Will a robot take your job? In 2015, NPR released an interactive tool on their website, allowing visitors to see whether automation will threaten their job. According to the tool, which is powered by data from an Oxford University study, there’s a 95% chance that accountants will be replaced by a machine within the next two decades. Here and at an upcoming session at the CCH User Conference, I’ll discuss those emerging technologies, how they are being used today, what they mean for the future of the accounting profession, and what you can do now to prepare.
Defining the technology
Artificial intelligence and machine learning are very hot buzzwords right now. To alleviate some of the confusion surrounding them, let’s make sure we’ve adequately defined the terms.
- Artificial Intelligence (AI). The broader concept of machines being able to make decisions and perform “smart” tasks that normally require human intelligence. This includes learning (the acquisition of information and rules for using that information), reasoning (using the rules to teach approximate or definite conclusions), and self-correction.
- Artificial Superintelligence (ASI). If AI is the ability of computers to mimic human thought, ASI goes a step beyond, where a computer’s cognitive ability is superior to a human’s.
- Machine Learning. A current application of AI based around the idea that when we give a machine access to data, it can continue improving its performance without humans explaining exactly how to accomplish tasks.
- Algorithms. A process or set of rules that describe how to perform a task, solve a problem or reach a specified goal.
How these technologies are being used
Accounting and finance have been leading the charge in leveraging AI and machine learning to deliver insights, inform decision-making, and drive efficiency. Here’s how it’s being used currently:
- Data security. Malware is a huge problem for IT departments everywhere. But the institutional intelligence company Deep Instinct says that malware tends to have much of the same code as previous versions. Only two to ten percent of the files change from iteration to iteration. Their software’s learning model can handle those variations and predict which files are malware with great accuracy. Other companies make use of machine learning algorithms to look for patterns in how cloud-based data is accessed. They can then report anomalies to predict and prevent security breaches.
- Fraud detection. Machine learning is getting better at spotting potential fraud. PayPal uses machine learning to fight money laundering. Their tools compare millions of transactions and can distinguish between legitimate and fraudulent transactions.
- Transaction coding. Accounting software providers are using machine learning and detailed statistical analysis to learn how a business categorizes its invoices so it can code transactions to the correct chart of accounts codes.
- Contract review. AI-based systems are cutting the hours it takes to review contracts in the finance industry. Software can now sift through thousands of commercial loan contracts. This can reduce the time taken by humans to do so from hours to seconds.
What does the future hold?
The above are just a small sample of what is possible now. Advances in AI are happening at a rapid pace. How fast? Think about voice recognition that you may use in the form of Siri or Alexa. A Stanford study found that speech recognition is now three times faster than a human typing on a mobile phone screen. The error rate dropped from 8.5% to 4.9%, not over the course of a decade, but in just one year.
In auditing, machine learning can be applied to entire databases, eliminating the need for sampling or test of controls. In the tax department, it can be used to interpret changes to the code and case law and identify clients that will be impacted by the changes.
What technology is available now?
The big players in the profession are heavily investing in AI. Here’s a look at what is currently available.
CCH and Validis have partnered to change the way accounting firms perform audits. Validis connects to your client’s accounting application and shares their entire financial history with their accounting firm. This minimizes the back and forth requests for information that traditionally slow down the auditing process. The software not only retrieves information, but uses an algorithm to interrogate the data for accuracy, organizes the data into reports, and allows the auditor to download those reports for further analysis.
Small business owners can save time on bookkeeping by scanning and forwarding invoices and receipts to SMACC. Their system uses AI and machine learning to extract relevant data, handle the accounting automatically, and provide suggestions to improve liquidity, profitability, and more. Small business owners receive greater transparency and control over their business with real-time financial data and guidance rather than just reporting back on what has already happened.
What this means for accountants
Rather than fear the changes that machine learning will have on the profession, we see it as an opportunity to shift repetitive tasks to machines so accounting professionals can focus on higher value, more interesting work. Rather than being replaced by machines, accountants will work with them to provide more efficient and effective services to clients.
Accountants won’t go away. However, their roles will change from a focus on hindsight to providing insight and foresight to help clients make better decisions and predict outcomes with greater precision.
What to do now
Many firms are struggling to understand what the future holds. But you don’t have to wait, unprepared for what the future may bring. Here are four ways you can act now to stay on top.
- Invest in niches. Don’t think of yourself as an audit or tax firm. Instead, think of yourself as being in the business of helping clients with their business and financial problems. That can include business valuations, forensics, litigation support, M&A, retirement plans, IT, operational efficiency improvements, and cost segregation studies.
- Have a plan. The NPR tool mentioned above suggested that machines could replace accountants within the next two decades. But that doesn’t mean you can wait 20, 10, or even five years to make a plan for the future. The time to start pivoting away from data entry, crunching numbers, and focusing on compliance services is now. If you’re not working on that now, you’re already behind. Come up with a plan to use technology to augment the services you provide to your clients. Then you can market yourself as someone who can help them navigate the future, rather than someone who could be eliminated by it.
Further reading and resources
Firms hoping to survive and thrive in the face of artificial intelligence should work to understand future technologies rather than fear them.
If you really want to dig into the nuts and bolts of how the profession can respond, check out the book, The End of Accounting by Dr. Baruch Lev and Dr. Feng Gu. They argue that The financial statements we’ve been relying on are essentially useless when it comes to capital market decisions because intangibles are the only assets that create value and reported earnings no longer reflect the factors that create corporate value. They also lay out actionable alternatives.
Our consultants are helping firms build on their existing compliance and transactional services to develop successful advisory practices. The Boomer Business Transformation Playbook™ helps firms create a future vision, develop a plan to execute on that vision, and train their teams to equip them with the mindsets, skillsets, and toolsets needed to become true trusted advisors to your clients.
And of course, attend the CCH User Conference, October 22-25, in San Francisco, CA. The conference will provide a wealth of information and workshops to help take your firm to the next level. I’ll be there, talking more about the futurescape of the profession and the emerging technologies that will change the landscape dramatically.