Let us pause for a second. Instead of perceiving all forms of Artificial Intelligence as everything that the world needs, let us look at it as just another form of technology. And hence, like other tools, AI comes with its share of benefits and limitations. It has become an integral part of how organizations enhance business today. Accounting firms are no exception. In the recent past, we have come across many research and surveys that conclude that AI, despite its dangers and limitations, continues to be widely accepted by accounting business leaders.
While AI is a great tool to simplify manual, regular, tedious jobs, it provides some invaluable benefits in areas such as predicting customer behavior, automating manual data entry, and helping build a future where it will integrate seamlessly with the DNA of any accounting business.
Let us first understand the risks associated with AI that might worry accounting leaders:
Accounting is a niche field. Since it deals with a lot of critical information, before using AI, it is important to understand what it is that you are getting into. Some of these things might be a cause of worry for accountants. They include:
Bias:
Artificial Intelligence can identify patterns in data and use them for predictions, rules, and decisions. While this is considered an advantage, if those patterns reflect existing biases, the algorithm is likely to amplify them. The outcomes will become a result of discrimination. This can often lead the accounting firm to make biased, even incorrect financial decisions.
Using AI as the ultimate tool:
Just like any other technology, it is important to use AI to leverage your operations. The problem arises when accountants use it as an assistant and take its word as the final one. The lack of cross-checking of the final results can be detrimental to the business. No matter how much data you feed into the system, AI does not have the capability to judge a unique case, read exceptions, and check data for authenticity. The high reliability of AI can jeopardize the output, if the data fed has been biased, incomplete, or poor quality.
Errors in the program:
AI might fail to program the way accountants expect it to when errors exist. In a large pool of data fed to the system, spotting errors might be hard and accountants end up relying on the misleading results. This can have serious consequences on the firm, their clients, and the reputation of both parties.
Risk of cyber attacks:
The world is going digital and so are the hackers and scammers. While Artificial Intelligence is an excellent tool to ease the life of accountants, it also opens up avenues for scammers to access critical information when there is negligence or carelessness. As tools and systems continue to get smarter, so do the hackers. They are more likely to use targeted AI systems to gain access to confidential information.
Risk of reputational damage:
AI systems handle large amounts of sensitive data in accounting. Accountants rely on them to make critical decisions about individuals in various areas such as bookkeeping, bank reconciliations, taxation, etc. If the system is biased, error-prone, or hacked for unethical purposes, it poses a significant amount of reputational risk to the organization that owns it.
Why do accounting leaders continue to use AI despite the risks?
While there are many risks associated with the use of AI in accounting, the benefits overpower them. Here are some data that support this theory:
- About 86% of CEOs believe AI is an important aspect of their business
- AI helps in improving accuracy by 98%
- AI in accounting will grow at a CAGR of 50% between 2020 and 2026
Here are the top reasons that are compelling to accounting leaders to adopt AI in their practice:
Better accuracy and decision-making:
There is no doubt in the fact that AI algorithms are prone to error. But this can be avoided. With proper training, AI systems can improve the accuracy of financial analysis and reporting. Having access to a vast amount of data makes advanced analytics easier to process. AI can provide valuable insights that can help accounting leaders make better-informed decisions.
Improved efficiency and productivity:
In accounting, there are loads of repetitive tasks – data entry, bookkeeping, and reconciliation are some of them. AI-powered tools can be incredibly helpful in easing out tasks like these and making time and space for accountants to focus on value-added activities. It also helps accounting leaders streamline the tasks for their firms, which aids in efficiency and productivity, enabling faster and better service delivery to clients.
Scalability and flexibility:
One of the major goals that accounting firms chase is scalability. AI systems can handle a large volume of data which helps in adapting to the changing business needs faster than traditional, manual processes. When accounting firms can scale and become more flexible, it helps firms grow their client portfolio, broaden the range of services they can offer, and address the dynamic market conditions. Having AI systems at their disposal also helps accounting firms take up additional jobs during peak season as well.
Managing client expectations and demands:
In accounting, meeting deadlines is one of the most critical aspects. Most clients have increasing expectations. Using cutting-edge technology like artificial intelligence to deliver high-quality, data-driven insights and services can go a long way in creating a lasting impact on clients. Accounting leaders should integrate AI into their daily operations to meet client expectations, demonstrate their commitment to growth and innovation, advise them, and strengthen client relationships.
Aids in talent acquisition and retention:
Using AI also helps ensure that you do not hire subpar talent. Embracing AI technology can attract top talent to accounting firms, particularly among the newer generation of accountants who are used to working with advanced tools. Opportunities to work with AI-powered systems and constantly develop new skills inspire the talent to join the force that enables constant growth and development.
The urge of accounting leaders to integrate AI into business – Conclusion
While the integration of AI into accounting presents risks, accounting leaders identify and embrace the transformational potential of this technology. The concerns outweigh the risks for firms. By using AI, accounting firms can gain significant gains, enhance accuracy in financial analysis and decision-making, gain a competitive advantage, and manage scalability and flexibility. However, accounting leaders need to approach with caution, implementing robust governance frameworks, investing in training and development, and prioritizing transparency and accountability.
If you are unsure how to use artificial intelligence to your advantage, outsource your accounting practice to an expert. Write to us at connect@finsmartaccounting.com to know how we can help.
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Director Growth Strategy & Alliance
Maanoj Shah is a finance and outsourcing expert with strong Business Strategy and Scaling-up experience. Over the last 20 years, he has incubated multiple businesses and helped build global enterprises in verticals as diversified as hospitality, technology, and healthcare.
