The Very Real Impact of AI on the Future of Accounting
Innovation in AI is making accounting a lucrative profession for accountants who can leverage its value.
AI could make the accounting profession more appealing via technology and innovation. Some accountants worry that AI will replace them, but the real opportunity is that accountants who know how to leverage AI software may someday replace those who don’t, observes Jeff Dernavich, VP of product at LeaseQuery.
Unless you’re truly living off the grid, you can’t make it through the day without seeing a headline about artificial intelligence (AI). Whether via ChatGPT, Bard, or one of the many applications leveraging its capabilities, AI is helping people with writing, shopping, personal assistant tasks, and more. As with any new development in technology, there are both opportunities and challenges ahead. As AI continues to evolve rapidly, leaders across industries will need to navigate the complexities of these tools and learn how to leverage them for the success of their companies.
Artificial Intelligence in Accounting
There is a wide range of uses for AI in almost every industry. While there are countless ways for this new technology to change lives for the better, there are almost as many ethical considerations and concerns about human redundancy. As AI continues to become more prevalent in the accounting industry specifically, the question many accountants keep asking is, “Will AI replace me?” The short answer is no. AI will change how accountants do their jobs, but it can’t and won’t replace them. The slightly longer answer is that the real concern is that accountants who know how to leverage AI software to be more effective and efficient may someday (in the not-too-distant future) replace accountants who don’t.
While accountants may be worried about whether they’re destined to be replaced by a machine, the more pressing issue for the accounting profession is the steadily increasing shortage of accountants. In fact, a 2022 Deloitte poll found that 82% of hiring managers for accounting and financial positions at public companies and 69% at private companies said talent retention is a challenge. Because it can reduce tedious accounting work, freeing up accountants’ time to focus on higher-level tasks, implementing AI may have the potential to make job openings more appealing to younger applicants who are interested in technology and innovation.
See More: How AI Can Improve Your Finance Department’s Workflow
AI Does The Drudgery
When you think of sexy career paths, accounting probably isn’t the first thing that comes to mind. And that’s because, all too often, the work has historically involved the drudgery of multi-month closing cycles, endless Excel formulas, and never-ending audits. While automation can take on some of those tasks, AI goes beyond understanding rules and can actually extract information to input it in other areas, as well as deliver a succinct summary of information to a user who would otherwise have had to read through hundreds of pages.
AI improves accountants’ efficiency and/or may even allow non-accountants to tackle some of the “busy work” while they focus on more complex work, like managing relationships, crafting strategy, evaluating opportunities, and making strategic decisions.
AI Adds Value
As user-friendly cloud-based software solutions become more prevalent, service providers across industries are being challenged to understand their clients’ business complexities and help them reach their goals in more strategic ways. Stats from Microsoft’s recent Economic Guardians of the Future report show 80% of finance leaders believe they and their teams are being challenged more than ever to add value beyond their standard roles and responsibilities. As accounting professionals seek more ways to work smarter, not harder, automation and AI have the potential to free people up in order to allow more collaboration and, in turn, more strategic work.
AI in Lease Accounting
One area of the accounting industry that recently added new complexity is the lease accounting sector. ASC 842, or Topic 842, the new lease accounting standard issued by the Financial Accounting Standards Board (FASB), governs how entities record the financial impact of their lease agreements.
Recognized as one of the most comprehensive changes to lease accounting in decades, ASC 842 requires all public and private entities reporting under US Generally Accepted Accounting Principals (GAAP) to now record the vast majority of their leases to the balance sheet. This new standard was established to enhance transparency into liabilities resulting from leasing arrangements and reduce off-balance sheet activities.
So, what does all that mean for CPAs? For many, fully understanding ASC 842 has been the source of immediate frustration as they determine the implications of the updated standards and begin to implement the required changes. Over the last two years, nearly 300,000 accountants left their jobs, and last year alone, more than 40% of accounting and auditing jobs were left unfulfilled. With the heavy burden of understanding the new standards and successfully complying looming over their heads, the lease accounting industry certainly isn’t looking more attractive to new applicants either.
This is where AI comes in – to make accountants’ lives easier. Lease accounting software that incorporates the use of AI technology reduces the number of hours spent doing repetitive and tedious tasks, while also cutting down on the potential for human error. It makes the work humans are doing more valuable by creating time for people to really think about the business and the impact of its accounting practices.
AI in Action
We’ve talked a lot about AI from a theoretical standpoint. Now, let’s get in the weeds a little more from a product standpoint and look at what role AI actually plays in the workflow of someone managing the lease accounting process.
If you’ve ever leased anything before, you know it usually involves a lot of printed pages that need to be initialed and signed in about 500 places. Then, after you used all the ink in your pen, that lease was probably scanned using a copier or printer, to then be uploaded and stored as an image inside a non-searchable PDF. With AI-enabled lease accounting software, users can upload a lease document that will be processed with computer vision and OCR technology to make a clean and searchable digital copy. This process alone can save hundreds of labor hours as well as make the information more accessible.
AI technology can then use the searchable copy of the lease to accurately extract key data for validation and then input that data into the system. But, the accuracy of AI isn’t the only important factor. When used to its full potential, AI should be combined with a tailored experience that helps the user understand the lease faster than having to read the entire document and find important clauses like renewal, termination, and HVAC or maintenance costs. Identifying those clauses means lessors and lessees can understand their responsibility and report it in the correct context. Embedding AI helps all users easily and accurately enter their leases into the product so that accounting is automated and compliance is complete.
After the initial adoption of the new lease accounting standards, the compliance journey doesn’t end. There will always be new leases and modifications to existing ones. There is limitless potential for AI to continue cutting out tedious tasks and taking on more of the day-to-day drudgery.
How have you been applying AI to cut through drudgery? Share with us on Facebook, Twitter, and LinkedIn. We’d love to hear from you!
MORE ON AI IN FINANCE
