Machines Are Learning Accounting

Machines are great at doing things that humans find repetitive, dangerous, or mundane. According to a report by TATA, early adopters of Artificial Intelligence generated average revenue increases of 16% (2015) whereas laggers saw a modest 5% revenue growth.

The reasons are obvious -- machines don’t get bored, weary, or experience pain. All of which can be associated with accounting...unless you’re an accountant. (Sorry, Dad CA, CPA, CGA, CMA).

Traditional accounting software has been relatively static. We’ve moved from hardcopy to software, to the cloud. But the data entry itself has remained constant.

My father taught me that in accounting, the output is only as good as the input. In other words, garbage in, garbage out. This was an important lesson because in order to make sound business decisions, the entries needed to be accurate and coherent.

Machines That Walk The Talk

Ernst & Young (EY) announced in 2016 it would spend $400 million in using A.I. to automate much of the labor involved in auditing clients’ finances. It’s a bold bet on machines. The opportunity is compelling. “Artificial intelligence and robotics are fundamentally reinventing the workforce,” says Uschi Schreiber, Chair of the Global Accounts Committee at EY.

But A.I. not just for the giants of accounting. Xero, recently revealed that its technology uses detailed statistical analysis to learn from and assist the individual business and their partner based on their own specific circumstances.

The automation will mean small businesses no longer need to worry about where their invoices are filed. The machine learning automation evolves with the processes used by the business owner and their advisor — when the small business comes to create their next invoice, Xero automatically suggests the account code so they don’t inadvertently make a mistake.

Xero’s new technology seeks to build a bespoke, personalized assistant for small businesses and their accountants to cut the administrative burden, prevent mistakes, and enable them to spend more time growing their business.

With over 10 million unique accounting codes, there is a growing need for smarter accounting systems. According to a report by Minefield’s, one of the top functional areas that Robotic Process Automation (RPA) may have the most benefits include invoice processing. It not a surprise that the volume and categorizing of invoicing is important, but tedious work.

In the last 12 months, Xero has processed more than $1.2 trillion of global economic activity and recently surpassed a million subscribers, giving it a unique and high-value dataset to drive insights and machine learning.

According to Xero CEO, Rod Dury, “Machine learning and automation will open up the next phase of innovation in accounting, driving a transition in the industry bigger than the move to the cloud did ten years ago. With technology doing more of the time-consuming, data entry work, we will see more accountants take on advisory and virtual CFO roles within the small businesses they support.”

“Rather than just keying in data, they’re interpreting the output - and with the power of machine learning, they’ll provide higher level advisory services that help clients feel in control of their finances which is a key human function that cannot be replaced.”

According to Xero, small businesses take an average of 1 minutes and 38 seconds to create an invoice in Xero — that works out to 13,600 hours or 6.8 years worth of time every day. For every second machine learning helps to shave off that average edit time, Xero’s latest innovation will save the world around a working month every day.

Angels & Demons

While one person may see A.I. as an opportunity, another may perceive a threat. In a 2013 University of Oxford study, Accountants and Auditors have a 94% probability of automation. A similar conclusion was made in a separate study by Deloitte, where Accountants and Tax Advisors were found to have a 95% probability of automation. This is in light of the higher education that accounts need.

It is clear that machines are apt to particular business processes that are manual and repetitive. However, it is also important to understand that workforce automation is not a zero sum game. According to Randstad, a global recruiting agency, “transactional roles like general ledger, accounts receivable and payable may be endangered, but other higher-skill roles like financial planning and analysis or business controlling would still be in high demand.”

Progress is desirable. Not necessarily easy or wanted. Whatever your situation, it is critical to ask, am I adding value? Critical thinking is an edge that humans have over machines...for now.

Ask your Doctor about Morfene to integrate Business Artificial Intelligence