Businesses are Turning to Accounting Tools with AI & Machine Learning Capabilities

Technology is taking center place across the globe, and its spectrum is widening up with advancements in artificial intelligence. AI has been successful in driving attention in businesses like no other technology because of its cognitive skills and ability to think like humans. AI has great potential in the accounting sector, and because of this many businesses are investing proactively in accounting software and tools backed with AI capabilities.  

Automating repetitive tasks, minimizing human errors, and adopting a data-driven approach are factors that businesses are turning to accounting tools with AI and Machine learning Capabilities.  

As per one of the reports, AI in the accounting market is expected to grow from $666 million in 2019 to $4791 million by 2024. 

This article will discuss the benefits, challenges and the future of accounting tools with AI and machine learning capabilities.

Challenges Faced by Accountants In the Rapidly Evolving Business World 

• Globalization of business: Due to globalization, organizations are operating their business cross-borders, but it has created new challenges for accountants. They have to follow accounting practices as per the local regulatory compliances and government norms. Companies find it difficult to monitor regulatory compliance for each country separately. Besides that, consolidating all the data from various business outlets and generating financial reports is tedious.
  
  
• Fraudulent:  Despite all the efforts, accounting frauds occur frequently.  Various types of fraud encountered in accounting are under-recording expense, over-recording sales revenue, embezzlement, fake supplier, account payable fraud, etc. 
  
  
• Fragmented accounting process: Many organizations struggle with their accounting process because they are inconsistent in their systematic online accounting process. They receive invoices and receipts in all formats on a daily basis, but they don’t have a proper system to document these receipts or invoices.  Besides that, some organizations prefer entering financial records at the end of the week or month, which means they are at high risk of misplacing or losing the documents.
  
  
• Not adapting to change:  There is continuous use of technology by organizations to streamline the accounting process and keep pace with the latest trends.  However, many organizations still follow the outdated process for accounting that is prone to errors. 
   
• Ever changing tax laws:   Ever-changing tax laws are a huge problem for accountants.  Every time when a new tax law is implemented, the accountants have to reform their accounting policies.  It is a complicated job and requires the accountant to constantly keep an eye on tax regulations.

These challenges can be easily addressed today with digital transformation. 

Why Are Businesses Turning to Accounting Tools with AI and Machine Learning Capabilities? 

Artificial intelligence and machine learning capabilities are applied across all segments today. Their application is proving to be valuable and beneficial for several businesses. 

• Workflow automation: Business organizations cannot achieve transparency in their accounting process if they don’t follow a standard workflow. It puts them at high risk of revenue loss and minimizes the scope of growth. To avoid this, business enterprises are using AI-based accounting software to implement workflow automation. The software uses rule-based logic to automate various accounting processes, from processing invoices to generating financial statements and meeting regulatory compliances. It helps business owners to gain more efficiency and eliminate redundancy from the process. It keeps everything organized so team members can quickly understand the process and settle it down. There are no issues of missing out on any of the accounting attributes, and the risk of fraud is also reduced. 
  
  
• Auditing: Auditing the accounting process is a gruesome process, and it has become vital when organizations are involved in complex business processes.  AI tools ensure that the auditing process is completed with high accuracy, in time, and thoroughly.  AI's ability to analyze various financial documents and identify fraud or illicit transactions is pretty impressive.  Unlike conventional auditing processes that rely on sample testing, AI-based audits conduct thorough testing.  It makes it more effective and improves the overall auditing process.  AI works with data on a granular level and provides insights that are impossible to get through traditional methods. 
  
  
• AI to improve regulatory compliances:  It takes ample time and effort for accountants to parse various regulatory documents and maintain them. They have to frequently review policies, audit trails, and workflow. Any mistake in the process or failing to meet regulatory compliance can prove costly to companies. Further, if there is any update or change in the regulations, it demands additional resources and time to streamline the workflow. Besides all the hard work, the room for errors and regulatory gaps cannot be ignored. These issues can be overcome through AI and machine learning. These technologies can process large volumes of regulatory data and track them for new updates. It involves minimal human intervention and does it with high accuracy. Companies can customize AI’s algorithm to the company’s specific needs and implement changes so that they can respond better to regulatory compliances.
  
  
• Reconciliation and reporting:  Account reconciliation is an essential step in accounting; it enables business owners to identify gaps in the accounting process and potential risks such as late payments, discrepancies in bookkeeping, and fraud in the system. Enterprises often struggle with the reconciliation process with large financial data and the need for continuously matching them with the respective account. These issues can be solved by AI-based accounting software. AI-powered tools are efficient in matching accounts continuously and fast-pacing the reconciling process. Besides that, it also populates reports that offer vital information about the organization's financial position and the errors committed during the process.
  
  
• Automates AP (account payable) and AR (account receivable) processes: One of the critical steps in the AP (Account Payable) process involves matching vendor invoices against purchase orders.  It is a labor-intensive job, and recording a wrong entry could disrupt the accounting process, which is more likely to happen when done manually. With AI-based accounting tools, this can be sorted; the software automatically scans and matches the documents as per the algorithm.  There is no room for manual error because everything is fixed.  AI can help automate various AP processes such as matching invoices, auto-payment for recurring invoices, payment approval, invoice filing and retrieval, etc. Likewise, it also helps in organizing AR (account receivables) processes. Accounting tools with AI can help manage AR (Account Receivables) efficiently. Not receiving timely payment or forgetting to take follow-up on payment could make the company debt-ridden. To keep cash flowing, establishing a systematic AR process is essential. It is easy to manage account receivable with fewer customers, but when businesses have multiple customers, the process becomes complicated. Accounting tools with AI , simplify the AR process and automate various AR activities like setting up payment reminders, accepting online payments, exception handling, capturing remittance data from various sources, etc.
  
  
• Tax filing: AI’s ability to automatically identify the patterns in data allows them to categorize the transactions and calculate tax automatically. Compared to manual transactions that could take hours for an accountant to categorize the transaction, AI takes only a few seconds. 
  
  
• Forecast revenue:  Most companies use financial statements to forecast revenue, which includes income statements, balance sheets, and cash flow statements. However, with the manual method, it is not possible to forecast revenue accurately. Therefore, organizations use AI-based accounting software to forecast revenue. It identifies patterns between multiple data sets, and creates predictive models. These predictive models collect data from various financial statements and forecast the company’s revenue and growth prospects. Over time the predictive model enhances its analyzing abilities and predicts revenue accurately. 

Conclusion

Business enterprises rely on financial data and accounting systems to make important business decisions. A well-maintained accounting system attracts investors, depicts the company’s financial position, and prevents misuse of the company’s assets. Accounting tools interlaced with AI and machine learning provide unprecedented opportunities for businesses to automate the accounting process and increase productivity. It assists accountants in various decision-making tasks and enhances their overall efficiency.