Navigating AI’s Impact on Accounting: Uses, Trends and Tools

When you define AI accounting, you may be thinking about using ChatGPT in accounting or ChatGPT in finance. But AI accounting is broader, including more types of artificial intelligence/machine learning applications, not just natural language processing (NLP) using large language models (LLM) like the generative AI transformer, ChatGPT developed by OpenAI. Generative AI is a type of deep machine learning. 

Besides using ChatGPT and other forms of artificial intelligence/machine learning, applications of AI accounting, AI bookkeeping, and RPA (robotic process automation) (with bots for quickly processing repetitive tasks) include:

• Automated invoice processing and payables workflow 
• Anomaly detection of outliers in data 
• Topic research
• AI-based analytic business intelligence for decision-making
• Financial report trends analysis commentary

This article focuses on artificial intelligence accounting uses and AI tools for accounting, including the best AI accounting software. Understand the extent of AI uses in accounting and the widespread popularity of AI accounting because it plays a crucial role in accountant productivity and business cost savings through efficiency resulting in less hiring, better analysis, and automation of stronger financial controls. 

Understanding AI in Accounting

Types of AI (artificial intelligence) that can be applied to accounting include:

• Machine learning
• Natural language processing
  • ChatGPT and other large language models 
• Computer vision
  •  image detection, recognition, and classification
• Expert systems for decision-making
• Robotics 

McKinsey & Company, a top-tier management consulting firm, believes that AI and related technologies can be used to significantly reduce G&A costs and save time for business support functions, including the finance department. See their Insights in “How bots, algorithms, and artificial intelligence are reshaping the future of corporate support functions.” 

Business support function improvement can be achieved by using AI accounting software with automation. AI applications include machine learning in accounting and other types of AI technology. 

Who’s Leading the Way in Using Accounting AI?

Businesses, public accounting firms, nonprofits, and governmental entities, including U.S. government departments like GSA, are using accounting AI. Notably, AI technology is becoming embedded in the software that they use. Some are using ChatGPT 4 and other AI tools directly to accomplish specific tasks. 

The accounting industry includes public accounting firms and accountants working as employees or independent contractors for businesses and organizations that are their clients. According to a Thomson Reuters Institute survey of accounting firms, tax professionals, and corporate tax departments in 2023: 

Thomson Reuters found that the top tier, Big 4 CPA firms (which include Deloitte, PwC, Ernst & Young (EY), and KPMG) are leading the way in AI adoption. 

These largest CPA firms are using AI for:

• Predictive analytics
• AI-powered tools for auditing to detect anomalies and possible audit issues
• Automated tax compliance
• Client insights to understand their clients’ needs 

Through their recommendations, these CPA firms can influence a large number of clients to adopt artificial intelligence. Thomson Reuters shares some understanding of the use of generative AI by tax professionals:

The large-language technology behind ChatGPT and generative AI is developing rapidly, however, and many tax professionals can envision using the technology — or tools that have incorporated it — to assist them in their work. Saving time on research is the most commonly mentioned use-case, but respondents identified many other possible applications as well.

Business and non-profit organization users of finance automation software, like AP automation, are using built-in accounting AI for invoice processing, expense management, fraud detection, spotting anomalies, and using embedded ChatGPT and other AI technologies for automated general ledger account coding and as a virtual digital assistant for analytics queries. 

How Can AI Be Used in Accounting? 

AI can be used in accounting for:

• Invoice processing, expense management, and employee expense reports
• Data analysis 
• Fraud detection
• Business intelligence and decision-making
• Pricing analysis
• Forecasting 
• Financial, regulatory, and business research
• AI-assisted scenario generation for strategic planning
• Auditing
• Business communications

Invoice Processing and Expense Management

Invoice processing applies to both accounts receivable for customer invoices and accounts payable for vendor invoices. 

In payables, invoice processing includes the entire process from:

• Receiving supplier invoices
  • for expenses, fixed assets, and inventory items 
• Matching invoices with purchase orders and receiving data
• Invoice verification and supplier validation 
• Account coding 
• Approvals 
• Payments 

With automation software, automated invoice processing workflows, including supplier onboarding and accounts payable and expense management, can be achieved electronically using AI technologies and RPA. Automation software streamlines and eliminates time-consuming paper document handling and manual data entry. We explain how to use artificial intelligence in accounts payable in more detail in another guide. 

AI /machine learning (ML) is used to capture invoice data headings and line items electronically with OCR scanning. NLP technology like the generative AI tool, ChatGPT, assists your business in achieving enhanced automated chart of accounts coding accuracy. AI can also detect fraud and errors. 

AI-based payment status notifications and other communications can be shared with suppliers and vendors through the supplier portal and by email. AI can also generate automated payment reconciliations in real-time. 

Besides AI-enhanced coding in invoice processing, AI-based data analysis and business intelligence can help your company achieve better expense management and reduce the risk of human errors. 

Data Analysis

AI data analysis and financial analysis include analyzing financial statements and revenue and expense trends for anomalies and commentary. AI can help your company analyze its spend management and identify opportunities for cost savings. 

The smart shop floor helps manufacturing and cost accounting identify opportunities for improving operational efficiency and reducing costs from rework and scrap. For example, ERP systems can be connected with IoT sensors to create real-time notifications of production problems and machine maintenance requirements. AI and IoT are increasingly used in combination for best results. 

Business Intelligence and Decision-Making

AI creates real-time business intelligence through dashboards, embedded ChatGPT digital assistants like Tipalti’s Ask Pi, and expert systems that can be used to make routine decisions or help with decision support in more significant areas requiring financial management or CEO and Board of Directors decisions. 

Pricing Analysis

Accounting and sales & marketing functions play a role in determining pricing adequacy. For online sellers like Amazon, AI can create dynamic pricing on a website that varies the price depending on the customer demand for an item at a point in time. AI can also perform automated pricing analysis for products not subject to dynamic pricing changes. 

Forecasting

AI includes the ability to perform predictive analytics, useful for preparing financial forecasts and cash flow forecasts. 

Computer vision, a type of AI, can be used to count cars in retail parking lots like Walmart to help generate revenue forecasts for financial planning models. ChatGPT capabilities can improve the formatting of forecasts to align with your specifications. But it’s best to use AI-driven financial forecasting software for efficiency. 

Financial, Regulatory, and Business Research

AI can assist your company with research related to taxation, accounting standards, global regulations, and economic, industry, and business research. If you’re using ChatGPT, you’ll need to input information through a prompt using PDF or other types of data files to close the gap between ChatGPT’s 2021 ending test data date and the current year. 

Tipalti uses AI technology to automate global regulatory compliance in its AP automation and global payments software. 

AI-assisted Scenario Generation for Strategic Planning

AI-assisted scenario generation is one AI finance application that can help you contribute meaningfully to the strategic business plan, making other strategic decisions, and your company’s financial performance. With these AI-generated scenarios, you’ll need to use your business judgment to determine which of these scenarios are realistic and feasible. AI brainstorming through machine learning applications in finance is achieved through access to vast amounts of its training information and continuous improvement. AI can enhance the results in creating scenarios and widen the range of possible business opportunities. 

Auditing

AI can be used for automatically preparing audit schedules from financial data related to financial reporting, analyzing financial information, and detecting data anomalies to be investigated by CPA firm auditors. In the accounting profession, AI can also be used by auditors at public accounting firms and by corporate internal auditors to help prepare reports.

Business Communications

The corporate accounting and finance team can use AI for more accounting tasks, including planning meetings, creating agendas, and writing emails and reports. You can use AI to edit the initial results and apply human skills to fact-check and refine business communications.

Will AI Impact Traditional Accounting Jobs?

At this point, It appears that AI in accounting will lead to job growth rather than job losses. According to a May 2023 World Economic Forum article based on its more comprehensive AI vs. jobs study, digital transformation specialists and business development professionals are experiencing job growth. 

This WEF AI jobs study confirms, as ChatGPT predicts, that “jobs requiring human judgment and decision-making, complex and nuanced communications, and creativity and imagination” are still needed and won’t be replaced by AI. Accountants use these types of job skills, and, therefore, shouldn’t feel threatened by job loss due to replacement by artificial intelligence. 

AI impacts traditional accounting jobs by shifting the focus of their role from manual data entry and paper-based transaction processing (in digital transformation) to higher-level, more strategic and analytical work for decision-making  that contributes to improved business results. 

However, companies will hire less staff to handle more efficiently processed, routine tasks by using automation software for accounting workflows like invoice processing and making global payments. 

How to Embrace AI in Your Accounting Processes 

The best way to embrace the use of AI in your accounting processes is to understand the multitude of potential AI applications and how AI can contribute to business profitability. Rather than spending a lot of time wrangling with ChatGPT chatbots or data science models in Python or R language on your own, consider using modern software that embeds AI technology. Whether you have newer cloud accounting systems or legacy on-premises software in your company, use modern cloud-based add-on software products with integration to your ERP software system. 

Software with AI and ML Capabilities

Software with artificial intelligence (AI) / machine learning (ML) capabilities includes AP and accounting automation software and automated purchase order management software for purchase order preparation and processing that integrate with your ERP accounting system. 

Automation is finance’s greatest asset when using AI. Automation software, which replaces manual processes and paper-based systems with touchless processing, is a type of digital transformation requiring employee support to produce the best results. 

Tipalti Finance AI Software

End-to-end Tipalti AP automation software integrates with any ERP system or accounting software as an add-on. Tipalti finance automation AI software uses AI/ML to digitally capture invoice data fields with headings and line items using OCR scanning technology. Tipalti validates suppliers with TIN numbers and uses AI-driven processes to detect fraudulent activities. 

Tipalti automation software for financial processes incorporates artificial intelligence and robotic process automation (RPA) technology, applying thousands of rules or machine learning algorithms for identifying invoice processing exceptions.

Tipalti embeds ChatGPT and other AI/machine learning technologies in its software. The solutions include advanced automated general ledger account coding of supplier invoices in accounts payable, and its Ask Pi digital assistant. Tipalti AI adds real-time business intelligence for discovering and analyzing data trends and anomalies to help businesses and nonprofits manage spend, improving their bottom-line results and cash flow.

What the Future Holds for AI’s Role in Accounting

According to the Global Banking & Finance Review: 

The Artificial Intelligence in accounting market is currently predicted to grow at a compound growth rate of approximately 45% and is expected to reach approximately $16 billion by 2028.

AI’s role in the future of accounting and finance automation has already started gaining traction as accounting professionals and CFOs adopt new technology.  AI accounting is growing in the number of AI tools, businesses adopting the advancements in technology, and recognized use cases. AI analyzes historical data and helps generate additional information and data for making more informed decisions. 

More software applications are using several forms of artificial intelligence and machine learning in their AI system products, making AI use by accountants and financial management easier and quicker to access. The benefits of AI are plentiful when it’s used wisely. 

The best CFOs, controllers, and accounting managers quickly adopt AI in accounting. The financial management team will be contributors to business profitability and analytic intelligence for decision-making, instead of being labeled as old-school beancounters. They’ll be rewarded with career upward mobility and new opportunities for growth. To learn how to optimize AI accounting in finance automation applications, read the eBook.