How Artificial Intelligence can change the world of Accounting and Finance
Artificial intelligence (AI) is a computer science term that describes the ability of computers to replicate the human ability to learn, evaluate, solve problems and make decisions. AI is used in accounting and finance for various purposes such as detecting fraud, automating routine tasks, and making informed decisions. AI also helps accounting and finance industries to save time, money, and gain a competitive advantage1.
In this article, I will highlight some of the ways that AI
can change the world of accounting and finance, and what skills are needed to
embrace this technology.
Fraud detection
Fraud is a major problem for businesses and organizations,
costing them billions of dollars every year. According to the 2020 ACFE Report to the Nations, certified
fraud examiners estimate that organizations lose 5% of revenue to fraud each
year2. Financial statement fraud schemes
are the least common, but most costly, carrying a median loss of $954,000. Asset misappropriations is the most common fraud that
occurs, with a median loss of $100,0002.
AI can help detect and prevent fraud by analyzing large
amounts of data and identifying anomalies, patterns, and outliers that may
indicate fraudulent activity. AI can also learn from previous cases and improve
its accuracy over time. For example, AI can flag transactions that are unusual
for a specific customer, vendor, or employee, or that deviate from the normal
patterns of behavior. AI can also alert auditors and investigators to potential
fraud risks and provide evidence for further analysis2.
By using AI for fraud detection, accounting and finance
professionals can reduce the amount of loss sustained by organizations,
increase the trust of stakeholders, and focus on more value-added tasks.
Automation
Automation is another key benefit of AI for accounting and
finance. Automation refers to the use of technology to perform tasks that are
repetitive, manual, or time-consuming. Automation can improve efficiency,
accuracy, and consistency of accounting and finance processes.
Some examples of tasks that can be automated by AI include:
- Data entry and
reconciliation: AI can extract data from various sources such as invoices,
receipts, bank statements, and tax forms, and enter it into the accounting
system. AI can also reconcile data across different accounts and systems
and flag any discrepancies or errors.
- Reporting and
analysis: AI can generate reports and dashboards based on predefined
criteria and parameters. AI can also provide insights and recommendations
based on data analysis. For example, AI can forecast cash flow, revenue,
expenses, profitability, and other key performance indicators.
- Compliance and
auditing: AI can help ensure compliance with accounting standards,
regulations, and policies by checking data quality, accuracy,
completeness, and validity. AI can also perform audits by sampling data,
testing controls, verifying transactions, and generating audit reports.
By using AI for automation, accounting and finance
professionals can save time and resources, reduce errors and risks, and enhance
the quality and reliability of their work.
Decision making
Decision making is another important aspect of accounting
and finance that can be enhanced by AI. Decision making refers to the process
of choosing among alternatives based on information, criteria, and goals.
Decision making can affect the performance and outcomes of accounting and
finance functions.
Some examples of decisions that can be supported by AI
include:
- Credit
decisions: AI can help assess the creditworthiness of borrowers by
analyzing their financial history, behavior, income, assets, liabilities,
and other factors. AI can also provide credit scores, ratings, limits,
terms, and conditions based on predefined models and rules.
- Investment
decisions: AI can help evaluate investment opportunities by analyzing
market trends, risks, returns, and other factors. AI can also provide
portfolio optimization, asset allocation, and trading strategies based on
predefined objectives and constraints.
- Risk management
decisions: AI can help identify, measure, and mitigate risks by analyzing
internal and external data sources. AI can also provide risk scores,
ratings, and reports based on predefined models and rules.
By using AI for decision making, accounting and finance
professionals can improve their judgment, speed, and confidence in choosing the
best course of action for their organizations.
To leverage the benefits of AI in accounting and finance,
professionals need to develop new skills and competencies that complement the
technology. Some of the skills that are needed to embrace AI include:
- Data literacy:
Data literacy is the ability to understand, interpret, and communicate
data effectively. Data literacy is essential for accounting and finance
professionals to use AI tools and systems, to analyze data outputs, and to
make data-driven decisions.
- Critical
thinking: Critical thinking is the ability to think logically,
analytically, and creatively to solve problems and make decisions.
Critical thinking is important for accounting and finance professionals to
evaluate AI inputs and outputs, to question assumptions and biases, and to
generate alternative solutions and scenarios.
- Emotional
intelligence: Emotional intelligence is the ability to recognize,
understand, and manage one’s own and others’ emotions. Emotional
intelligence is vital for accounting and finance professionals to collaborate
with AI tools and systems, to interact with clients and stakeholders, and
to cope with change and uncertainty.
By developing these skills, accounting and finance
professionals can enhance their value proposition, career prospects, and
professional satisfaction.
Conclusion
AI is transforming the world of accounting and finance by
enabling fraud detection, automation, and decision making. AI also requires
accounting and finance professionals to develop new skills such as data
literacy, critical thinking, and emotional intelligence. By embracing AI,
accounting and finance professionals can improve their performance, efficiency,
and effectiveness in their roles.
References:
1: Artificial Intelligence in
Accounting - University of North Dakota Online. https://onlinedegrees.und.edu/blog/artificial-intelligence-in-accounting/
2: Embracing the role of artificial
intelligence in accounting and finance: contemplating the changing skillset
expectations | Emerald Insight.
https://www.emerald.com/insight/content/doi/10.1108/DLO-01-2021-0016/full/html
3: Business implications of AI within
tax & accounting | Reuters.
https://www.reuters.com/legal/transactional/business-implications-ai-within-tax-accounting-2021-06-30/
4: How AI Will Impact The Accounting
And Finance Industry? https://www.hostbooks.com/us/blog/how-ai-will-impact-the-accounting-and-finance-industry/
5: Artificial intelligence in
Accounting & Finance - LinkedIn.
https://www.linkedin.com/pulse/artificial-intelligence-accounting-finance-ankit-jain
6: 29 Examples of AI in Finance 2023 |
Built In.
https://builtin.com/artificial-intelligence/ai-finance-banking-applications-companies
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