How your accounting practice can leverage AI

It’s no surprise that the accounting industry has one of the highest artificial intelligence (AI) adoption rates in the UK. After all, AI has huge benefits for practices of all sizes.

From automating bookkeeping to generating reports and forecasts, AI can ease the administrative burden and equip you with reliable data and insights.

While some of us might see the advancement of AI as a threat, a combination of human intelligence and artificial intelligence is essential for the future of accountancy. In this guide, we’ll explore how you can combine AI with human-led services in your practice.

What is artificial intelligence in accounting?

Artificial intelligence refers to a set of technologies that simulate human intelligence and perform tasks. Today, these technologies can hold human-sounding text conversations, make predictions based on data analysis, and even drive cars.

AI in accounting helps to automate and streamline some of the day-to-day admin for practices. You’ll find it in cloud-based accounting software, apps, and integrations. What’s more, artificial intelligence can analyse data far more quickly and precisely than a human can. These technologies can compile financial reports, make accurate cash flow forecasts, and recognise fraud.

Advantages of AI in accounting:

Artificial intelligence in accounting can help you increase practice efficiency and give data-driven advice. Here’s a quick look at some of the benefits:

1. Automation: Data entry, bank reconciliation, and invoice processing can be automated by AI in accounting software – saving you time. Instead of tackling piles of admin, you can focus on business strategy, client support, upskilling, and anything else that adds value to your practice.
2. Accuracy: AI can analyse data quickly without sacrificing accuracy. Repetitive tasks are completed with precision. It’s great for identifying patterns and anomalies in data that could otherwise go undetected by humans, resulting in a lower risk of error or fraud.
3. Cost savings: It’s easy to lose track of the hours spent on repetitive tasks every week. And these jobs don’t always provide the most reward for you, or value for your client. AI can help you claim these hours back, reduce labour costs, and improve overall practice efficiency. You might even find you can take on more clients with the extra time on your hands.
4. Real-time insights: Using AI means you won’t need to give advice based on outdated figures or patchy data. AI gives you access to real-time insights on clients’ financial performance. As a result, your clients can make smarter, data-driven decisions, bolstered by your advisory expertise.
5. Enhanced security: Fraud detection is often a time consuming process. AI tools can expedite this by identifying patterns and anomalies in data, and notifying the right person. These tools can also help with fraud prevention, which helps protect the financial health of a business.

Can AI replace accountants?

While artificial intelligence could take on various aspects of accountancy roles, it’s unlikely to replace accountants and bookkeepers altogether.

From the outside, accountancy looks like a numbers-orientated role. But as you’ll know, there’s more to it than meets the eye. How you interpret those numbers and convey those messages to clients is what matters most.

Building solid, trusting client relationships where you provide strategic business advice is something artificial intelligence can’t replace. What it can do is support you in this role by delivering reliable data, analysis, and reports to substantiate your advice.

Stuart Miller, Head of Product Compliance & Industry Engagement at Xero, provides his take: “Technology and AI have clearly changed how the profession operates, allowing accountants and bookkeepers to provide valuable insights into their clients' business affairs.

When I began my career in 2003, I was using adding machines, manually ticking the bank, using T-Accounts and even teaming up with colleagues to call and cast accounts. Today, these tasks are handled by AI and technology, which allow us to focus more on advisory work and really adding value to help clients thrive”.

How can accounting practices use AI?

With artificial intelligence taking care of the day-to-day admin, many practices will find they can move to high value advisory services and strategy. Coupled with blockchain in accounting, AI technology can bring transparency and time savings to everyday accounting tasks.

That’s not to say the transition will be easy. Plenty of practices are still getting to grips with how to use AI in accounting. Let’s explore the different kinds of AI you can use in your practice, and how these can help you stay competitive.

AI in accounting software

One of the easiest ways to use artificial intelligence is through AI accounting software.

Some providers already offer AI features that help accountants and bookkeepers to automate repetitive tasks, improve accuracy, and quickly generate reports.

Xero has a whole suite of AI product features. Analytics Plus gives you access to deep insights, so you can base your advice on more accurate, reliable data. Bank reconciliation predictions are powered by machine learning, and can classify transactions that don’t match up to invoices or bank rules. Automatic form filling helps you speed through your expenses.

Stuart adds: “In a world where tax administrations are looking at the concept of ‘compliance by design,’ these tools can provide accountants and bookkeepers with up-to-date, real-time information to best advise their clients and add significant value to their business”.

One of the key benefits of AI in accounting software is that you don’t need to use extra tools or add-ons. You can reap the rewards of AI from your existing cloud-based accounting software.

AI in accounting audits

AI is the perfect partner for auditors. It can analyse reams of data quickly, picking up on patterns and anomalies that would be tricky for humans to spot.

This can help auditors focus their efforts on the right areas. Once AI technologies have located specific items, auditors can devote their attention to the areas most likely to have material misstatements.

Stuart explains: “AI-driven audit accounting software offers significant opportunities for driving efficiencies by automating tasks, improving data analysis, enhancing risk assessment, and facilitating real-time reporting. However, it's important to note that AI should complement human judgement and expertise in the auditing process, rather than replace it entirely.”

AI in accounts fraud detection

Identifying patterns is one of the key steps in fraud detection. AI tools can analyse customer data, transaction data, and any other relevant data points to detect fraud.

Traditional fraud detection methods often generate lots of false positives. These can be costly and time consuming to investigate. Using analytics and machine learning, AI can help reduce false positives and identify fraudulent activity with precision.

Some systems use machine learning algorithms so that they get more accurate over time. This means they can adapt to new and evolving types of fraud, which is extremely useful considering the growth of economic fraud and crime.

AI in predictive analytics

Predictive analytics uses past data to predict the future. It’s useful in cash flow forecasts and other financial projections, as well as for reconciling accounts.

Xero’s bank reconciliation predictions is an example of predictive analytics in action. The feature uses data, algorithms, and machine learning techniques to match and code transactions. Analytics Plus also uses predictive analytics to create accurate cash flow forecasts and financial projections.

AI in automating tasks and data visualisation

Think about the tasks you do everyday that have clear and formulaic steps. These are the ones that AI can do best. Things like data entry, bookkeeping, and basic financial analysis can be automated and enhanced by AI-powered systems, freeing up time for you to focus on more complex tasks that require human judgement, critical thinking, and advisory expertise.

Data visualisations are an invaluable tool for helping clients understand their financial picture. AI can create all kinds of visualisations, such as charts, graphs, and dashboards that bring clarity to complex financial data.

How can accountants stay relevant with AI?

Understandably, some accountants and bookkeepers might worry that their skills are being outdated by AI. But that couldn’t be further from the truth.

While AI can provide invaluable insights through data, those insights need translating and contextualising for clients. Automation and analysis is only useful if there’s a trusted advisor who can convey these messages, explain what they mean, and advise on strategy.

The UK is built on small businesses. With 5.5 million of them currently operating, accountants and bookkeepers can provide invaluable advice, especially during tricky economic times.

Want to stay relevant in this rapidly changing industry? Let’s explore some steps you can take.

Upskill and focus on soft skills

AI can replicate some human intelligence skills, but not all of them. By embracing AI, you’ll have more time to spend upskilling. Focus on soft skills that enhance your advisory services – like critical thinking, problem solving, and communication. AI can provide you with the data and insights to use these skills more effectively.

Provide value added services

Once AI has boosted your practice efficiency, you can provide additional value-added services like strategic advice, financial planning, and risk management. These services are most effective when you have reliable data backed by learned experience and human empathy - something that AI can’t replicate.

Collaborate with AI for efficiency

Treat AI like a friend, not an enemy. By combining AI and human intelligence, you and your clients get the best of both worlds – accuracy and data-driven decision making, paired with learned human experience and judgement. For example, an AI-powered analytics tool can give clients a clear picture of their projected cash flow, while advisors can develop a strategy for mitigating and managing any gaps.

The first step is experimentation. Research the latest AI tools and technologies, subscribe to newsletters and YouTube channels, and follow the experts on social media. Once you understand how these tools can be leveraged for practice efficiency, you can enhance your existing services and introduce new ones too.

Use accounting software powered by AI

The role of AI in accounting is still evolving. And while it’s highly unlikely that AI will replace accountants and bookkeepers altogether, it’s true that the industry will change dramatically.

Embracing AI tools can help you improve accuracy, make cost savings, and equip you with real-time data insights. Clients want advisors they can rely on for expert advice and strategic support. Having good quality, reliable, current data to do that with is essential – and something AI can help you with. But as we’ve explored in this guide, strategic advisory still requires a human mind on the job.

AI powered accounting software like Xero makes it easy to enjoy the many benefits of artificial intelligence. With intuitive features like Xero Analytics and bank reconciliation predictions, you can adopt AI at your own pace.