Rohit Gupta is the CEO and Co-Founder auditoria.aiA leader in AI-powered automation solutions for corporate finance teams.
In a world where technology is advancing at lightning speed, finance departments are struggling to keep up. With the availability of artificial intelligence (AI), machine learning, and other time and resource-saving technologies, the finance industry, and accounting in particular, is lagging.
future of finance reporting
Month-end closing isn’t the only inefficiency in accrual-based accounting, the more widely used form of accounting for many businesses. It is an ideal candidate for a facelift that is required to offload many repetitive tasks and processes. With many different stakeholders to report to and a significant amount of data to be handled manually, the potential for errors and omissions is high. Accounting will benefit greatly from enterprise technology that collects and centralizes information from spreadsheets and data points. This eliminates the dissemination of information and minimizes the margin of error. Integrating artificial intelligence technology eliminates the labor required for previously repetitive tasks such as emailing invoices, sending reminders and frequent follow-up with stakeholders.
To remain relevant and maintain a competitive advantage, the future of financial reporting will require advanced technology to be deployed. Accrual based accounting, an essential aspect in finance back office, requires up-gradation with technology to make the process faster and more efficient.
Technological advances lend themselves well to automating accounting processes. The advent of AI and machine learning allows routine tasks to be streamlined and optimized. Various software technologies have evolved for the next generation, including cognitive robotic process automation (RPA), AI and machine learning, developed specifically for the business and finance worlds.
RPA. The two main advantages of RPA are that it can be programmed to handle routine tasks through automation, and it can be taught more complex tasks without the risk of human error. RPA can teach software to be more accurate in predicting outcomes, such as estimating accruals. Using RPA for more monotonous tasks like accessing suppliers and vendors can save time. Integrating RPA into the accounting process can not only reduce labor costs but also eliminate the human error component and allow employees to focus on more value-added work.
AI. Using AI technology in your accounting practice can help detect discrepancies or otherwise unusual or inaccurate activity, including backdating. AI can be taught to identify fraudulent transactions. Artificial intelligence is a purposeful employee with nothing to gain from the job and without the ability to make or hide mistakes.
machine learning. Accounting departments can use daily machine learning to capture systems of record, shared inboxes and actions with key stakeholders and then relay information and actions to a human point person through workflow. Machine learning can evolve to understand when to escalate requests requiring intervention.
One technology currently gaining traction in the financial world is blockchain. Blockchain enables real-time, automated processing, which can eliminate the need for an individual to physically transfer numbers to an account. It coordinates the activities of both sides of the transaction simultaneously to avoid labor-intensive communication and post-conciliation. Blockchain also has built-in security measures through its transparency and stability. Transactions cannot be erased, edited or changed in any way, and they are fair game for anyone to view. Imagine the time savings if the numbers didn’t need to be transferred physically on a spreadsheet from “waiting for payment” to “payment” or the headache from not digging through paperwork to check payment status. gets reduced. Blockchain seeks to accurately distribute in real time who has paid and who has not.
Although blockchain has many benefits, it should be approached with a healthy dose of caution. It was not intended for accrual-based accounting and all related activities. Blockchain still has some drawbacks as it is quite slow, uses a lot of energy per transaction and is still prone to hacks. There is great potential for blockchain integration, but as with any new technology, due diligence needs to be done and a professional should be consulted.
big labor for high volume
This technology will have different effects on different companies. In particular, companies with high volume accrual invoices will feel the greatest impact. Why? Automation can reduce the time taken to close the month through automated communication and instant recognition of transactions. Accuracy can be improved by reduction of touch points and removal of some human labor. Resource time that was previously spent manually tying up the end of the month and preparing the audit workbook will instead be reallocated to more important tasks.
Beyond the benefits of time and money, automation provides security. Machine learning lacks the human traits that often lead to error, including boredom, distraction, and fatigue. Precision is not optional in financial accounting. If the accruals are materially inaccurate, there is a risk that companies will need to reassess their financial position. The consequences are wide-ranging, including the burnout of employees from all extra work, loss of investor confidence, and increased audit fees. Mistakes are inevitable, but in the case of accounting, they have the potential to derail a company’s growth path.
slow change carries risks
Accounting departments are often slow to change — and with good reason. Change takes work and carries a level of risk. And finance work should be done even when a software implementation project is underway. As the world embraces new technology, it’s important to consider what might work for your company.
The process isn’t helped by the fact that recent history has been difficult, to say the least. If there is one lesson to be learned from the past two years, it will be that complacency can be dangerous. Blockchain and AI are set to disrupt the way accounting is practiced, so now is the time for organizations to evaluate how and when to automate finance activities.
Credit: www.forbes.com /