How Will Automation and Artificial Intelligence Affect the Accounting Industry
Maryann Van Horn
Personal Statement
This was written for my English 102 final paper. I’m a student in the Accounting program, and I thought the conversation about what’s going on in the real world and how it could impact aspiring accountants was really informative.
Abstract
This paper will discuss how the introduction of Artificial intelligence (AI) into accounting practices will have a significant impact on the future of accounting. Accountants should be prepared for significant changes in the industry with the introduction and adoption of AI. Artificial intelligence has the ability to improve accounting performance, accuracy, and insight. Because these advances have the potential to eliminate the need for much of the human interface in accounting, accountants must be knowledgeable on how to use, support, and integrate this new technology to blend human and machine into a single entity that will become financial advisors.
Keywords: Artificial intelligence, Automation, Accounting, Financial Advisor, Finance, Changes in the Accounting industry
How Will Automation and Artificial Intelligence Affect the Accounting Industry
“The development of full artificial intelligence could spell the end of the human race…It would take off on its own, and redesign itself at an ever increasing rate. Humans, who are limited by slow biological evolution, could not compete, and would be superseded”
—- Stephan Hawking, BBC interview
Let us face it; accounting can be quite the tedious activity. Many even characterize it as boring. It is not a physically demanding activity, of course, but long hours spent crunching numbers is nonetheless not an easy task. Plus, you have to be good at math. Accounting is a process of recording and analyzing data collected from business transactions. There is a myriad of specialties that make up the field of accounting: Managerial, financial, and auditor accountants are examples of various types of accountants. Managerial accountants draw conclusions and assist company managers in making decisions on how to run the organization. Financial accountants assist investors and creditors to access the company’s financial performance and evaluate its financial health and risks. Auditors examine whether the financial statements correctly reflect the profitability of the business and are compliant with the different laws and regulations. A business generates data, and that data must be analyzed and acted upon if a business is to be successful.
It is in this increasingly sophisticated world of business and finance that the regulatory demands on businesses have also become almost overwhelmingly complex. Ask any accountant and you are likely to hear endlessly about the suffocating number of rules, regulations, and analytics that businesses must account for. Data analytics are used by accountants and auditors to evaluate statistics, to assess the performance of a company’s business activities, and to ensure regulatory compliance.
Record the data, look at numbers, trends, figures, rules, and regulations. Then analyze, comply, monitor, adjust, recommend, and report. Theses can be very tedious and certainly very time-consuming activities. This is where artificial intelligence and automation come in. Data, numbers, trends, figures, rules, and regulations all follow a set of logical rules and patterns, and a business cannot be successful without someone keeping track. Originally a “computer” was a person, someone good with numbers hired to keep track of the data generated by a business. With the advent of mechanical computers, much of that number crunching was automated. Computers are especially adept at working with numbers and at following rules and logical patterns. Therefore, some of the first financially successful software programs were spreadsheets, programs designed specifically to aid in accounting. Over the ensuing years these spreadsheets have progressively evolved, becoming ever more complex and sophisticated. We are now on the cusp of another giant leap in the evolution of automation: Artificial intelligence. Artificial intelligence (AI) enables machines to learn from their experiences, interpret knowledge, make changes, and apply what they have learned to perform tasks that are similar to those performed by humans (“How AI,” 2020). This latest evolutionary step may, however, come at a cost. Employees and employers alike are uncertain whether they may still have a career or whether there will be a continuing need for accountants as the accounting industry shifts rapidly. The implementation of any new technology is often an important transition that has an impact on jobs in the industry, and there is no question that artificial intelligence will have a significant impact on the future of accounting.
AI has the ability to greatly improve accounting performance, accuracy, and insight. However, it also has the ability to replace humans. Obviously, this can be an alarming trend for accountants. With the advent of artificial intelligence accountants will simply need to adapt or, in all probability, be eliminated. The answer, at least for now, is that accounts must become knowledgeable and learn how to integrate this new technology.
Artificial Intelligence Advancements Have the Ability to Improve Accounting Efficiency
A company’s main goal is often to optimize workflow performance. AI will play an important role with this by automating routine processes such as financial administrative work and logistical daily entry (Ash, 2020). People can only function efficiently for a limited amount of time and cannot sustain a constant standard of success during the day (Gardner, 2019). AI, on the other hand, never gets exhausted or frustrated and can work around the clock. This has the potential to greatly improve business performance and can help the company work more smoothly. Additionally, with a computer and artificial intelligence at work, chances of making an error are greatly reduced (Gardner, 2019). Furthermore, with the ability to serve a company around the clock, AI can adapt to major incidents at precisely the right time (PixelPlex, 2020). Aside from increasing efficiency, AI also has the potential to easily process vast quantities of data.
Artificial intelligence can be used by businesses to quickly crunch large volumes of data to give important feedback to business-related issues (PixelPlex, 2020). An auditor, for example, will have the ability to execute an audit quickly and efficiently as it constantly has access to relevant data rather than needing to research and collect data necessary for the audit. In turn, this increases the accuracy and efficiency of audits by allowing audits to cover 100 percent of a company’s financial activities rather than only samples (Rana, 2020). If this process were performed by a single individual, the time taken would be enormous, and the audit would almost certainly include mistakes (Rana, 2020). AI also streamlines the process of collecting, organizing, and analyzing relevant data in a way that improves the effectiveness of an organization (Govil, 2020). As a result, a business can track improvements in real time and make changes as appropriate, rather than waiting for a quarterly or monthly update when the problem might be too late to repair. This awareness encourages firms to be vigilant and change direction if evidence reveals negative patterns.
Artificial Intelligence Advancements Have the Potential for Improving the Accuracy of Accounting
With traditional accounting and bookkeeping, mistakes can, and often do, get overlooked. Artificial intelligence has the ability to learn. This means it can become aware of how the business operates and then instantly find problems and adjust as necessary to ensure all documents are indeed exactly right (Pretoria Reckord, 2020). An individual oversight may cause an accountant to repeat the very same mistake over and over again, even though it may be something as basic as transcribing a combination of numbers or skipping a decimal place (Botkeeper, 2020). However, a single decimal place or a reversed series of digits has the potential to cost a business thousands of dollars or even more. Since AI can spot discrepancies and identify inaccurate or irregular entries in records and statements, accountants with the aid of AI can rely on accurate details any time they construct documents (Botkeeper, 2020). Minor mistakes are common for most accounts, but AI will catch these straight away. AI continually monitors information automatically to ensure it is reliable and accurate. It constantly compares data in order to make certain accounts, data and regulations all align appropriately (Botkeeper, 2020).
Since period-end activities exist on a regular basis, artificial intelligence can affect the way finance and accounting departments work (Chukwuani & Egiyi, 2020). Artificial intelligence enhances the accountant’s ability to produce reliable information at any point during the month, enabling the organization to make more informed decisions. Accounting accuracy increases because accountants are not trying to cram weeks of work into one week and are not required to carry out so many mundane tasks as before. Projects that were formerly reserved for the end of an accounting cycle are now incorporated into daily tasks, enabling accounting to finally match the pace at which the business operates (Chukwuani & Egiyi, 2020).
These Advances Have the Potential to Make Accounting More Insightful
Perhaps the most important facet in artificial intelligence is its ability to learn. It mimics the human ability to analyze data and make decisions based on the data. This means that finance experts can use AI to help in planning and decision making based on actionable information obtained from their client’s previous transactions and external variables. This can be done in real time when AI learns the business, resulting in greater accuracy and the ability to process vast amounts of data (Govil, 2020). This also gives accountants the capacity to analyze data from the past as well as for future events with greater certainty. Businesses can use this data to conduct cash flow projections, estimating when the organization will run out of funds and implementing steps to prevent cash flow difficulties from becoming a greater problem (Govil, 2020). For example, if a company is considering expansion, accounting professionals can determine whether or not this is a wise decision.
Data can be used to think more critically about events or decisions that impact the whole organization because of the capability to get detailed knowledge of a client’s activities (Calabrese, 2020). Business benefits from insight. The ability to predict what is on the horizon drives decisions on whether or not to produce more goods and services. More importantly, AI can also learn to decide what may be necessary to lower the risk for a potential disaster. It can decide if it is wise to cut prices, invest in higher quality, or when it may be necessary to enhance protection and regulation (PixelPlex, 2020). Providing access to critical data enables company owners to make intelligent decisions to ensure success and long-term sustainability (PixelPlex, 2020). Through reviewing and evaluating data, AI in accounting and finance has the ability to discover patterns and additional insights (Calabrese, 2020). Artificial intelligence is constantly learning; thus, with continually developing insight, financial planners or accountants can adjust an investment plan or expenditures to better plan for the future and avoid possible financial mishaps (Calabrese, 2020). As a result, productivity improves, expenses decrease, sources of revenue rise, and economic targets are met.
Human Accountants May Be Less Needed as A Result of These Advancements
Clearly, when artificial intelligence is integrated into a business, it can fundamentally change that business. Specific tasks that would normally be performed by someone who may be new in the field could be entirely automated. Procurement, invoicing, sales orders, cost reporting, accounts payable and receivables are only a few examples of internal accounting systems that may be entirely automated (Marr, 2020). Risk management, analytics computation, credit union reconcilement, and even audits can all be entirely automated (Gregory, n.d.) So, now that everything is potentially largely self-operating, what is an accountant supposed to do? Analyzing data and providing trustworthy advice will be the primary focus of accountants in the future. Customer relations will also play a larger part in the accounting industry as a result of this recent shift towards AI.
Accountants will become crucial in providing advisory services (Editor@HostBooks, 2020). Instead of sacrificing hours on mundane tasks, accountants could devote more time to their customers. Mastering the customer experience would be a top priority for companies aiming to succeed (Root, 2019). Customer service is a multifaceted term that involves different methods, equipment, and channels, but it all basically comes down to how satisfied the customer is with their encounter. If it is great, you will get a customer; If it is terrible, you will miss out to a company that has perfected the art of client service. Standard industry philosophy is focused on getting work completed using technologies like email, databases, and tax organizers. Client standards are evolving, and today’s customers expect to communicate alongside their accountant in a new fashion. They demand a personalized, accommodating, and technology-guided experience. Accountants, for example, would need to personalize their customer experiences, become proactive about their communications, and provide their clients with the best strategies for mutual trust and respect. The aim really is to understand your customers and understand how their relationships with your company affect them (Root, 2019).
Accountants May Be Retrained or Educated as A Result of These Advancements
Since accounting is expanding to provide more customer support, advisory services, and data management, accountants’ expertise would need to be reassigned in other ways. As a result, they will need more hard skills like computer science and data analytics (ICAEW, 2018). A stronger focus is also recommended on improving soft skills such as writing and active listening, critical thinking, and resilience (ICAEW, 2018). Accountants will need to learn all aspects of their clients’ companies as they turn into trusted financial advisors (Gregory, n.d.).
As a result, prospective professionals and auditors will be obligated to make greater use of their interpersonal and analytical skills to complement the continuous improvements in automated technologies in order to stay competitive and employed. According to the article “Accounting in 2040: 4 Ways the Industry Will (Probably) Change in 20 Years” (2019) accountants will need to improve their ability to work with actual people as technology automates more of the simple mundane jobs. Among the most difficult transitions is trying to leave behind old ways of thinking. Accounting companies that employ AI, on the other hand, would outperform their rivals by improved performance and increased support as a result of creativity and technology (Pretoria Reckord, 2020).
Since the beginning of recorded history, people have found it necessary to record their transactions–how much was traded at what cost, and at what profit. Traders quickly learned that those with the most efficient accounting system usually came out ahead. Human computers were used to keep records. They got a huge assist with the invention of the calculator. The calculator evolved into the computer and another giant evolutionary step was taken in the industry. We are now on the brink of an evolutionary step that will fundamentally change accounting. Artificial intelligence clearly has the potential to revolutionize not only accounting but business itself. While the overwhelming evidence at this juncture points to many changes, there are some cautions. The transformation does not appear to be a positive thing for employment, particularly with artificial intelligence at the forefront of accountants’ minds. Unfortunately for those who worry about their jobs, AI is inevitable. So, accountants will need to have a new mindset going forward. This means they will need to rethink what it takes for them to be successful in today’s world. The variety of responsibilities which the accountant conducts would then transform. The emphasis would be on data interpretation and guidance instead of unnecessary repetitive tasks. Because of this processing, the account’s responsibility moves from data entry to becoming trusted financial advisors. And then there is the fundamental worry that underlies the arrival of artificial intelligence. As Steven Hawking worried: “The development of full artificial intelligence could spell the end of the human race. It would take off on its own, and redesign itself at an ever-increasing rate.” What happens when the machine decides it does not need the human interface to conduct business? That may indeed be a worry for future generations.
References
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