[Outsourcing & Cloud Accounting]_
How_ can_ artificial_ intelligence_ (AI)_ be_ used_ to_ facilitate_ your_ bookkeeping_ or_ accounting_ processes?
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When thinking about AI, there are probably many images that come to mind. Whether it’s a sophisticated android robot that mimics human behaviour or a conversation with virtual assistants like Apple’s Siri or Amazon’s Alexa, AI is used in almost every industry around the world and helps us perform various tasks that usually require an aspect of human intelligence.
What is Artificial Intelligence?
The definition of artificial intelligence is used to describe a broad range of actions from chatbots to object and image recognition. At the core of artificial intelligence is the idea of a machine or a computer system having the capability to learn and ‘think’ in the same manner as a rational human being. Some of these mimicked human behaviours include the ability to plan, learn, reason, problem-solve, interpret, perceive and manipulate.
AI can be described as ‘narrow’ or ‘general’ when interpreting the level of its sophistication. Narrow AI is related to the capabilities we see today where a system is taught to carry out specific tasks without being explicitly programmed on how to execute these functions. Examples include speech and language recognition, vision recognition – as seen in self-driving cars, recommendation engines or even drones carrying out visual infrastructure inspections. These are all examples of ‘machine learning’ where a computer is given a large amount of data and uses that information to synthesise certain outcomes or actions.
General AI, on the other hand, is the next level of AI capabilities which is not quite available yet. This is the type of AI that is adaptable, flexible and can learn a vast array of tasks, much like a human.
AI technology can be a valuable tool when making more informed business decisions across any industry. Within the accounting space, there are many ways AI is being utilized to help bookkeepers, business owners, and accountants make better decisions based on data analytics.
AI and Expense Management
You might have heard of the term ‘OCR’, or Optical Character Recognition being used at some point. This is not something new, but rather something that has been developing in the background for years. OCR technology makes it possible for machines to read and interpret handwritten, typed or printed text characters. More importantly, this technology can be used to help with managing your business expenses.
Capturing business expenses has never been easier. With apps like Receipt Bank and AutoEntry the painful task of sifting through a shoebox full of receipts at the end of the year is streamlined. Receipt Bank and AutoEntry have leveraged OCR technology to allow users to simply take a picture of their receipt and let the system do the rest. What is incredible is the apps’ ability to only extract relevant information like a supplier’s name, the transaction date, the amount, and any tax-related breakdowns. These apps can also read multicurrency receipts making it a truly global solution.
AI and Bookkeeping
After capturing your business expenses digitally, the next piece of the accounting puzzle is getting this recorded into your books. Your cloud accounting software package is at the heart of recording and interpreting your day-to-day accounting operations. This is not only a nice to have, but with the first phase of HMRC’s new Making Tax Digital (MTD) for VAT in full swing, it is a legal necessity for eligible businesses to maintain digital records and submit VAT returns using MTD compatible software. A cloud accounting software like Xero makes this process easy.
Like many other cloud accounting packages, Xero uses AI to automate tasks that were once manual and laborious. For example, Xero utilises AI to automatically categorise expenses and income transactions based on the past behaviour of the user. The system ‘learns’ from the actions of a user and maps this behaviour across to future transactions with similar characteristics.
Each accounting entry entered into your cloud accounting software enrichens the depository of accounting data and streamlines the ability for your accountant to provide you with advice readily. Accountants and business owners can then use this rich depository to make future predictions and forecasts.
AI and Forecasting
Cashflow reporting apps like Fluidly and Float use algorithms and AI to make more informed predictions on what is going to happen to cash flow trends in the future. By interpreting past trends, patterns and anomalies within the data, these apps can start to piece together a more robust outlook on future cashflows.
Where does your accountant fit into all of this?
As your accounting process becomes more streamlined, your accountant is now freed up and in a better position to become a strategic partner. There are still many nuances that AI cannot pick up that only a professionally qualified accountant can. Tax planning advice or taking into consideration non-quantifiable variables or recent changes in tax laws is not yet comprehendible within the realms of AI. Every time a variable changes, a machine will need to ‘re-think’ its approach.
Nonetheless, it is always worth taking an audit of your current bookkeeping system to see if AI-based technology can help you streamline certain processes. Accountants can then work more collaboratively with you to offer better strategic advice and greater visibility over the financial health of your company.
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