The Future of Accounting: How AI Is Changing the Financial Landscape
Gazing into the crystal ball, we’ve glimpsed the future of accounting. In a world of constant change, industries are transforming, roles are shifting, and accounting is no exception. While it won’t vanish, significant changes are on the horizon.
What does this mean for you as a business leader or individual accountant? In this blog post, we explore the evolution of the accounting industry with the rise of artificial intelligence (AI) and how this might impact the financial landscape. Understanding these shifts is crucial to prevent being left behind.
The Evolution of Accounting: Automation & AI
Firstly, let’s refresh the purpose of your finance team.
The core function of a finance team is to provide timely and accurate financial reporting to help influence management’s decision making to improve business performance.
Let’s look at the first part of that equation – timely and accurate financial reporting.
How Automation is Shifting the Reporting Landscape
Financial Information as a Commoditised Product
Over the past few years, how financial reports are prepared and delivered has already begun evolving. Businesses are increasingly using offshore labour to complete routine transactional tasks, reducing the cost of the data entry that goes into reporting financial information. This has and will continue to enhance the timeliness and accuracy of those reports for the better.
More Automation, Less Human Interaction
Looking ahead five to 10 years, the industry is poised for substantial changes with the rise of AI. We anticipate a surge in automated transactions, streamlining processes from tax lodgments to interactions with the tax department and beyond. For example, bank accounts already integrate seamlessly into business finance systems such as MYOB Exo, eliminating the need for your staff to perform manual data entry.
This evolution means nearly all business transactions will occur with minimal human intervention. The integration of data from various sources, such as bank loans, equipment finance contracts, employee entitlements, and payroll information, will be seamless and continuous.
For business owners, this shift brings with it changes for the better. With automation handling routine tasks, you’ll have more accurate information quicker and cheaper. Who doesn't want something to come down in cost where you can achieve the same outcome?
While these advancements benefit those in ownership and leadership positions, individuals within finance teams subsequently face a shift in their roles. With data directly sourced and accurately placed, the routine tasks accountants once handled are diminishing. The paradigm shift of up to 99% of processes operating without substantial human involvement means the era of labour-intensive transaction processing is nearing its end. To stay relevant, accountants must embrace upskilling. Exactly which skills, we cover below.
How AI is Helping Management Make Informed Decisions
Moving beyond the delivery of financial information, the next frontier is the analysis of financial data.
Stock Market Decision-Making
AI is already making strides in financial analysis. Some listed companies on the stock exchange already solely rely on AI algorithms for investment decisions, with AI-created algorithms analysing balance sheets, scrutinising profit and loss statements and scouring the internet to inform investment choices. There is therefore no human interaction, other than the creation of the software or the code for that AI.
Extending AI to Your Business
If AI is poised to guide multimillion-dollar investments in the stock market, it's foreseeable that similar technology will permeate the wholesale, manufacturing, construction and service-based industries. Behind the scenes, AI may not only generate reports but also provide actionable insights. It may become like a trusted advisor, deciphering what's positive or negative, and giving you a holistic view of your financial health and performance for the day, month, or a specific period.
Communication: The Unreplaceable Skill
Despite automation, strong communication skills will always be irreplaceable. To remain relevant in the accounting industry over the next decade years and beyond, you must be (or become) a master communicator.
Accountants must become adept at translating complex financial information into actionable insights. AI will be able to provide information, but it won’t yet have the ability to influence. To have a future in accounting, individuals must be able to build rapport, to simplify data and present information that is not overwhelming, and thus remove the fear people have when looking at the numbers. This will all contribute to influencing decision-making, an essential skill that will distinguish good accountants from invaluable ones.
Imagine you’re in the cockpit of an airplane, where there are hundreds of controls that all contribute to the overall journey. But there are limited components that will actually get the plane from Point A to Point B, like the rudder, thrust, and flaps. Similarly, in finance, accountants are like pilots. There are many switches, but their job is to guide business leaders by knowing and highlighting what’s important. Like pointing out a specific switch and saying, “Let's use this one this month for this reason.” It’s about steering towards the right financial decisions and influencing the outcome.
For Accountants: Navigating the Future
If you’re an accountant or planning to enter the accounting field, here's the rub: familiarise yourself with reports, understand the numbers, and master the art of building relationships. Your role might evolve, and these skills will be crucial to stay relevant.
For Business Leaders: Embrace Change
Business owners and leaders, these times are promising! Your finance team costs will drop significantly, and with the right guidance, your team's intelligence will likely increase. Over the next 10 to 15 years, expect a shift in team size due to these positive changes. It's a time of excitement and opportunity, especially for those considering a career in accounting.
Learn everything we teach our clients, free
Join 400+ business owners & leaders who receive practical business & accounting tips, delivered free to your inbox every week. No fluff, just high-level expertise. Sign up now.