AI in Accounting: 6 Big Trends and How To Make the Most of Them

Whether we like it or not, AI will impact our lives. However, instead of ignoring the rapid developments surrounding us, we can learn how to use them to our advantage.

As a business owner or accountant, staying relevant and competitive is paramount for success. Not leveraging the power of AI in accounting software can mean falling behind competitors or peers, being subject to inefficient and outdated processes, getting caught up in compliance issues, and missing out on opportunities for growth.

To help you stay ahead, our experts at Techopedia have collated the six biggest AI accounting trends of 2024. We also share our AI accounting best practices, top tips for staying relevant, and what the future holds for accounting with AI.

Table of Contents Table of Contents

1. Key Takeaways
2. AI in Accounting: The 6 Biggest Trends We're Seeing Today
3. AI Accounting: Best Practices and What To Watch Out For
4. What the Future Holds for Accounting With AI
5. Conclusion
6. References

Show Full Guide

Table of Contents

1. Key Takeaways
2. AI in Accounting: The 6 Biggest Trends We're Seeing Today
3. AI Accounting: Best Practices and What To Watch Out For
Show Full Guide
4. What the Future Holds for Accounting With AI
5. Conclusion
6. References

AI in Accounting: The 6 Biggest Trends We’re Seeing Today

Let’s explore the most game-changing trends in 2024.

1. Smart Bookkeeping and Data Entry

AI is revolutionizing the bookkeeping process by using advanced algorithms to categorize financial transactions. Automated bookkeeping is already a well-known feature included in the best accounting software, but AI takes it to a new level.

Before AI, automated bookkeeping and data entry required users to create rules instructing the software to put all transactions from a specific vendor into a specific account. Some more advanced software featured basic algorithms that allowed the software to recognize recurring vendors and make these rules on its own.

Contrast this with AI machine learning. AI doesn’t just process financial data—it continually learns from it. This allows its accuracy to significantly improve as time goes on. AI can even recognize and fix its own bookkeeping errors before humans notice anything is wrong.

Here are some specific ways AI-driven bookkeeping and data entry are changing the way accountants work:

• Automatic receipt and invoice capture: AI algorithms are significantly more accurate than their less advanced predecessors at extracting vendor names, dates, and amounts from invoices and receipts (which are often crumpled and hard to read). This means accountants will spend less time double-checking automated transactions for errors.
• Real-time expense tracking: AI bookkeeping engines are continuously running, which means transactions get moved into the correct accounts as soon as they occur. Accountants will no longer have to wait for a bookkeeper to categorize transactions before running reports.

2. Streamlined Invoice Processing and Expense Management

AI is adding massive efficiency gains to time-consuming invoicing and expensing processes.

End-to-end invoicing has always been a manual process for accountants. Traditionally, here’s what it involved:

1. Receiving an invoice from a contractor or supplier
2. Matching the invoice with its corresponding expense in accounting software
3. Verifying amounts and even reaching out to the contractor or supplier to confirm
4. Obtaining approval from management to pay the invoice
5. Paying the invoice

AI accounting engines use advanced algorithms to automate the entire process, from the moment the invoice is received to when it’s approved and paid.

Specific features include:

• Automated communications: AI can draft emails to contractors and suppliers to verify invoices, as well as send messages to management for payment approval. These parties will receive AI-generated messages, and they can respond as if they were in contact with a real human. This means accountants will spend less time sending out repetitive communications.
• Automatic employee spending controls: AI can learn from your budget and flag any non-approved or excess spending as soon as it occurs. Accountants can stay under budget more effectively and spend less time reviewing expense reports.

3. Automated Compliance and Tax Preparation

For accountants, tax season is a labour-intensive part of the year. AI is substantially streamlining the grunt work traditionally associated with taxes and compliance. Plus, the reduction of manual input from accountants cuts down on potential mistakes and inaccuracies.

Here’s how it does it:

• Document compilation: AI can comb through company files and assemble the vast numbers of documents needed to file taxes, allowing companies to get a jump on what is often a very time-sensitive task. Therefore, accountants can get started preparing taxes much faster.
• Automated tax deductions: AI can analyze your business’ transactions during the past calendar year and identify potential deductions that apply. It then categorizes the deductions for easy review by tax accountants, who can accept or reject the deductions based on the tax code. Overall, accountants can cut down on extensive manual research into potential deductions.

• Compliance risk assessment: AI can use its algorithms to identify transaction patterns indicative of non-compliance. Just like with deductions, it categorizes its findings for review by accountants who can either disregard or investigate further. This allows accountants to easily recognize and fix compliance issues before they result in penalties.

It’s important to keep in mind that AI datasets are often months old, and sometimes the information is flat-out wrong. Until we see significant AI upgrades, humans should still oversee the overall tax preparation process and perform complex calculations themselves.

4. Predictive Analytics

AI-based predictive analytics are more accurate and more specific than any of the predictive accounting tools of the past.

Traditional accounting analytics tools would analyze past and present data and provide general insights and calculations. Accountants could then take that information and make guesses on how the future would play out.

Through tools like Xero Analytics, AI can now do all of this on its own. It can comb through past and present financial data, recognize complex patterns and spending habits, and make a range of detailed predictions of the most likely future outcomes.

Predictive analytics showcases the trend towards artificial general intelligence or AGI. AGI is a subset of AI that refers to human-like diversity of application. Instead of simply performing specific tasks, AGI can “think” the way humans do, and make big-picture predictions that only humans could make in the past.

Here are some examples of how predictive analytics is affecting accountants:

• Scenario generation: By analyzing past sales history and even weather data, AI can generate multiple different scenarios detailing how much winter clothing a retail store should expect to sell from October through March. It can weigh the likelihood of each scenario and give specific numbers on how many items should be produced and where they should be distributed. This means accountants will spend less time estimating future outcomes and more time deciding how to proceed given the AI-generated outcomes.
• Cash flow forecasting: Being profitable and actually having cash on hand are two different things. In the past, cash flow forecasting was time-consuming and sometimes wildly inaccurate. Now, AI can analyze past spending data as well as future budgets to accurately estimate how much cash a business will have in the bank at a given point in time. This means accountants can increasingly move on from mundane, math-heavy forecasting work.

5. Customized Data Visualization

AI is revolutionizing the financial data visualization process, making it easier to create intuitive, readable charts and graphs.

How accountants choose to present financial data is almost just as important as gathering the data itself. Colleges teach entire courses on how to present data most effectively. For better or worse, these types of tasks are becoming obsolete for humans.

AI accounting software can analyze a given set of financial data, choose the type of visualization that best represents the data, and then create a chart or graph. And because AI engines can run constantly, charts and graphs can be adjusted in real-time to reflect new financial data as it comes in.

Here are some specific features:

• Easy modification: Modern AI uses a feature called natural language processing (NLP) to communicate with users in casual, everyday language. So, instead of modifying graphs by tediously rearranging financial data in Excel tables, accountants can now write requests like, “Make a streamlined, modern chart with muted colors,” and the AI will generate a visualization in response. Therefore, accountants can obtain their exact preferred chart styles with simple written requests.
• Custom visualization based on user interaction: AI is continually learning and improving. Based on how users interact with the charts and graphs it creates, AI will subtly change the layouts of its future presentations, emphasizing the data points that users are most likely to be interested in. This means accountants can spend less time modifying graphs and charts to show key data.

6. Intelligent Auditing and Fraud Detection

AI accounting has taken auditing and fraud detection to unprecedented levels of accuracy through advanced algorithms and pattern recognition.

Before AI, auditing was a drawn-out job that involved hours of manual data review—and any automated auditing tools relied on static rules programmed by humans. Now, AI-powered auditing and fraud detection software is capable of recognizing subtle discrepancies that would have been easily missed by legacy tools and even human auditors.

Key features include:

• Predictive fraud detection: Using predictive analytics, AI can anticipate where fraud and unintentional errors are most likely to crop up in future financial data. This allows accountants to take proactive measures to prevent fraud and unintentional errors before they even happen.
• Reduced false positives: Since AI continually refines and improves its algorithms over time, it will flag fewer false positives than its traditional automated predecessors. Accountants can spend less time investigating false alarms and more time investigating genuine issues.

AI Accounting: Best Practices and What To Watch Out For

Let’s look at the right ways to implement AI into your accounting infrastructure:

• Start with clear objectives: Before you implement AI accounting, decide exactly what you want to accomplish with it. Whether you want to automate bookkeeping, auditing, predictive analytics, or something else, setting specific goals beforehand can save considerable time.
• Prioritize data quality: Make sure the financial data your AI will be analyzing is accurate and up to date. Garbage in, garbage out applies here—high-quality data leads to high-quality forecasting, data visualization, and compliance suggestions.
• Choose the right tools: Choose the AI accounting software that fits best with your business and objectives. In particular, do some research on potential vendors’ scalability, integration capabilities, and overall reputation.
• Focus on training: Don’t be afraid to invest heavily in intensive AI training for accountants. AI is most productive when it’s responding to specific, detailed prompts from humans who know what they’re doing.
• Implement AI gradually: Before going all-in with AI accounting, single out a few projects for test runs. Analyze what the AI did well, where it made mistakes, and make necessary adjustments before you implement it company-wide.

Finally, be aware of over-reliance on AI in general. As we mentioned earlier, it’s extremely important to know your AI’s most recent training date, as it will be unaware of any information discovered or published after this date. For example, if your AI was last trained in August 2023, don’t rely on it for tax prep information when filing your 2024 taxes.

What the Future Holds for Accounting With AI

The path forward with AI accounting is very much uncharted, but we can still make some general, data-driven assumptions.

Will Accountants Be Replaced by AI?

It’s very unlikely that human accountants will be fully replaced by AI any time soon.

In fact, it’s more likely that AI will allow accountants to increasingly focus on more enjoyable aspects of the job, like data interpretation, presentation, and other big-picture items. This is because routine, repetitive tasks are always the first to give way to automation—as has been the case in the past.

However, the downside is that if any accountants are going to be replaced, bookkeepers and roles that involve heavy number-crunching will likely be the first to go.

That said, well-versed, qualified accountants will remain very much needed, especially in these four areas:

• Making strategic decisions: Though AI is getting much better at big-picture analysis, it still has a long way to go in terms of overall trustworthiness. A recent survey showed that ChatGPT answered more than half of all coding questions incorrectly. Human accountants are still more qualified than AI to make strategic business decisions, and they should remain in charge for the foreseeable future.
• Turning AI solutions into action: AI accounting can articulate some pretty striking and insightful solutions to a wide array of business problems. But, at the moment, that’s all it can do. Human accountants are still needed to take these AI suggestions, modify them, and turn them into a reality.
• Offering empathetic financial insight: Non-accountants tend to think accounting is all numbers, but client trust and communication are also a huge part of the job. Human accountants are still the best at empathizing with clients and coming up with solutions that cater to their emotional needs, as well as their financial ones.
• Tying everything together: When the rubber meets the road, being an accountant involves everything from checking emails to troubleshooting glitches in accounting software. The idea that an AI engine can perform all of these intermediate duties in 2024 is completely unfounded and will likely stay that way for the indefinite future.

Tips for Accountants To Stay Useful With AI

Here are some specific steps you can take to stay relevant as an accountant in the age of AI:

• Embrace technology: AI is not going anywhere, and you won’t help yourself by ignoring it. Instead, increase your usefulness and efficiency by becoming an expert at using AI accounting features.
• Develop analytical and soft skills: AI is significantly reducing the number of simple, repetitive accounting tasks. This allows you to focus on communication, leadership, empathy, and broad problem-solving skills.
• Specialize: Choose a few of the big trends listed above, and specialize in those areas. Become the best in your field at prompting AI accounting engines to give the most accurate and informative answers.
• Stay updated: The accounting landscape is constantly changing. Stay up to date on any revisions to the accounting standards or tax code. Most importantly, continue monitoring and learning the newest AI accounting trends as they develop.

Conclusion

Whether you’re a business owner or an accountant, engaging with AI accounting is the first step to benefitting from it.

We’ve collated the six biggest accounting trends to help you adapt to ever-changing industry practices. AI in accounting enables business owners to keep up with the competition and ensures accountants stay relevant.

Though the foreseeable future is anything but certain, it looks like human accountants will be increasingly using AI to streamline their financial processes across the board.

Our review of the AI-powered Xero Accounting software is an excellent place to get started implementing AI accounting in your business.

Robbie Mizzone

Editor

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Robbie Mizzone

Editor

Robbie holds a BSc in Accounting and Finance from Centenary University, New Jersey. He's worked for banks and private companies alike, including Kering (Gucci, Balenciaga), focusing on financial reporting, account reconciliation, and complex accrual analysis. An avid explorer and jack of all trades, Robbie's garnered experience in luxury hospitality, carpentry and construction, and is now backpacking solo around the world.

All Articles by Robbie Mizzone