In this guest article, accountant & tech-enthusiast Mohit Baheti discusses the benefits of artificial intelligence in accounting.
Like any other industry, the accounting industry is ever-evolving. We have moved along a lot from the accounting and early auditing systems developed by ancient Egyptians and Babylonians to Luca Pacioli from Italy who was the first one to publish a book on double-entry bookkeeping; followed by the modern chartered accountancy profession that originated in Scotland in the 19th century. Even recently we have seen a major advancement like the forensic audit.
So, are you ready to take the next big leap into the future of accounting? If the answer is YES you would now be thinking… “But how?” The answer lies in the new age technology… Artificial Intelligence.
What exactly is Artificial Intelligence?
Let’s start with a lighter note. Imagine waking up someday and being served with the kind of tea you would have asked for without having to speak a word, or the breakfast just as per your mood. Good morning my dear friends! Welcome to the world of Artificial Intelligence.
Many of us are still unaware of this term or simply unsure about how would it impact our industry? Artificial Intelligence in the simplest of words would mean to make the machine think, react and even learn in a way humans would do in given circumstances. And after a small span of time, it becomes such an expert that it develops the ability to work in new circumstances too.
We actually need a Tesla in the accounting industry, which is ready to turn the tables and offer robust solutions to revolutionise the functioning of a regular accounting firm. Take for an example the retractable door handles Tesla introduced, the naysayers said the same thing “do you think we even need that!!?” But this soon went on to become a standard and much-desired feature in the luxury cars. Of course, it was not needed, of course, it was nearly impossible from an engineering point of view, but hey, we know what happened afterwards.
Similarly, applying AI to accounting shall open new avenues and will free up time and resources for the more lucrative services such as financial advisory, cashflow forecasts, and assistance to startups beyond the regular compliance and maintenance work. The benefits of using AI are endless but let’s talk about a few most advantageous ones.
The benefits of Artificial Intelligence
- Automating the tasks of routine nature: If AI is deployed to automate the regular tasks then the accountants can free themselves from doing or managing conventional jobs. An average business owner finds compliance requirements as just a burden whereas services such as management reports, cash flow and business forecasts, guidance on investments etc. do add quantifiable value and hence, can prove to be a real game-changer for a new age accountant.
- Reduced turnaround time and costs: Continuing the aforementioned point you will be amazed to know that Amazon’s “click to ship” time reduced by 225% due to use of robots and AI-built algorithms, according to McKinsey Global Institute. The increase in the probability of a sale, savings in time and even human labour are bound to increase revenues, reduce costs and ultimately resulting in higher profits.
- Better decision making: Artificial Intelligence acts as a complete package deal when it comes to decision making. It not only provides you with ready to use information but with its ability to make a future forecast based on the knowledge it has gained over the period and considering the current situation, it enables the user to make quick and informative decisions.
- Segregation of information and quick action thereupon: AI with the use of OCR (Optical Character Recognition) is able to detect the data, understand their category and separate the transactions recorded, under various accounting heads, enabling the automation of processing of accounts receivable, accounts payable, inventory management etc.
- Audit: An AI algorithm was able to detect Ebola virus outbreak more than a week before it was declared by the World Health Organisation. This gives a clear indication that AI senses anything that’s unusual and issues an alert. Thus a fraud or error in the accounting system can be detected on a real-time basis. It can learn the existing pattern of financial inflow and outflow and point out any anomaly by detecting any deviation from the generality. AI’s feature of scalability helps it deal with all the financial data with equal accuracy.
- AI Expertbots: With the use of AI, expert bots can be developed for each function such as checking the contractor status for IR35, advising on the best way to withdraw money from a company, comprehensive tax planning advice etc.
Hurdles in the implementation of Artificial Intelligence
- Resistance to change– Accountants have made themselves so busy that any change in the systems they use is bound to disrupt their operations.
- The need for transparency– Generally one cannot look inside the black box to see how the data fed in the system has been used and how a particular conclusion has been arrived at by the AI. However, this limitation can be countered by allowing the users to approve or disapprove a particular rule which the bot has learned.
- The success of AI: Using AI can prove to be successful only if there is a sufficient amount of good quality data available for their learning. So, a lot depends on what you feed in.
- Cost of implementation– The use of AI requires lots of investment. The development phase itself entails a large chunk of resources. This makes it possible to only be implemented on a large scale, rather than to be customised for specific firms or requirements.
As we know every coin has two sides, so does the use of AI. Unquestionably, the benefits of using artificial intelligence are abundant. In the coming years, access to AI products will be easily available to all sectors and sizes of business alike, thus, speeding up the menial tasks in every industry. The winner in the race shall be the one who embraces the technology with open arms and adopts as well as adapts to it.
The accountants today, like any other professionals have dug their head so deep into the existing way of working that they’re missing out the writing on the wall, about the use of AI and tech in aiding their services and processes. It’s high time to break this status quo and ride high on the incoming wave of cutting edge technology-based solutions for their everyday requirements.
Mohit Baheti is a chartered accountant & a tech-enthusiast with 12 years’ versatile experience. He started working in fintech based startups with Capium in 2015 & later co-founded Online Account Filing Limited in 2018 where he is the director of operations.