With AI promising the greatest transformation in many industries, including tax & accounting, we need to begin asking what the implications of this will be.
Artificial intelligence (AI) continues to promise the greatest level of transformation within many industries, including tax & accounting. “The global AI market was valued at $62.35 billion in 2020, and is expected to expand at a compound annual growth rate of 40.2% between 2021 to 2028,” according to Grand View Research.
Given this level of investment, especially among industries like financial services, we need to begin asking what the implications of this technology will be on the accounting profession. According to the 2020 World Economic Forum Outlook Report, the time spent on current work tasks by humans and machines will be roughly equal by 2025. Given that, what will workflow, operations, and our tax teams look like in four years?
Instead of being fearful of the impact and effect that this advanced technology is going to bring, the industry should be busily creating plans for how firms can prepare, instead of being disrupted. Here are three primary implications for AI implementation and the deeper effects they cause.
Clearly, leveraging AI in data analytics will create several benefits as the sheer amount of data available for analysis will increase. Decisions, projections, and forecasting will no longer be based on samples, but could potentially include the entire data set.
The 2020 ACFE Report to the Nations stated that certified fraud examiners estimate that organizations lose 5% of revenue to fraud each year. 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 $100,000. While the ACFE’s report notes the presence of anti-fraud systems has decreased the amount of loss sustained by organizations, imagine the economic impact of decreasing such fraud through early detection made possible with the inclusion of AI.
AI allows for great visibility of anomalies within an organization’s data, and thus increases the trust that stakeholders such as C-suite executives, board members, and investors can have in the reporting and insights developed from the analyzed data.
That means that accounting professionals equipped with more complete data analytics can provide greater insights and more accurate projections, enabling them to continue to fulfill their role as trusted business advisors.
AI’s ability to identify abnormalities in data also reduces the number of errors reported in financials. When leveraged in intelligent automation processes, the potential for human error greatly decreases, which reduces liability risk and increases the reliability of the deliverables.
Further, the more AI is used the more “learning” it experiences as additional data is fed into the system. That’s why it’s imperative for organizations to increase staff training around interacting with AI systems and avoiding biases in the AI solutions.
Key to this is establishing an AI governance plan. The complexity of the plan can scale to the size of the project. And accounting professionals should not abdicate the responsibility solely to their IT professionals. Instead, to ensure the objectives and outcomes are clear, there should be continual communication and monitoring of the plan by all parties. IT can drive and maintain the system, but accounting professionals should not drop their responsibility of communicating the needs and results expected from the software.
One of the biggest challenges in the accounting profession is creating more capacity among their teams. The growing workload and moving deadlines is weighing on the profession heavily. The question most asked by accounting leaders is simply “Where do I find qualified staff?” It is time to ask new questions, look at new alternatives, and develop or leverage new solutions.
As organizations deploy more intelligent automation they can then decrease repetitive, often non-value added, activities from their teams’ to-do list. This itself can reduce the overtime hours team members may be working, and allow them to increase their time and attention on their highest and best use. Not only does this increase capacity, but it increases the value tax teams can provide to their colleagues and clients.
<b>Taking the steps toward AI</b>
To begin using AI does not require having a highly skilled technology team; in fact, there are many accounting applications on the market today that give practitioners access to AI without having to develop it themselves. Indeed, it now appears that all major technology companies are investing in AI.
And while we’ve offered just a few of the implications that result from the advancement of artificial intelligence, there are no signs that AI development will decrease in this area. That means that tax & accounting leaders need to begin brainstorming about what the impacts of AI will be on their business, and develop an action plan to address that impact. They should start with choosing one of the implications listed above that would have the greatest impact for their team, business, or industry. Then, they should:
- create two action steps;
- begin further research;
- examine the software their organization uses now to see if AI is being properly leveraged;
- if it is not, reach out to the vendor to find out where AI developments are on the software’s development roadmap.
We have not yet identified all the potential that AI holds for the tax & accounting profession. That means, firm leaders have time to explore and test, doing it at their own pace — as long as they begin now.