The Future of Finance and Accounting?
Since the creation of double entry bookkeeping 500 years ago, which was considered one of the greatest advances in the history of business, the accounting profession has not seen much innovation. However, the world of accounting is just the latest in a number of industries affected by the rise of Artificial Intelligence (AI). AI has created a tsunami of innovation and that innovation has increasingly impacted on the accounting industry. So here are our views on the future of AI as it pertains to the accounting industry.
WILL TECHNOLOGY REPLACE ACCOUNTANTS?
New Zealand – A Slow Adopter
A recent CPA Australia survey of conditions for businesses in 2017 showed that New Zealand small businesses are technology laggards compared to other countries in the Asia Pacific region. For example, only 33% of the New Zealand firms received 11% or more of their sales through new payment technologies through AliPay, ApplePay and WeChat Pay compared to 58.4% of the Asia average. Only 26.8% of the New Zealand firms found their investment in technology in 2017 was already profitable compared to 63.3% of the Asia average.
Businesses that use artificial intelligence (AI), big data and the Internet of Things (IoT) technologies to uncover new business insights “will steal $1.2 trillion per annum from their less informed peers by 2020” says Forrester Research in a new report, Predictions 2017: Artificial Intelligence Will Drive The Insights Revolution. These technologies will increase business’ access to data, broaden the types of data that can be analyzed, and raise the level of sophistication of the resulting insight.
Accountants – A Dying Breed?
Over the next 10 years, Forrester Research estimates that AI will take over 16% of jobs in the United States. Google believes that robots will achieve human intelligence levels by 2029. Gartner (an American research and advisory firm) estimates that 33 percent of all occupations will be performed by smart robots by 2025.
Accounting systems are beginning to use a combination of data mining, supervised learning, fuzzy logic and other statistical methods. They can be quickly deployed to shadow financial transactions and generate recommendations to support business decision making.
Cloud based accounting software package such as QuickBooks say that they are 75% automated. Clients transmit their receipts, which are then converted into machine-readable form. The receipts are allocated to the proper account after encryption. Over time, the system teaches itself to improve its functions: sales, expenses and invoice management.
New Opportunities – The Dream Team
American economist Philip Aueswald stated in his book "The Coming Prosperity" that over the course of history, whenever machine and new tools substituted one type of human capability, new human experiences and capabilities emerged.
Accountants, whose job is predominating data entry, reconciliation and based around accounting entries and the ‘production of the financial statements’ should start to broaden their skill base. AI will increasingly be used to eliminate accounting errors and automate/integrate data entry through centralized ledgers and blockchain technologies.
And not just accountants, auditors and the audit industry are likely to undergo significant shifts in the coming years, as audit methodology changes to embrace new technologies. Accountants must move into the realm of financial management, that is an advisory role.
Financial Management involves analysing, applying judgment and explaining the financial statements to their clients, helping guide decision making with a financial context and framework.
Accountants will need to train in the art of storytelling, by using the huge amount of data that AI can provide to effectively convey meaning and a message.
Together Accountants and AI can form a dream team.
Thinking Ahead – Innovation through Artificial Intelligence
(Callaghan Innovation White Paper)
CPA Australia Asia Pacific Small Business Survey 2017: