Artificial Accounting – How Technology Can Boost Your Bottom Line

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By Joanne Graham in Investing on Apr 18, 2018

Say Ta-Ta to Time Honoured Traditions

From men in stuffy suits to penny-pinching portrayals of misers, accountancy has always suffered a chronic lack of glamour. Despite sky-high professional entry requirements, critical business processes and big salaries, it’s always been the boring big brother to the pace, luxury and sheer sexiness of banking. After all, while it may be thorough on process, it’s been low on innovation; the industry’s greatest invention – double-entry bookkeeping – is a whopping 500 years old. But as artificial intelligence sweeps its way through the financial sectors, accountancy is also undergoing its own evolution, as the need to blend big data, third party automation and artificial intelligence brushes the dust off this traditionally grey industry.

Seeds of Change
The shift from staid to savvy began in 2016, when Accountex made a bold prediction for the following year; 90% of small and medium-sized businesses, it said, would be using cloud accounting software within 12 months. While music and photos are fine in the cyber-sky, the idea of businesses cutting their ties to the tangible processes of book-keeping and bean-counting seemed an unfamiliar prospect, but almost 18 months later, their prescience is paying off, with tech-savvy accounting and associated app-development becoming the new norm.

App-Happy
Clearly seen with the growth of online accountancy firms such as Crunch, Boox and Magic Accounts, all of whom have swapped the literal costs of a high-street presence for the immediacy of an online office, it pays to be brave with accounting these days. Taking their approach from the phenomenally successful subscription box business model, which can be seen selling everything from dog food to artisan gin, these companies offer monthly plans designed to suit the accounting needs of anyone from a freelancer to a full business start-up. But while a one-stop shop is always an attractive offering, it’s the tech-happy apps that match seamlessly with their clients’ online lives that really make the difference. By harnessing the latest advances in fintech, invoicing on-the-go appeals to the quick-fire freelancer’s life, while access to online accounting software means that expenses and tax can be seen at the swipe of a smartphone. But more important than either of those is securing client loyalty, as Joel Oliver, CEO of MyFirmsApp explains –

‘With adults spending the majority of their time on their smartphones, accountants have it in their grasp to boost customer loyalty by delivering a tailored app experience that reaches out and makes the client feel valued.’[1]

Digital Tax

When government departments start to adopt new technology, you know it’s here to stay and from April 2019, all VAT-registered businesses with a turnover above the £85,000 threshold will have to keep and submit digital records in order to comply with HMRC’s ‘Making Tax Digital,’ plan. For those businesses who choose not to use commercial software, free packages – including updates – are set to be made available by HMRC, but it’s always good to get a headstart so an investment in both the technology and training before the due date will ensure you hit the ground running.

In-House AI
While the offshoots of entrepreneurism widen choice for the consumer, AI’s application to in-house accounting processes is of clear benefit in many other ways, too. Its ability to automate tasks which would otherwise fall foul of the faulty human attention span make it a prime contender to take on jobs that will invariably save time – and therefore money. The dry details of spreadsheets and data entry can be comfortably placed on AI’s broad shoulders, while users of Sage’s chatbot, ‘Pegg,’ need only speak into their smartphones for the bot to respond and log their data accordingly; it can even derive those all-important KPIs and provide analytical feedback. The nature of AI also lends itself to solving problems caused by the differences between how individuals work, such as  variations in account codes. Using machine learning, AI can apply itself to creating rigorous processes, eliminating any ambiguity as it goes, thus resulting in unparalleled accuracy.

Meanwhile, the potential for auditors to move from chance checks to auditing 100% of companies’ financial transactions moves ever nearer, meaning there’ll be no place for mistakes – or malfeasance – to hide.

Adopt, Excite, Innovate
The industry regulator, the Financial Reporting Council, is also keeping a keen eye on the potential of AI through its sub-committee, the Financial Reporting Lab, which drives experimentation and exploration in the tech sector. In 2016, they launched their Digital Future project to investigate the impact of technology on reporting communication, and just last week, they released a request calling for finance professionals, tech experts, and those with an interest in AI to join the next phase of their experiments regarding corporate reporting.

When it comes to long-term change and sustainability, the Big Four accounting companies are leading the charge, embracing AI in new and novel ways, from Ernst Young’s use of drone imagery to replace junior staff on ladders taking stock inventories, to Deloitte’s use of ‘Natural Language Processing,’ to review high volumes of contracts, which slashes the time and money taken to previously execute.

Finally, tech giant Accenture are pioneering RPA, or Robotic Process Automation, which brings the possibility of a virtual workforce into view, enabling back office tasks to be fully automated across a series of financial disciplines including accounting. Initial projections suggest an 80% cost saving and up to a 90% saving on time, [2] which will give businesses enhanced scope to develop and broaden in ways inconceivable until now.

Future Finance

While the future is fiercely bright for AI, with Bank of America Merill Lynch predicting it’s set to swell to £108bn by 2023[3], it’s easy to be frightened by the prospect of such a technology. But there are renewed and proven claims that AI is set to be an ally, not an apocalypse. For while its exacting approach will reap rich rewards, the enquiring and independent human mind will always have its place, as Andrew Gambier, head of audit and assurance at the Association of Chartered Certified Accountants, explains when he says that people will pick up on issues “where things have been missed out or not reported properly, machines will only look at what they are faced with.’  He goes on  – “This may also create opportunities for the system to be gamed,” [4] which highlights the vulnerabilities of automating so much to so few; as much as AI’s evolution will change the face of much that’s familiar, it will also create its own issues which will be up to us to solve.

Opportunities in data science and engineering will become increasingly popular, drawing together different mathematical and scientific disciplines to take accounting to a new level, while the soft-skills needed to build relationships, identify opportunities and advise on difficult decisions will always be necessary.

AI can’t, after all empathise with any real meaning, and meaning is what people will always seek. While the analytical and data-driven nature of accounting lends itself perfectly to the automation of AI, perceptive and intuitive business consultancy, which requires a very human understanding of your client, will come increasingly to the fore.

 

[1] http://www.accountex.co.uk/client-loyalty/

[2] https://www.accenture.com/us-en/insight-financial-services-robotic-process-automation

[3] https://www.techemergence.com/valuing-the-artificial-intelligence-market-graphs-and-predictions/

[4] https://www.ft.com/content/0898ce46-8d6a-11e7-a352-e46f43c5825d

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