Artificial Intelligence (AI) is the next big thing in the tech domain. Since the launch of ChatGPT and Bard (generative AI), tech enthusiasts have been curious to explore the advantages this new technology can pose. Accounting and financial departments are already on the lookout for digital transformation to stay ahead of the competition.
In the dynamic landscape of accounting, integrating artificial intelligence (AI) has become a transformative force, reshaping how firms manage data, make decisions, and engage with clients.
In this blog, we explore the diverse ways accounting firms harness the power of AI to enhance efficiency, accuracy, and overall business operations.
The Rise of AI in Accounting
The Evolution of Technology
Historically, accounting has evolved alongside technological advancements. Cloud technology integration has already boosted the accounting industry in flexibility, availability, and scalability. With the rise of AI, accounting firms are embracing automation to streamline tedious and time-consuming tasks, including Auditing, payroll, tax, and banking.
- Enhancing productivity and output quality, AI concurrently enhances transparency and auditability.
- AI unlocks diverse opportunities, freeing finance teams from traditional, time-consuming tasks and allowing them to explore additional avenues for business growth.
- AI contributes to accurate financial statement forecasting, utilizing machine learning (ML) for finance professionals to predict future trends by analyzing historical data and records.
The Challenge and The Growing Trend
For most accounting firms, adopting AI presents challenges such as being relatively new, lacking sufficient security measures, and providing answers that may be incomplete, misleading, or inaccurate.
The chief concerns revolve around data security and privacy, with about two-thirds of survey respondents expressing apprehension about the risks of utilizing ChatGPT and generative AI for corporate or client work. Notably, 73% of those surveyed currently have no intention of incorporating this technology into their operations.
Still, the trend of adopting AI in accounting is rising, with firms recognizing the potential to revolutionize traditional processes. AI is making waves in the industry, from data entry to complex financial analysis.
As much as 11% of the firms already started using AI technology within their organization. However, it is still under development, hence the slow adoption rate. Let’s look at some use cases where accounting firms can use AI.
Streamlining Data Entry and Processing
- Automation for Efficiency: One of the primary ways accounting firms leverage AI is by automating routine tasks. Mundane data entry processes are being replaced by intelligent systems, reducing manual efforts and minimizing errors.
- Enhancing Accuracy with Machine Learning: Machine learning algorithms are pivotal in improving accuracy in data processing and financial reporting. These algorithms learn from historical data, adapting and evolving to deliver precise results.
Fraud Detection and Security
- Strengthening Security Measures: AI tools are instrumental in detecting and preventing fraudulent activities. By analyzing patterns and anomalies, these tools enhance financial data security, safeguarding against potential threats.
Client Relationship Management
- Personalized Client Interactions: AI contributes to improved client communication by offering personalized services. Chatbots, virtual assistants, and automated communication tools enhance client experiences, fostering stronger relationships.
- Customized Financial Strategies: AI assists in tailoring financial strategies based on client needs and preferences. By analyzing client data, firms can provide more customized and relevant financial advice, enhancing overall client satisfaction.
How Do the Big 4 Use Artificial Intelligence?
The Big 4 accounting firms, KPMG, PwC, EY, and Deloitte are leading AI adoption for upcoming generations. These organizations have heavily invested in technology and are leveraging the same to offer perfect solutions to their clients with more advanced and insightful services.
A great example of Deloitte’s AI-facilitated process is the document-review platform, which became operational in 2014. According to Deloitte, this platform automates reviewing and extracting information from contracts, significantly minimizing labor-intensive human efforts.
The firm asserts that this technology has played a pivotal role in reducing the time spent on scrutinizing legal contract documents, invoices, financial statements, and board meeting minutes by up to 50 percent or more.
Deloitte Catalyst: Another initiative started by Deloitte is a community of startups working together to understand and decode AI technology to integrate the applications into businesses for their potential Clients. The sole purpose of this community is to help enterprises, start-ups, and governments grow with the help of emerging technology, including AI.
EY is another top firm that has started the implementation of Artificial Intelligence in the analysis of lease contracts. The company has stated that implementing the technology has allowed them to gain more insightful knowledge in leasing contracts, specifically in commencement date, amount to be paid, and renewal or termination options.
As per a writeup in Accounting Today, EY is actively automating audit procedures. They’ve claimed that this initiative aims to decrease the administrative time allocated to reviewing audit documents, enabling employees to devote more time to engaging in the evaluative and analytical aspects of the process. These applications seem to be undergoing a pilot phase, as one would anticipate.
PwC is the second-largest accounting firm when it comes to revenue. PwC has already started leveraging the power of AI in fraud and error detection by developing a platform, GL.ai, in collaboration with H2O.ai, an AI-enabled system-developing company based in Silicon Valley.
The sole objective of this tool is to learn and grow with every audit process. The company has claimed that they have invested significantly in Natural Language Processing (NLP) for the same. GL.ai has undergone training using audit data from Canada, Germany, Sweden, and the UK.
KPMG has developed its suite of AI tools known as KPMG Ignite. KPMG Ignite encompasses several notable components, including AI tools, AI integrators designed to ensure compatibility with existing IT infrastructure, advisory support for client firms, testing procedures, prototype development, and exploration of emerging AI applications.
Additionally, KPMG is also using AI to analyze and extract information from leasing or investment contracts.
Despite our research it is hard to determine the actual technology all these big four organizations are using. Like many AI applications it appears that the technologies are still in the developmental phase, within Big Four firms.
In conclusion, the use of AI in accounting firms is multifaceted. From automating routine tasks to enhancing decision-making processes and strengthening security measures, AI is reshaping the industry.
As technology advances, accounting firms that embrace AI will likely find themselves at the forefront of innovation, providing better services and staying competitive in a rapidly evolving landscape. What do you think of the recent development of AI and how would you prefer to use it? Let us know your suggestions in the comment section.