According to a recent study by KPMG, over 59% of large organizations already use AI in their financial, accounting, and tax departments and about 29% plan to implement AI-powered software within the next 12 months.
In this article, we explore how AI popularity is gaining traction among accounting departments, talk through the main opportunities AI-enabled accounting software solutions present to financial specialists, and cover some concerns related to technology implementation.
Top AI use cases in accounting
With a natural language processing (NLP) component capable of recognizing and processing a vast amount of data from invoices, bank statements, or receipts, AI tools can automatically input that information into the bookkeeping software, reducing manual entry mistakes and speeding up the process.
In addition, artificial intelligence can speed up and enhance journal entries to update debit and credit balances. With deep learning capabilities, such advanced tools can learn to distinguish between various types of financial transactions, like expenses, revenues, or liabilities, and categorize them to make the organization of financial information more accurate and efficient.
AI can also enhance the reconciliation process by matching transactions from various sources, like bank statements and invoices, quickly identifying discrepancies or unusual patterns that may indicate errors.
Enhanced data analysis
Artificial intelligence surpasses humans in the efficiency and accuracy of data analysis. AI-powered tools can process large data volumes to identify patterns, correlations, or trends not apparent to the human eye. AI data analysis comes into use for various financial activities.
- Forecasting and budgeting. Machine learning models can forecast future market trends, stock performances, currency fluctuations, and other financial metrics. Relying on these predictions and historical cash flow data, AI-enabled software can aid in budgeting and forecasting financial performance for the future fiscal year, making decision-making more accurate and precise.
- Risk assessment and scenario analysis. By analyzing historical data and market trends, AI can help assess the risk associated with various investments, credit lending, or other financial decisions. To dive deeper into possible outcomes of multiple financial endeavors, AI can simulate various economic and business scenarios to predict their potential impact on a company’s finances, helping in strategic planning and risk management.
- Real-time data analysis. AI-enhanced real-time analytics processes financial data as it is generated, providing immediate insights into cash flow, profitability, and expenses via real-time customizable dashboards. All that allows accountants and business owners to view the most relevant financial information instantly.
Optical character recognition (OCR) technology can scan and digitize tax-related documents, such as invoices, receipts, and forms, and then automatically classify and enter this information into tax preparation software. Further on, AI systems can handle complex, multijurisdictional tax calculations, including different rates, rules, and treaties. Such tools are particularly handy for businesses operating in multiple countries.
One of the real-life examples of such AI-powered tax calculations is FlyFin. The tool uses artificial intelligence to find all necessary tax deductions, with certified public accountants (CPAs) controlling the process.
Error and fraud detection
AI-powered accounting and finance management tools continuously learn from the enormous number and types of documents and data. It allows them to quickly identify patterns and detect errors, anomalies, unusual transactions, or inconsistencies in financial data. AI can even flag potentially fraudulent financial activities, helping to prevent financial loss and maintain the integrity of financial records.
MindBridge financial risk discovery platform is an example of how AI analyzes financial transactions to detect anomalies and trends that would be difficult for humans to find.
Ensuring compliance with government or state standards (like GAAP or IFRS) in financial operations is a top priority for many businesses, and artificial intelligence can come at hand. AI systems can monitor and interpret regulatory changes across different jurisdictions and update the compliance requirements accordingly. To top it off, AI can automatically generate financial reports that comply with financial or industry-specific standards, reducing human error and saving time.
Trust but verify
Data security and integrity are two of the most significant concerns associated with AI in finance and accounting. Is it safe to entrust confidential information to such a powerful instrument? While the answer to this question is equivocal, organizations can undertake certain actions in terms of the whole IT ecosystem to protect their data when implementing AI-enhanced tools.
It is paramount to ensure unauthorized users don’t have access to sensitive financial data to prevent its leakage. Therefore, companies should encrypt sensitive data both at rest and in transit, implement strict access control and authentication methods, use data masking techniques as well as conduct regular audits to check for anomalies or errors in the data that can lead to incorrect financial statements or decisions.
However great the technology is, human control throughout its usage is essential. Take, for instance, the case of a New York lawyer who relied on ChatGPT and submitted a brief in a federal lawsuit containing decisions and quotations from the AI tool. As it turned out during the process, ChatGPT invented more than half a dozen relevant court decisions, undoubtedly putting the lawyer to shame. This example shows that despite the growing adoption of AI, the technology requires human control and guidance, whether we deal with everyday journal entries or complex tax calculations.
While AI will not replace accountants and financial departments, it will significantly transform the accounting and finance sectors along with multiple other industries. The technology proved effective in various financial operations, from automating the bookkeeping processes to detecting fraud, empowering real-time analytics, and improving compliance. Therefore, AI represents a great opportunity rather than a threat, and if properly implemented and wisely used, the return on investment won’t take long.