The adoption of AI in accounting is growing slowly but has the potential to transform the profession. To maximize the benefits, AI should enhance human effort, not replace it.
The time for AI in accounting is coming, if only gradually. AI has the potential to remedy old bottlenecks by automating routine tasks, and to elevate the profession by providing brand new tools. In both cases, AI works best when it augments, but doesn’t replace human efforts.
As of 2024, just 8% of accounting firms report adopting GenAI solutions, as compared with 65% of all businesses globally. But 51% of accounting firms are either planning for, or considering, the use of AI in the future.
It’s important to remember that AI is in its infancy. Adoption varies widely by industry, location, and organization size. At the outset, organizations should ask themselves exactly what “pain points” they are trying to address and how AI can help. In other words, start with the problem, not the technology.
This article will examine how adopting AI in accounting can resolve existing problems and enhance business outcomes.
Solving traditional problems with AI
Staff shortages and burnout. Using AI in accounting as a labor saving device is an obvious choice in a profession that has lost 300,000 accountants and auditors in recent years – well above replacement rates. And the main reason for the attrition is burnout, according to the Journal of Accountancy. As people leave, a “doom loop” can develop in which the remaining staff have to take up slack until they, too, become burned out and leave.
One way AI can help is by reducing repetitive, mundane tasks. As the Journal of Accountancy puts it, “[I]f a large part of your firm’s work is inserting numbers into boxes . . . stay tuned.” AI tools can not only speed up data gathering and data entry but reduce common errors in the process.
According to Forbes, “Accounting professionals use AI with data tools to analyze vast amounts of data with precision and speed, a task that once consumed significant human resources. This shift is not just about doing things faster; it’s about doing things better.” At the most basic level, using AI in accounting lets firms do more work, more accurately, with fewer people.
The “productivity paradox.” Although accountants began to adopt technology early on, the profession didn’t take advantage of its full potential. The result is what Cornell University professor Louis Hyman calls the “productivity paradox.”
According to Professor Hyman, the productivity paradox comes from digitizing traditional paper processes without improving them. Searching through electronic files and directories may be even less efficient than reviewing paper documents, for example.
AI tools can break through the productivity paradox. AI can be trained to gather data from a collection of documents and enter it into ledgers, tax forms, and other documents. Not only can AI “insert numbers into boxes,” it can search out the relevant numbers from a collection of documents and find the correct boxes. Humans then become quality control, rather than the laboring oar.
Augmenting humans with AI
Improved audits. Some big firms have “baked” AI into their audit processes, giving them the ability to extract data from contracts and other “unstructured” sources. These AI tools can review huge data sets and identify patterns humans might miss, resulting in better accuracy and higher compliance standards. And document review by AI is becoming more common even in smaller firms, spreading the benefits.
Adopting AI in accounting can also enhance results by tackling the thorny problem of manual journal entries. Manual entries are challenging because they “are always connected” to a risk of management override, according to the Journal of Accountancy. The result can be material misstatements in audit reports. But AI powered software can be trained to sift through thousands of manual entries – far beyond human capacity – to determine whether any are indicative of fraud.
Value-added services. Finally, adopting AI in accounting can free humans to do more complex, judgment-intensive tasks. Forbes says, “AI is not replacing accountants but enhancing their capabilities, allowing them to focus on more value-added services.” Those include more lucrative “client advisory services,” where AI adoption is three times higher than in the profession as a whole.
Large firms like KPMG, for example, use AI tools to offer clients real-time insights and predictive analytics. The shift can transform accounting into a forward-looking advisory service. And big players aren’t the only ones at the table. Financial forecasting driven by AI powered software is becoming increasingly available to smaller players, as well. The result has the potential to transform the profession.
The process of adopting AI in accounting is underway. To make the most of the opportunity, organizations should take a close look at the current situation and ask themselves whether AI can help and if so, what applications will produce the most value.
©Carmen Diep all rights reserved.
GoalTegic is a boutique business financial consulting, controllership, and accounting firm, offering a full range of financial support services for AI startups, small and medium sized companies, technology companies with combined 100 years of experience. Please contact us if you need our help.