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AI for Accounting: Benefits, Use Cases, and Best Practices

AI for Accounting: Benefits, Use Cases, and Best Practices
on August 14, 2023
AI for Accounting: Benefits, Use Cases, and Best Practices

The future of accounting is rapidly evolving, and artificial intelligence is leading the charge. With a projected compound annual growth rate (CAGR) of 32% by 2028, AI for accounting is quickly becoming a game-changer for businesses of all sizes.

Why the sudden surge in demand? It’s no secret that traditional accounting methods are often time-consuming and prone to human error. AI solves these challenges by automating routine tasks, improving accuracy, and generating real-time insights.

By leveraging AI for accounting tasks, businesses will improve productivity, save money, and unlock real-time analysis of their financial data. These insights enable more informed decision-making and effective financial planning to help you stay competitive in today’s fast-paced business environment.

Benefits of AI for Accounting Teams

Implementing AI in accounting improves accuracy and increases operational efficiency so your business can stay agile in a changing economic landscape. Here are the key benefits of using AI for accounting:

Real-Time Data Analytics

Traditional financial data analysis involves manual processes that can lead to delayed decision-making and missed opportunities. AI empowers your accounting team to process and analyze large amounts of financial data in real time so you can gain insights into your business’s financial performance and identify trends or patterns as they emerge.

Natural language processing (NLP) analyzes unstructured data such as emails, invoices, and other financial documents to extract relevant insights about the business’s financial performance. This analysis enables accounting teams to quickly and easily access critical financial data, such as cash flow, accounts receivable and payable, and revenue, without manually sorting through documents and spreadsheets.

Improved Decision-Making

AI identifies relationships between variables that humans may not be able to detect, enabling more accurate financial forecasting. These insights will help you make more informed decisions about resource allocation, investments, and financial planning so you can stay agile and quickly respond to changing market conditions.

With deeper insights into the business’s financial health, your accounting team can identify risks faster and allocate resources to reduce potential financial losses. For example, AI-enabled accounting systems can analyze cash flow data in real time so you make more accurate and informed cash flow projections and avoid problems down the line. Alternatively, if your forecasting identifies an increased demand for a particular product or service, this could indicate an opportunity for growth that you can capitalize on.

By using AI to analyze financial data faster and with greater accuracy, you can also uncover potential cost savings. This will help you identify areas where you can reduce expenses or implement automation to streamline business operations.

3 Use Cases of AI in Accounting

AI automates repetitive tasks and streamlines workflows so accounting professionals work more efficiently and focus on higher-level analysis. Let’s explore some of the most popular use cases of AI for accounting.

1. Fraud Detection

Using AI to detect fraud can minimize the risk of financial loss and protect your business’s reputation. AI-powered algorithms detect anomalies and inconsistencies in data, such as discrepancies between records or suspicious activity, to identify potential problems before they happen.

AI-enabled accounting software monitors financial transactions in real time and flags any unusual transactions, such as those that exceed certain thresholds or are made outside regular business hours. Machine learning algorithms also analyze historical financial data to uncover patterns of fraud, embezzlement, or other suspicious activity.

2. Tax Preparation

AI can help you prepare and file tax returns more accurately by analyzing your business’s financial data and applying tax regulations. This will allow you to claim tax credits and deductions you might not have been aware your business is eligible for.

For example, Boast gathers data from all of your systems to identify and categorize eligible projects, time, and expenses so you can easily claim research and development (R&D) tax credits. This provides significant relief on the costs for R&D and allows you to reinvest those funds into your business or reduce taxable income.

3. Invoicing and Cash Collection

AI can also automate the invoicing process and identify which customers are more likely to pay their bills on time. With AI-powered accounting software, you can send automated payment reminders to customers, track and analyze payment history, and use predictive analytics to determine the likelihood of future payment delays or defaults.

For example, machine learning algorithms can analyze customer payment behavior, such as how often they pay late, how much they owe, and how quickly they pay after receiving an invoice. Based on this data, the software can flag high-risk customers and prioritize collection efforts accordingly.

AI can also help businesses optimize their invoicing process by automatically generating invoices and sending them out to customers, reducing the chance of errors or delays. This can ultimately lead to faster payments and improve your business’s cash flow.

4 Best Practices for Using AI for Accounting

Let’s go over some best practices for implementing AI in accounting so you can successfully integrate this emerging technology into your business operations:

1. Start With Small Projects

When implementing AI in accounting, it’s best to start with small, manageable projects to minimize risk and build confidence. This helps you see if the AI solution is working effectively and efficiently. From there, make adjustments before scaling up to larger and more complex projects.

For instance, you might begin by implementing AI for automated data entry for a single department or process before scaling it up to the entire accounting function. As a bonus, this approach helps you demonstrate the value of AI to your team and encourage further investment in the technology.

2. Choose the Right AI Tool for Your Needs

Not all AI tools are created equal; some may be better suited to specific accounting tasks than others. The right tool will integrate seamlessly with your existing financial processes to help your accounting team be more productive rather than complicating their workflows.

Start by looking for a tool tailored to your industry or specific accounting task, and check if it is compatible with your existing systems and data sources. You should also determine whether the software can grow with your business and handle increasing volumes of data. Remember to evaluate the cost of using this tool and compare it to the expected return on investment.

3. Prioritize Data Quality

For the most accurate AI-generated insights, you must establish data quality standards and processes for data cleaning, normalization, and validation. Suppose your business has incomplete data on supplier invoices. As a result, an AI-powered tool may not be able to detect fraudulent invoices created by scammers impersonating legitimate suppliers.

To ensure high-quality data, start by identifying the data sources used for your accounting processes. Then implement data validation and verification processes to ensure accuracy and completeness. For example, you can implement automated data validation checks to ensure data is entered correctly and consistently across all systems.

4. Monitor AI Performance

Inaccurate or unreliable insights can lead to poor financial decisions and negatively impact business performance. By monitoring AI performance, you can identify and address issues early on, improving the accuracy and reliability of AI-generated insights over time.

Let’s say you’re using an AI-powered tool to automate the process of invoice processing. You can monitor the tool’s performance by comparing the accuracy of the data extracted from the invoices to the data manually extracted by an accountant. If there are discrepancies, investigate the issue and adjust the AI algorithm to improve accuracy.

Leverage AI for Accounting to Reinvest in Your Business

With AI revolutionizing the accounting industry, businesses that adapt and embrace AI-powered accounting tools will be able to unlock valuable insights from their financial data, optimize workflows, and make more informed decisions. Implementing this new technology will help your business save time and money while staying competitive in a fast-paced, data-driven environment.

By capitalizing on the benefits of AI for accounting, you can invest resources in other areas of your business. Sourcetable, the next-generation spreadsheet, first discovered the benefits of R&D tax credits when the team partnered with Boast. After just two R&D tax filings, they were able to increase their cash flow and extend their product runway, which can make or break any startup.

To learn more about how to get free money for your business’s innovation, check out our Ultimate Guide to R&D Tax Credits.

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