Artificial intelligence (AI) has entered the mainstream, shaping how we live and work. The changes we’re witnessing today could be the tip of the iceberg, hinting at the extensive potential still to be unlocked.
According to estimates by PwC, AI is projected to contribute an astounding $15.7 trillion to the global economy by 2030 – a figure that eclipses the current combined economic outputs of China and India. Of this considerable sum, $6.6 trillion is expected to arise from gains in productivity, as companies integrate AI technologies to augment their workforce and automate certain tasks and roles.
The impact of artificial intelligence in accounting is becoming too significant for UK accounting firms to ignore. No matter where they stand on the digital maturity curve, AI offers firms a chance to boost efficiency, embrace data-driven methods and prepare for future challenges.
Accountancy Age predicts that the growing use of artificial intelligence in accounting could augment the UK’s GDP by £2 billion. Firms that integrate AI are expected to see their revenue growth triple compared to those that don’t. Encouragingly, 61% of UK accountants believe that AI offers more opportunities than risks.
Whether you are ready to take your digital transformation to the next level or you are still weighing your options, understanding current capabilities, anticipating future developments and considering ethical implications can help keep your firm current and competitive.
What is AI?
Artificial intelligence (AI) refers to the ability of a computer or machine to simulate human-like intelligence, allowing it to process information, learn and execute tasks typically requiring human intellect. This includes capabilities such as understanding language, recognising patterns and even playing games.
It’s crucial to differentiate AI from robots, as they are often confused. AI acts as the ‘brain’ that can learn and make independent decisions, while robots are designed to perform specific, repetitive tasks based on predefined rules and do not inherently learn or adapt unless integrated with AI.
How AI is transforming accounting practices today
The role of artificial intelligence in accounting is varied and offers benefits that can be felt across the firm. AI can:
- Improve accuracy and standardisation: By automating routine accounting tasks like data entry, calculations, reconciliations and report generation, AI reduces the risk of human error, ensuring higher accuracy and consistency.
- Lighten the load, even during peak periods: AI-driven solutions are typically highly scalable, allowing for quick adaptation to new business requirements and regulatory changes. Even during peak times, this technology can manage the increased workload without additional strain on the team, maintaining smooth and efficient operations.
- Improve data flows: Many accounting firms use a variety of bookkeeping and business systems. AI can be integrated to automatically retrieve data from these disparate systems, enabling more accurate and timely accounts management, financial reporting, tax return preparation and analysis.
A mega-trend: Generative AI
When exploring the impact of artificial intelligence in accounting, it is difficult to ignore Generative AI (GenAI). Among the most notable examples is OpenAI’s ChatGPT chatbot, which has amassed over 100 million users worldwide since it went public in November 2022.
While this technology may appear to have emerged suddenly, it is actually the result of decades of dedicated AI research. Today, GenAI is enhancing productivity in accounting and many other professions by automating content creation, extracting insights from data and streamlining access to information. According to McKinsey Digital, GenAI has the potential to automate up to 70% of tasks that currently consume significant employee time.
One company making headlines in the UK with its GenAI strategy is Klarna. This Swedish fintech firm with offices in the UK unveiled plans to cut thousands of jobs over the coming years by capitalising on efficiencies gained from its investment in AI. The company aims to reduce its number of employees through natural attrition, meaning it will not hire replacements for staff who depart. Despite a potential rise in workload for those staff who remain, Klarna anticipates that AI will manage the extra duties, which could potentially lead to higher salaries. These plans were disclosed alongside the company’s interim results, which indicated a 27% revenue increase that Klarna attributed to AI-enabled scale efficiencies.
This news has been met with mixed reactions. It’s important to note that many organisations take a different approach and implement AI to support rather than replace their teams.
How to use AI in accounting
To better envisage the role of artificial intelligence in accounting, here are a few use cases. Accountancy firms can currently harness AI to:
- Accelerate the preparation of client accounts
- Conduct manager and partner reviews more efficiently
- Continuously monitor client files to detect unusual balances and missing transactions
- Leverage historical data to predict trends and assist in planning
- Enable seamless internal and external communication
The ethical impact of artificial intelligence in management accounting
As they roll out AI-driven technologies, accounting firms have a responsibility to ensure these tools benefit the profession as a whole. The ethical impact of artificial intelligence in management accounting is a multifaceted issue. Here are some key points to consider:
- Transparency:
AI systems must be transparent in how they process data and make decisions, especially when these affect financial outcomes. There is a need for AI systems to be explainable, so that accountants and auditors can understand and verify the processes by which AI-derived conclusions are reached. - Data privacy:
With AI relying heavily on data, there is a heightened risk related to data privacy breaches and misuse of sensitive information. By ensuring AI systems comply with data protection regulations, firms can protect client confidentiality and prevent financial fraud. - The impact on human jobs:
As AI steps in to automate more complex processes, this continues to raise concerns about job displacement within the accounting industry. Ethical adoption of artificial intelligence in accounting involves considering strategies for retraining or redeploying staff affected by automation. When implemented thoughtfully, AI can create new opportunities. Over the next five years, Demos reports that AI could generate nearly 20,000 new jobs in the sector, with firms using AI likely to hire ten times more workers than those that don’t.
The evolving role of artificial intelligence in accounting
What’s on the horizon for accounting firms?
By 2025-2026:
- AI’s ability to accelerate reporting processes could help firms manage upcoming regulatory developments in the UK’s digital financial reporting landscape. The Financial Reporting Council (FRC) and other UK regulators have begun consulting on significant changes in how financial information is submitted. This includes potential expansions into sustainability reporting, interim financial reports and prospectus data.
By 2027:
- 41% of financial services organisations are expected to achieve long-term AI adoption maturity, which means they will have used AI for more than seven years.
- Over 50% of GenAI models are projected to be tailored to specific industries or business functions, a leap from just 1% in 2023. In accounting, this could lead to more specialised AI tools for tasks like financial statements, management reporting and tax computations.
One to watch:
- Quantum computing, built on principles of quantum mechanics, uses quantum bits (qubits) to perform calculations at speeds unattainable by today’s computers. In accounting, AI-enabled quantum computing could dramatically reduce the time it takes to analyse data and manage tax processes. Although no commercially viable quantum machine exists yet, firms that stay informed and gain the relevant skills could achieve a first-mover advantage when this technology hits the market.
“Quantum is poised to dramatically reduce the time and cost required to carry out tax audits. When used alongside AI, advanced analytics and multidimensional ledger analysis, quantum presents an opportunity for near real-time processing of taxpayer transaction audits.” – Channing P. Flynn, EY Global International Tax and Transaction Services Partner
Conclusion
AI technology offers immense potential to transform the way accountancy firms work, communicate, unlock insights and serve clients. The truth is, we are only just beginning to understand its power and impact. By prioritising employee development and being mindful of the ethical impact of artificial intelligence in management accounting and other areas of the profession, firms can harness the power of AI responsibly and effectively, ensuring alignment with their core values.
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