In a world awash with financial data, manual accounting methods now seem almost archaic. Picture heaps of paperwork, long hours and an endless cycle of coffee refills. Although we’ve achieved the capability to collect data like never before, the question remains: How do we manage and make sense of it all?
The answer lies in AI. Yes, we’ve been hearing the term everywhere, but its prevalence is not without reason. AI is an essential tool for modern accountants, transforming laborious tasks into manageable ones and redefining roles from data entry to strategic advisory. Today, we’ll explore how advanced AI applications are shaping the future of accounting, taking on everything from complex financial forecasting to risk management and tax compliance.
AI-based financial forecasting
When it comes to financial forecasting, the magnitude of data that needs to be processed can be overwhelming. It’s also traditionally been a resource-intensive affair. Teams of analysts would painstakingly examine standard business metrics like market demand and expected pricing, generating projections for varied markets and regions each quarter. The time and effort involved were substantial.
Enter AI, though, and the picture changes. By deploying advanced machine learning algorithms that sift through enormous data sets with ease, it factors in everything from market trends and consumer behaviour to real-time financial indicators — offering a degree of accuracy that’s nothing short of remarkable. And the thing is, advanced machine learning algorithms don’t just process these enormous data sets; they thrive on them. With continued use and as more data is fed into the system, machine learning algorithms refine their predictive models, enhancing their accuracy over time.
Moreover, AI brings an additional layer of assurance to the forecasting process by considering variables often overlooked by human analysis. Whether it’s unstructured data like social media chatter, customer reviews or even weather patterns, AI delves deeper. It evaluates how these subtle elements interact with conventional financial data, offering insights that human analysts might miss. What we end up with is not just a faster forecasting process but one that is far more insightful and nuanced.
Risk management and fraud detection
If numbers and data are involved, risk is omnipresent. Be it investment choices, business deals or internal processes, every decision carries a certain degree of risk. In traditional accounting systems, managing these uncertainties often requires substantial resources and specialised expertise. Even then, there are gaps, and that’s where AI significantly ups the ante.
AI platforms, leveraging machine learning and complex algorithms, are able to detect patterns and recognise anomalies with unparalleled accuracy. For example, let’s consider the case of duplicate payments within an organisation. These might seem like negligible glitches on the surface, but they can amount to substantial financial setbacks over time. In one notable instance, AI-driven analytics flagged duplicate payments that had gone unnoticed for an astounding eight years. The advanced algorithm detected the recurring anomaly, something that had consistently evaded human detection, leading to immediate corrective measures.
This layer of AI-driven scrutiny extends well beyond flagging errors. It’s equipped to analyse vast amounts of transactions, scrutinise contracts and evaluate financial practices to identify any signs of risk or potential fraud. From credit risk to operational risk, and even compliance risk, AI monitors multiple touchpoints of financial activity.
Armed with AI, accountants can preempt risks, recommend proactive measures and solidify their position as strategic advisors to businesses that are navigating an increasingly complex financial landscape.
AI in tax planning
When firms like Deloitte, KPMG, PwC and Ernst & Young put their weight behind a technology, you know it’s a game-changer. These leading companies (known as the ‘Big Four’) deploy AI for multiple tasks, including accessing up-to-date regulations, categorising documents, analysing past audit results and creating reports.
Tax codes and regulations are notoriously complex. AI simplifies this by quickly analysing the text of these laws, making it easier for accountants to identify tax-smart strategies. This feature becomes especially useful in international tax planning, where AI can assess obligations specific to each country and provide real-time data insights.
The Synergy of AI and human insight
If there’s something we want to drill in, it’s that while AI is transforming the accounting landscape, it doesn’t eliminate the need for skilled accountants; rather, it elevates their roles. Freed from tedious data entry and basic calculations, professionals can turn their attention to strategy and advisory functions.
Furthermore, the continuous operation of AI algorithms — unaffected by breaks, holidays, or sleep — ensures that accounting processes keep running smoothly, especially when it comes to detecting fraud.
The fact of the matter is that AI handles the heavy data lifting while humans focus on higher-level analysis, creating a robust accounting framework capable of navigating complexities and delivering insightful, reliable results.
And for those looking to fully leverage these capabilities, Dext solutions can integrate right into the tools that you already use daily — Xero, Quickbooks, Sage and more. Combining automated data extraction and analytics with user-friendly interfaces, our tools help you reclaim your time and focus on what truly matters.
To find out more about the role of AI in accounting, sign up for our webinar series: ‘Unlocking the Potential of AI in Accounting’?