsource nor develop such systems internally. 

 

The second reason is Awareness. Many businesses are not aware of the benefits that AI can provide them. They do not have the required personnel or people with skills who understand the application of AI. 

 

Right from stock trading companies, hospitals, insurance sector to education sector, AI has been successfully implemented. In accounting and finance, there are a large number of transactions that have to be dealt with. It is the duty of the professionals to record every transaction, journalize it, post it to ledgers. 

 

The most time-consuming and tedious job is handling so many transactions, especially in the Business-to Business class of companies. In B2B there are thousands and lakhs of customers, which means that the amount of data involved will be in bulk.

 

Therefore, instead of manually entering and dealing with such heavy data, companies can apply AI enabled tools to ease the workflow and help professionals from getting fatigued. 

 

Forbes in 2020 said that- Accounting includes payroll, taxes, finance, banking and auditing and once it is completely and fully automated through AI systems a huge disruption will be there in the Accounting sector which will give lots of opportunities and benefits to everyone including the companies.

 

AI not only helps to reduce tedious tasks but it also improves the productivity, output and profits of a firm. It helps in generating a more transparent and accountable system. AI will also help in improving the future forecasts of a company. 

 

In accounting we rely on data, and we use past data and trends to predict the profits and make financial statements. AI will help in drawing these comparisons, trends and financial statements.

 

Also Read | AI in Risk Assessment

 

 

Benefits of AI in Accounting & Finance

 

AI will help the accountants create a favorable and automated environment to work in. It will help them remove repetitive tasks and focus on better results. It will also help in the following aspects as well:

 

• Quick Decision making

 

• Getting smart insights

 

• Easy analyses of huge volume of data

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Benefits of AI in Accounting & Finance

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Given below are some of the positive ways in which AI has impacted Accounting and Finance departments:

 

1. Predicting and Forecasting

 

One of the most important functions of a finance professional is to provide future insights in a business. With the help of AI this function can be performed accurately and more efficiently. Moreover the heavy lifting burden of accountants will be lifted from their shoulders. 

 

It is difficult to manage and maintain daily reports and access the data at the same time. To build a more strong and comprehensive relationship with the clients, AI tools will be very beneficial for businesses. 

 

Machine Learning is the solution for every problem. Along with machine learning, Cloud Computing technologies can also be adopted by companies to make a better and efficient environment.

 

 

2. Smart Assistants

 

Are you one of those professionals that prefers to turn their phone off to concentrate better while sending statements and financials to your clients? If yes, then you are not the only one.

 

There are so many people that do the same thing. This issue can be curated by using the AI smart assistants. With the help of these smart assistants you can do so many things at once.

 

They will help you compile a list of all the clients. Moreover, they can send the information to the clients as per your needs and demands. There are many smart tools like Apple Siri, Google Assistant etc.

 

These assistants are of two types. One is a natural bot and the other one is a scripted bot. A natural bot is more sophisticated and a smarter assistant because it can do whatever you ask. It is not aligned to a specific function or task.

 

They use speech recognition systems and human voice synthesis tools to work. They offer more range. On the other hand the scripted bots are made to do specific tasks. You must have seen many scripted bots on websites. A natural assistant is a better choice for accounting and business purposes.

 

Also Read | What is a Virtual Agent?

 

 

3. Automatic Allocation and Tagging of Transactions

 

Automatic Tagging and Allocation of Transactions are two areas where AI can be very helpful. If you use AI enabled tools then you can save a lot of time in tagging the transactions and grouping them in a ledger.

 

You have to use an accounting software and based on your previous tagging, it will tag all the transactions and group them for you. Imagine how much time you are saving. Sometimes, you may come across transactions that are a bit complex. It can be difficult to tag them and allocate them.

 

In accounting we follow generalized principles and do work accordingly. Some of these rules are complex and difficult to understand. With the help of an AI tool you can easily tag these transactions and the computer can either intuitively or through other softwares analyze the transactions.

 

Over the decade we have seen how much growth AI has done and how it has discovered the principles of accounting and adapted them.

 

 

4. Detection of Anomaly

 

Whenever you have to process large amounts of data, it is difficult to do it manually. The chances of committing unintentional mistakes also increases. We are humans and we can make mistakes either due to negligence or carelessness. 

 

In accounting small mistakes can create a huge impact on the end results. We have to revise and revisit the initial stages to find the mistakes and correct them. Can you imagine how much time it will take?

 

What is the solution? You can use AI tools to process this data. Computers are made to learn and they can function without mistakes if the input is correct. You can minimize the chances of making mistakes by using computers.

 

In case any anomaly is there in the initial stages then it becomes very easy to detect them. There are multiple softwares that cater to this need. It will make the whole chain of processes quicker and effective.

 

In case you have to do an audit of any business. Then you may follow the Sampling method. In the sampling method you randomly collect data from any point and analyze it. If the data is system generated then it will be uniform and chances are that there will be no anomaly.

 

Therefore, detection of anomalies using AI is much easier and you may not even make a mistake if the data is entered properly.

 

 

5. OCR Detection

 

OCR stands for Optical Character Recognition. It is not a new method but by using AI in OCR we can improve its accuracy and get even more output.

 

OCR is used for document recognition and by using AI in it we can recognize invoices, receipts and a lot more. Normally while recognizing any document i.e. extracting information from it, humans have to pinpoint where the information is. 

 

Then the software can extract the information. Computers understand numbers as everything is converted into binary for them. 

 

But when we talk about accounting receipts and invoices, there are so many numbers and all of them are scattered and different. Like the date, amount, taxes and even the credit card number.

 

For humans it is easy to identify everything and allocate it. But for softwares it requires training. With the help of OCR and AI we can easily do so. We can extract the data using softwares instead of humans. 

 

Now these softwares have become so advanced that they can scan new documents as well. Even if the quality is not upto the mark, softwares can detect it. It is because of the use of AI.

 

Also Read | AI in Insurance
 

 

Areas in Accounting & Finance influenced by AI

 

There are multiple areas in accounting and finance in which AI has created a huge impact. Areas like- Receipt processing, Suppliers onboarding, Procurement, Auditing, Taxation, Cashflows, Expense Management etc are influenced by AI. Let us look at some of these.

 

1. Receipt Processing

 

Processing the invoices is probably the most tedious task in accounting. Every accountant gets frustrated if it is done by hand. After a certain point the efficiency reduces and mistakes are made. 

 

Even though it is a traditional practice, still many small businesses are engaged in it. The scenario now is that due to digital transformation by AI, invoice processing has become simpler and quicker.

 

There are AI management systems that help the accountant process invoices. This way they can process more data, zero-errors are done and vendor relationships are improved.

 

2. Suppliers Onboarding

 

With the help of AI we can get more customers and improve the existing relationships. A company can make a distinct identity in the market and survive competition with AI. It is easier to scrutinize the taxes and credits of the suppliers and make the right decision.

 

3. Expense Management

 

It is difficult to manually manage and tab the expenses of an organization. The finance team has to adapt to an AI based system using which they can check the daily expenses as well as the monthly expenses.

 

It is important for every company to keep the expenses within a certain limit to prevent shortage of funds on a later date. AI can help to boost the process and make expense management totally digital with no mistakes.

 

AI has totally disrupted the profession of Accounting and Finance. It has made it wider and created more opportunities for businesses and personnel.