Blog Accounting Understanding the Future of Automation and AI in Accounting
13 September, 2023

Understanding the Future of Automation and AI in Accounting

When CFOs were asked what one recommendation they had to improve company decision-making, the top response was “implement digital technologies, AI, and automation.”

And for good reason. Tools like automation and AI technology can create a positive ripple effect that extends to forecasting, planning, and analyzing your metrics.

Such perks encourage today’s finance professionals across all departments to develop a healthy appetite for technology-enabled decision-making, budgeting, and forecasting, which is especially applicable in accounting.

After all, avoiding technological changes in accounting is like insisting on navigating with an atlas and a compass when we all have dynamic maps in our pockets. Sure, getting where you want to go is possible, but you’re more likely to get lost and fall behind.

Let’s dive into how automation and AI in accounting are transforming financial planning and the role of finance and accounting within an organization.

How artificial intelligence is changing accounting

Embracing automation and AI in accounting means businesses can process larger amounts of data more efficiently and more accurately. Letting technology handle repetitive and time-consuming accounting tasks, such as ledger entries, will give your team more time to focus on high-impact financial management work that requires human expertise, like identifying opportunities to improve cash flow or profitability.

The journey from traditional accounting to intelligent budgeting

To understand the impact automation and AI technology will have on the accounting industry, it’s helpful to take a stroll down memory lane to see how we got here in the first place.

Traditional budgeting

Traditional budgeting was often done annually and followed a top-down approach where financial targets were set based on previous performance and assumptions about future changes.

This approach requires repetitive data entry and manual calculations to track each transition and balance accounts. Accountants mainly used spreadsheets for forecasting and budgeting by adding their own formulas.

In many ways, it was like trying to reach a destination while wearing a blindfold. You know where you want to go, but without real-time financial data, you don’t know where you are now.

Even if you peek out the bottom of the blindfold for clues, you have to rely heavily on estimates and assumptions that you hope will point you in the right direction. Many times you remove the blindfold and are miles away from your goal. Ultimately, the journey is a repetitive process filled with endless trial and error.

Not to mention, traditional accounting also generates rigid results like forecasts and budgets that aren’t easy to update once you receive new information.

The arrival of digital commerce tools

Digital commerce tools started the transformation of budgeting and forecasting by providing access to more data and automated calculations. It was akin to removing the blindfold and getting an accurate map of your location.

Software with automation features can record transactions, balance accounts, and generate forecasts without as much manual input — and you can access all of that data in real time.

Real-time data increases the accuracy of budgets and means businesses don’t have to rely heavily on estimates. It’s become crucial for businesses, with 44.7% of companies reporting that improving forecast accuracy is a top financial performance strategy for 2023 and beyond.

Besides better forecasts, automating calculations and ledger entries decreases the risk of manual error and makes budgeting less time-consuming.

That way, businesses can update projections as new data becomes available.

Intelligent budgeting

Intelligent budgeting represents the future of bookkeeping, budgeting, and forecasting. Features like automation, AI technology, and machine learning will change how businesses do accounting by enabling real-time financial planning.

Real-time financial planning is a dynamic approach to budgeting that uses current data from internal and external sources when creating forecasts and budgets.

If we use the map analogy, this is your dynamic Google maps with live traffic estimates and a voice telling you where to turn and what to expect.

Dynamic forecasts and budgeting give you the opportunity to respond to and monitor for changes in the environment and adjust to less predictable situations, like seasonal demand.

And, just like Google Maps, the future of accounting is here, with 48% of accounting professionals expecting their organizations to invest in AI and automation by 2024.

Benefits of AI in accounting

The use of AI in accounting to facilitate real-time financial planning offers several benefits to businesses, including the following:

  • Improved decision-making: Access to the more recent, accurate, and reliable data means you’re making business decisions based on more relevant, high-quality data.
  • The ability to create a proactive strategy: Having access to up-to-date information and predictive analytics tools means you can capitalize on opportunities faster or address problems before they start to affect your results. It also makes you more financially resilient, which can help you weather an economic downturn without losing profit.
  • Increased agility and adaptability: Decision-makers have the power to adapt their strategy based on real-time financial reporting.
  • More time for strategic tasks: Automating repetitive tasks can help accounting teams and business leaders free up more time to work on high-impact initiatives and decision-making.
  • Cost-effective scaling: Insights from automation and AI-powered financial analysis give businesses a more comprehensive view of their finances, which can help identify avenues for market expansion and opportunities to streamline your workflows and reduce costs at the same time.
  • Expanding the role of accounting: With time-consuming routine tasks covered by technology, accountants can serve as strategic advisors to business leaders.

Concerns related to the adoption of AI in accounting

Despite the business benefits, the transformation from traditional accounting to intelligent budgeting can raise some concerns. For instance:

  • Potential job displacement: With any AI-powered tool, there’s the concern that the software may make some job responsibilities or roles obsolete. However, the best results come from using AI and automation to support accounting capabilities instead of replacing human team members entirely.
  • Data security and privacy: Automation and AI may require access to large amounts of data, making security and privacy a priority for companies to protect their and their customers’ information.
  • Skills and learning: Accounting professionals will need to consider continual learning and upskilling to ensure they can capitalize on all of the opportunities and benefits presented by intelligent budgeting technology.

Potential concerns are no reason to stay behind the curve and avoid intelligent budgeting altogether.

Instead, business leaders should understand the concerns associated with intelligent budgeting and take steps to proactively ensure a responsible and effective transformation.

Here are a few things to keep in mind that can help you navigate the future of accounting more smoothly.

Give intelligent budgeting a supporting role

Just as Google Maps can’t drive you to your destination, AI and automation aren’t replacements for human team members.

Instead, intelligent budgeting can enhance the capabilities of your team, automate manual accounting processes, and enable informed decision-making.

Automate with human oversight

While accounting software with automation and AI can reduce human error, these tools aren’t a 100% guarantee against mistakes. As such, you still need a team to test the algorithms and methods to validate and verify the results.

Humans will still be responsible for explaining decisions made by AI tools, which means it’s crucial for them to have an understanding of how the software works.

For instance, you can use intelligent accounting software to generate financial statements, but have someone verify the accuracy of the information before it’s reported to stakeholders.

Prioritize ethics and human judgment

To integrate technology responsibly into your business, it’s important to remember that human judgment is a crucial element in the accounting profession.

Keep in mind that artificial intelligence was created by humans, after all, which means it’s possible for the software to introduce bias into financial processes. For example, bias can result in discrimination in lending decisions or fraudulent transaction alerts.

Final thoughts: Understanding the future of automation and AI in accounting

While holding on to tradition may be tempting, running your business with a map and a compass may not be the best way forward. Embracing tools like automation and AI have the power to get you where you want to go more efficiently.

By using technology to handle time-consuming, mundane tasks, accountants will be able to increase the accuracy of their insights and achieve more in less time. That gives them more time to focus on long-term growth and strategy.

Business leaders, too, will have quicker access to the most up-to-date information, which supports improved data-driven decision-making and the ability to respond proactively instead of react.

If you want to leverage the same technology benefits for inventory management, such as real-time product data, smart forecasting, and seamless accounting integrations, try Cin7 today.

TAGS

CATEGORIES

Accounting

SHARE THIS POST

Stop managing your inventory.
Start connecting it.

You might also like

What Your Marketing Department Can Learn From Your Inventory Management System

A chain reaction of improvements Since their Cin7 implementation, Brompton’s US business has gone from strength to strength. The first and most important ingredient in their transformation: their inventory management is now tip-top. Phil cites a laundry list of improvements, including the ability to ring-fence stock for certain channels, preventing mis-ships. “Another work around we […]

General retailSports & equipment
Top Five Key Lessons for Automating Your Inventory and Financials

Learn the top five ways product companies and ecommerce specialists can automate their inventory and financials with Catching Clouds: An Acuity Company.  The Top Five Key Lessons for Automating Your Inventory and Financials:  Done right, automation actually makes good people even better To get financial fundamentals right, give them to someone else You need an […]

FIFO vs. LIFO – Reporting compliant inventory valuations

In retail and wholesale sales, solid profits result from inventory that is closely managed. In this blog, we will discuss inventory valuation and accounting principles. We will cover why it is so important to value your inventory, different methods for inventory valuation, and how you should choose your inventory valuation method based on your business. […]