The digital revolution is in full swing, and no industry is immune — especially not the world of accounting. As firm leaders in audit, M&A, and CAS, the question is no longer if you should be implementing an AI strategy but how. A McKinsey report predicts that generative AI will increase productivity from 0.1 to 0.6 percent annually between now and 2040, depending on the speed of technology adoption.
This rate increases by 0.2 to 3.3 percentage point with generative AI is combined with other technologies, resulting in TRILLIONS of dollars in productivity gains being added to the global economy. With so much at stake, it's paramount for accountants to understand the profound changes on the horizon and to harness the potential that AI for accounting offers.
The Age of AI for Accounting
Traditionally, accounting has been a numbers game, relying heavily on manual data entry, calculations, and analysis. It’s also been slow to adopt new technology. However, with the advent of AI, the dynamics are shifting. Generative AI, in particular, has the potential to synthesize vast amounts of financial data, generate forecasts, and even create reports autonomously. This not only streamlines processes but also offers insights previously deemed unimaginable.
Justin Pulgrano, the CRO of Finagraph, and a former EY veteran of 8 years, emphasizes the importance of adapting to this new technological wave. "Accounting is on the brink of a significant transformation. Those who craft and execute a strong AI strategy will lead, while others will play catch-up. The choice is clear."
Additionally, generative AI is poised to change how businesses operate – impacting everything from sales and marketing to training and HR. Firms not only need to adapt their own business practices but also be prepared to advise their clients through the untested waters. For example, does a company that employs multiple uses of generative AI have a higher value in an acquisition than one who doesn’t? (is there a better example we could use here that sounds more accountant-y? like how do you apply ERC credits to an ai-generated report?) And how do you train your team to be able to answer these questions?
Real-World Applications: Generative AI in Action
To grasp the comprehensive power and potential of AI for accounting, let’s delve deeper into some real-world applications:
Automated Data Entry: Generative AI can parse invoices, receipts, and other financial documents, inputting data into the appropriate fields without human intervention. This means a reduction in errors, quicker data processing, and ultimately, a more efficient workflow.
Predictive Analysis: Beyond just analyzing historical data, AI can generate forecasts on cash flow, profit margins, and more. For auditors, this provides a more in-depth view while allowing for analysis of 100% of data instead of just sampling. M&A professionals, on the other hand, can leverage these predictions to make informed decisions about potential acquisitions.
Risk Assessment: AI's ability to rapidly analyze vast amounts of data translates to a heightened level of due diligence and fraud prevention. Recognizing financial risks or anomalies that might escape the human eye becomes simpler, ensuring that M&A transactions are based on solid, data-driven insights. Additionally, auditors will better be able to spot fraudulent issues that management or shareholders need to be alerted to.
Client Advisory Services: With generative AI, accounting professionals can provide clients with forward-looking insights, helping them navigate financial decisions. By modeling various scenarios, accountants can offer strategic advice tailored to each client's unique situation at a much larger scale than if doing such modeling manually.
Regulatory Compliance: AI can keep track of ever-evolving regulations and ensure that firms remain compliant. This automation reduces the chance of costly regulatory missteps and helps firms maintain their reputation in the industry.
Customer Relations: Generative AI can think of questions even before your client can. It can help you create custom chat, draft entire help article databases, and auto-respond to things like requests for reports in friendly tones that match your company voice guidelines. In short, AI can provide on-demand services for your clients without requiring your team to be on-demand 24/7.
Crafting Your AI Strategy: Taking the Leap
Embracing AI in your accounting firm is a journey, one that requires careful planning and execution. As you contemplate this transformative step, consider the following actionable strategies:
Education is Key: Building a foundational understanding of AI across all levels of your organization is paramount. Consider bringing in consultants to help offer insights into where AI would fit at your firm. Invest in specialized courses and training that will equip your team with the knowledge they need to harness AI's potential.
Pilot Programs: Begin with targeted pilot programs to understand AI's impact and identify areas of improvement. Implementing programs in manageable chunks will help increase adoption and allow enough attention to ensure success. Additionally, the hands-on experience will offer insights into how AI can best serve your specific firm's needs.
Collaboration: Establishing partnerships with AI-centric tech firms can be beneficial, especially with alliances that help vet technology. These collaborations provide access to cutting-edge technologies and insights, ensuring that your firm remains at the forefront of AI advancements in accounting. Knowing that other firms and alliances have incorporated the tools helps to minimize your risk while also providing you with a built-in network of peers where you can ask questions and share best practices.
Feedback Loop: As you implement AI, create a mechanism for continuous feedback from your team. Their on-the-ground experiences can provide invaluable insights and help refine your AI strategy over time. Associate-level team members on the front-line of many of the manual work steps are especially helpful to gather feedback from.
Ethical Considerations: As with any technology, AI brings its own set of ethical considerations, especially in the realm of data privacy. Ensure that your firm establishes robust ethical guidelines to navigate these challenges responsibly. Make sure any technology that you use meets certain privacy requirements, like Soc 2, and that both your legal and IT teams are involved in the process so that they can raise any red flags before any issues can arise.
Navigating the Challenges
While the benefits are plentiful, it's also essential to acknowledge the challenges. One of the primary concerns is potential job displacement due to automation.
However, Pulgrano offers a different perspective. "AI doesn't replace accountants. It augments their capabilities. By automating mundane tasks, professionals can focus on value-added services and strategic advisory roles," he said. Given the shortage in the accountant pipeline, perhaps the bigger risk is NOT incorporating AI to replace roles that there simply aren’t enough humans to fill.
Another challenge is the steep learning curve. Implementing an AI strategy requires change management, upskilling, and often, a shift in organizational culture. This is where leadership comes into play. By championing AI for accounting within the organization, leaders can motivate teams, ensuring a smoother transition. The steps shared above can help leaders with this process.
The Future Awaits
As the landscape of accounting undergoes this seismic shift, it's imperative for firms to stay ahead of the curve. The convergence of generative AI and accounting is not a fleeting trend but the future.
In the words of Justin Pulgrano, "We're at an inflection point. The firms that realize the value of integrating AI today will be the industry leaders of tomorrow. The question isn't if you'll adapt, but when."
So, as you contemplate the future direction of your firm, remember the crucial question: What's your AI strategy?