As one of the oldest professions in the world, it’s difficult to imagine a future where accounting services are performed by artificial intelligence or robots but as with many other industries, this is indeed the direction we’re heading. However this doesn’t mean that the machines are taking over.
How is artificial intelligence affecting accounting?
Accounting is driven by data, and in many instances it’s patterned and repetitive, as is the processing and reconciliation of this information. Therefore, it’s the perfect environment for artificial intelligence and machine learning, which have been instrumental in the industry for some time.
Accounting software begins learning about the transactions of a business from the moment it’s implemented and connected to bank accounts or integrated with other software platforms. It quickly learns that certain transactions are matched to a particular supplier and GL code, leaving the bookkeeper or accountant with the simple task of clicking ok. At a very basic level this is machine learning and its implementation has increased the efficiency of every business and accounting services company. In addition, it’s the type of work that accounting professionals don’t really want to be doing. Even newly qualified graduate accountants aren’t willing to learn the very basics of double-entry bookkeeping because they know that software has been designed to do the heavy lifting of this boring work.
AI is also working at a higher level in accounting tasks, such as in the process of auditing an organization - it identifies anomaly transactions within the patterns of data and flags them as possible causes for concern to be investigated. Developments also include software that can identify invoices in staff inboxes, run a fraud check and then input the invoices into an accounting software platform before sending them on the appropriate authorisation pathways.
Essentially this is where artificial intelligence is having a positive effect on the accounting sector - identifying patterns within data with some interpretation for automatic processing or for the purpose of further human investigation. AI is perfect for these types of tasks because of the need for a high level of accuracy and speed, and it removes the issues around human error and the tendency of humans to be distracted from mundane, repetitive tasks.
On the flip side, accounting services companies will need to take a closer look at job roles and responsibilities within their firm, assessing what new roles may look like into the future and how to create fulfilling work for those employees. With so much change occurring in the industry, this then leads us to the question of why AI or algorithms aren’t able to complete all accounting services.
Why isn't accounting done by an algorithm or AI?
Whilst AI has the capability of looking at business data and identifying patterns, it doesn’t have the ability to identify the cause of that pattern or even what’s brought about an anomaly within that pattern. Human intervention is required to analyse the data at a higher level and identify exactly what’s occurring. Often this involves a conversation with stakeholders and an understanding of the business situation along with the ability to read deeper than the initial response from a stakeholder.
In addition, the historical nature of accounting data, limits AI in its capabilities. Accountants are data specialists and are often required to perform high level analysis of data for the purpose of advising a business on strategic decision making into the future. AI can assist in this process, but the understanding, forward planning and out-of-the-box thinking that businesses require, can only be performed by humans. Business strategy is rarely repeatable and is often based on one-off decisions that seize an opportunity. It relies on innovation and creating a competitive advantage which can rarely be assisted by historical data. If you were to plug in the data required to make a decision about the future, you’d receive a negative net present value result because of the associated risk. AI would actually advise against anything along the lines of research and development. Accountants need to understand the past, but rather than merely extrapolate that data into the future, they need to use it to understand cause and effect results that would occur and be able to strategize into the future.
What’s more, with incidents such as the global financial crisis and the COVID-19 pandemic, there was no historical data to predict how events would unfold into the future. They were by all accounts, unprecedented events and therefore impossible for AI to assist. In fact, in any period of rapid change, AI will be unable to keep up until it has enough new information to determine new patterns.
Will accounting software replace accountants?
In short, no: accounting software, AI, machine learning and algorithms won’t replace accountants because they simply can’t think into the future. They will, however, replace the lower level, repetitive, transactional tasks that many accountants and bookkeepers perform. And this leaves the accounting profession in a very exciting phase. AI can identify trends and provide real time information which, when analyzed by an accounting professional, can provide real value to businesses and assist in strategic decision making for the future.
According to Sage, over 58% of accountants agree or strongly agree that AI will improve their accounting services company in the future as they can see the increased value it will be able to offer businesses. Accountants who are only executing compliance will be in trouble but those who utilize their experience, knowledge and understanding of business to provide advice and critical thinking for business owners, will be in a position to help businesses change, adapt and succeed into the future.
So where does this leave new accounting graduates? Entry level jobs will be less about the mechanics of accounting and more about applied critical thinking. According to Professor Michale Davern from Melbourne University, young accountants will still need to understand the data but rather than processing it, they’ll be required to interpret the data, understand cause and effect and make judgements based on the data and their business knowledge. As a result, they'll also require a much more expanded skill set from the beginning of their career with a focus on problem solving.
What are the advantages of AI in accounting?
In this digital age, information and data is key to business success and with AI able to do the heavy lifting in identifying patterns and completing basic tasks, it provides incredible advantages and opportunities to firms that offer accounting services. It’s augmented intelligence rather than artificial intelligence, with human decision making as a key step in the process.
Accounting firms will be able to channel their efforts, and intellect, into offering the advisory services that businesses will require in order to adapt and succeed in these changing times. This kind of work is not only more interesting and challenging for employees, it’s also of more value to business owners and therefore more lucrative for the accounting firm.
Accountants have the opportunity to get closer to businesses as trusted advisors and partners. They may even face the challenge of offering advice to businesses about how and when they should invest in artificial intelligence themselves - providing the tools to determine if AI proposals are worthwhile and identifying issues that may arise from the technology.
However accountants will need to move quickly in order to establish their place in this business advisory capacity. For most firms, this is likely to involve a major overhaul of structure, procedures and skills base but will result in a fantastic future for accounting services professionals who are prepared to seize the opportunity.
Would you like to learn more about other technological trends in the coming years? Read more in our blog Tech trends we’ll see in 2021.
