With the emergence of ChatGPT – the AI chatbot from OpenAI – the world has taken notice of how advanced AI technology has become. There are fears of AI taking on work of all kinds, from generating art and written posts, to automating tax returns and bookkeeping.
At face value, the AI revolution could be a great thing for the accounting and bookkeeping world. It can speed up and automate processes, have potential cost savings, and more efficiently use resources.
That’s not always the case though, some things just require a more human touch. Nuance, expertise, personality – a human connection is required for your financial data. These things aren’t found in AI.
Pros and Cons of AI in Accounting and Bookkeeping
Like anything else, the use of AI has advantages and disadvantages. Let’s dive into why you may or may not want to make the decision of using AI for your business.
Pros
- Increased Efficiency: AI can automate routine tasks such as data entry and bank statement reconciliation.
- Scalability: A business can scale its operations without hiring additional staff for its accounting department.
- Reduced Data Entry Errors: AI – when operating correctly – won’t make data entry mistakes that humans are prone to making. AI can help reduce the number of errors made on data entry tasks.
Cons
- Cybersecurity Risks: Computer systems are vulnerable to cyberattacks, even for the world’s largest companies. A data breach of an accounting AI system could be devastating for a business.
- No Human Judgement: AI lacks the nuanced experience and skill of humans to make educated decisions.
- Dependence On Technology: If the AI system a business is using fails or the company operating the system folds, the business suffers being left without critical financial data.
How Is AI Used In Accounting and Bookkeeping?
Currently, the best use of AI is for automating repetitive tasks and streamlining processes. AI can also be used to glean insights from data that aren’t otherwise obvious at first glance.
Let’s look at some of the ways AI is being used in the industry right now.
Data Entry
AI tools are able to extract data from documents like receipts or invoices and enter that data into various accounting systems. This can help free up time for an accountant to spend more time on strategic accounting decisions and analysis.
Bank Statement Reconciliation
Accounts may now use AI to automatically flag discrepancies between bank transactions and accounting statements for further investigation by accounting staff.
Fraud Detection
AI systems can be trained to identify irregular spending patterns and outsized purchases. When these transactions are identified, accounting staff can be notified for further investigation.
Cash Flow Forecasting
There are AI tools now to help analyze historical financial data and generate forecasts for future cash flows.
AI can be a helpful tool in some circumstances, but as your mom probably told you, there are two sides to every story. AI also comes with significant risks that cannot be discounted when considering the financial implications on your business.
What Risks Are There For Using AI In Accounting and Bookkeeping?
AI can be a helpful tool in many cases, but relying on AI too heavily can lead to significant risks. We have outlined some of those risks you should be aware of when considering using AI in your business’s accounting and bookkeeping.
Cybersecurity Risks
No matter how secure a computer system may seem, they are vulnerable to cyberattacks. Having your business’s or customers’ sensitive financial data accessed could be catastrophic.
A data breach of these computer systems could lead to bank account numbers, social security numbers, and other sensitive data being accessible to its hackers.
Malware attacks can render the system inoperable or – in a worst-case scenario – access and steal data from the system while being completely undetected by its user.
Errors In The AI’s Training
AI is only as intelligent as the data it is trained on. AI doesn’t get its intelligence from just anywhere, it’s creators train the AI using data sets. If this data doesn’t fit your nuanced use case or business’s situation, you may be getting ill-advised advice.
The companies who develop these AI systems also introduce biases into them to help them analyze data accurately. These biases also introduce more risk to the platforms however, if they aren’t tuned to your business’s specific circumstances, they will miss the nuances that a human accountant will otherwise understand and consider.
Lack Of Transparency
A great accountant is one who is a great communicator. An AI system can’t and won’t explain to you how it arrived at a set of conclusions. It can’t communicate its reasoning for decisions and we can’t understand how its algorithms work to understand its biases.
Does Haven Financial Use AI?
At Haven Financial we’ve built our company on being awesome human beings to work with. We do not use AI to handle your accounting, we believe that some things just can’t be replaced by a computer.
Haven Financial is closing in fast on a decade as a company and combined we have decades of specialized experience that allows us to consider your unique circumstances and the nuanced factors that go into analyzing financial statements.
We intentionally operate with a lean team so we can stay focused, collaborate, and support each other to serve you in the best way possible.