AI accounting: revolution, impact, and future

Accountancy dates back thousands of years, and it has certainly come a long way from clay tablets and abacuses. But despite the huge evolution the practice has undergone throughout its history, right now might be the most exciting and revolutionary period accounting has ever seen.

Thanks to the advent of AI accounting, the adoption of AI tech is changing the fabric of accounting as you know it, automating manual processes, improving accuracy, and speeding up workflows. AI-driven analytics can provide you with deeper insights into financial health, and give you the data you need to carry out predictive analysis and support strategic decision-making.

This change is affecting the accounting sector at pace. To understand its impact on the future of the industry, Sage surveyed 1,000 accountants and bookkeepers across the UK. The report gives insight on the benefits and risks that come with AI use, as well as highlight the regulations needed to govern it.

Created in partnership with ACCA and leading think-tank Demos, the “Going for Growth: Creating an AI-first Future in Accounting” report explores current and future AI adoption, as well as its current and potential impacts on day-to-day work, business performance, wellbeing, and the accounting profession as a whole.

This article will explore some of the key findings from this report, including the evolution and impact of AI-powered accounting. However, one particular finding stands out: if every practice adopted AI at the same pace as industry leaders over the next 3 years, £2 billion could be added to GDP, with an additional 19,900 jobs being created.

“It’s really exciting to see that AI adoption is gathering pace amongst UK practices and that it is not just large firms reaping the benefits,” said Alistair Brisbourne, head of technology research at ACCA.

“As the report attests, professional accountants have a firm grounding in the risks associated with AI, data use considerations, and potential efficiency and productivity benefits. As an industry, it is evident that the accounting profession is well placed to utilise these skills to create clarity for businesses and support the development of appropriate frameworks.”

Alistair Brisbourne, head of technology research at ACCA

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The AI revolution shaping accounting

As accountants continue to integrate AI into their organisations, the time-honoured accounting practices of yesterday will likely be phased out—and there are certainly some aspects of it that won’t be missed. Traditionally reliant on manual data entry, ledger maintenance, and reconciliation, legacy accounting practices were time-consuming and prone to human error. All this repetitive manual effort was far from ideal, but the biggest downside of accounting’s “old ways” is that they severely limit the amount of time you have to focus on strategic financial planning.

But with AI, that’s about to change.

More than a quarter (26%) of accounting and bookkeeping practices have already adopted artificial intelligence technologies, with this number on track to rise to 52% in the next 5 years.

But how is AI actually being used in accounting right now? Firstly, it’s important to note that AI is an umbrella term for a range of artificial intelligence-powered functionalities and use cases. This umbrella is likely to get even bigger over time as the tech evolves and more ways to apply it are discovered.

Today, the impact is felt across the industry. AI tech is showing up in accounting in several different ways, including:

• Machine Learning (ML) which automates data categorisation, predicts financial trends, and detects anomalies for fraud prevention by learning from and spotting trends in historical data
• Data analytics that provides real-time insights, creates financial forecasts, and delivers smart, contextual information for more strategic decision-making
• Automation that can perform repetitive tasks like data entry, invoice processing, and reconciliation, improving both efficiency and accuracy
• Generative AI tools, such as ChatGPT and other digital assistants, that use NLP to quickly surface information from large amounts of data and generate content like text using simple, conversational prompts
• Optical Character Recognition (OCR) that helps process and digitise information by turning scanned images into editable and searchable text, speeding up data extraction and analysis

How AI is impacting the way accountants work

AI offers accountants a multitude of solutions to work smarter, not harder. Here are 5 key ways that AI can transform your day-to-day work.

1. Perform repetitive tasks—AI can automate repetitive, time-consuming tasks like data entry, invoice processing, and transaction categorisation. Tasks that previously took hours or days can be completed in minutes, cutting down on the amount of manual effort needed to get these essential tasks done, and minimising any errors.
2. Simplify data analysis for faster forecasts—AI-powered tools can analyse massive volumes of financial data far more quickly, working around the clock. This speeds up analysis and reporting, and also helps you spot trends, anomalies, and insights that might not be visible or available using traditional methods. AI can also help you generate accurate financial predictions instantly, like cashflow forecasts, by analysing historical data and market trends. This saves you time, enables you to make more informed predictions, and helps clients better plan for the future.
3. Improve fraud detection—AI excels at detecting patterns, which is great news for accountants who want to spend less time manually looking out for anomalies that might indicate fraud.
4. Extract data more easily—with tools like OCR, you can reduce the amount of time spent on data entry by automating the extraction and processing of data from sources like receipts, invoices, and bank statements. No more tediously typing each line out by hand.
5. Streamline communication—AI can also facilitate smoother, faster communication with clients. According to the report, over half of accountants are using chatbots to connect with clients. This helps them find what they need faster by easily performing tasks like answering common questions, scheduling appointments, and collecting information.

The bottom line is that with AI handling routine tasks, you can focus on higher-value activities like advisory and strategic planning, boosting your productivity, and helping you deliver better experiences for your clients.

Barriers to implementing AI accounting—and how to overcome them

AI has become very accessible, very quickly, giving you and your practice many options when it comes to integrating it into your accounting processes. You can access AI functionality through publicly available generative AI tools, purpose-built, industry-specific solutions, and, in many cases, through existing accounting solutions that are investing in adding AI to their products.

However, the implementation of any new tech comes with challenges, and AI is no exception. If you’re considering adopting AI in your accounting practice, here are a few common obstacles you might encounter, and how to overcome them.

Data quality: there’s a famous saying about data—garbage in, garbage out. AI needs good data to learn, forecast, and surface useful insight. Feeding your AI solution poor-quality data can hamper the algorithm’s performance, so make sure you put proper data governance, cleaning, and management practices in place for the best results.

Cost: initial investment can also be a barrier to adoption. However, many AI services are cloud-native and available to use on a pay-as-you-go basis, which helps reduce initial outlay. You can also go for a gradual implementation, focusing on high-impact areas first to help manage costs. In some cases, you may be able to purchase an AI upgrade for products and services you already use, meaning you don’t have to budget for a whole new solution.

AI skills gap: AI is new to everyone, so it’s natural to be concerned about a lack of AI expertise among accountants slowing down adoption. In fact, almost two-thirds (63%) of accountants and bookkeepers are worried that skill gaps will restrict how effectively they can use AI.

The good news is that many AI solutions, especially those built for an industry like accounting, are designed to be accessible and easy to use. You don’t have to be a data scientist to implement AI into your accounting processes, but of course, a bit of targeted training is still a good idea to bridge any knowledge gaps and make sure you’re making the most of your AI solution.

Regulatory compliance: AI is a powerful tool, and it must be used ethically. Accountancy firms handle a lot of sensitive and personal information about their clients and companies, so it’s critical that whatever AI systems you implement comply with appropriate data and privacy regulations. Carrying out regular audits and engaging with legal experts can help you make sure you’re fully adhering to compliance standards.

Change management: humans are often resistant to change, even when the change can make our lives easier. This opposition to modifying processes and learning how to use new tools can seriously impede AI adoption. But you can mitigate much of this obstructionism with effective change management. Make sure to involve all stakeholders from day 1 of your AI implementation project, fully communicating the benefits that they’ll enjoy, and providing proper training to help ease the transition.

Harnessing AI with AI-powered accounting software

Since the earth-shattering arrival of AI, there have been a lot of major developments. Business software creators have worked hard to bake AI into their products and help customers maximise their productivity. That means even in niche industries, you can harness AI quickly and easily through software that’s built specifically for your needs.

And there are already plenty of AI software options for accountants that bring together multiple AI technologies to help you save time and get more done.

AI-powered accounting software is designed to help businesses by automating routine tasks like data entry, invoicing, and reconciliation, boosting accuracy and saving time. These platforms offer real-time reporting and advanced data analytics that unearth deeper financial insights, fuelling better forecasting, more informed decision-making, and give you the ability to adapt to change.

The future: What’s next for AI accounting?

This fast-evolving technology will no doubt continue to shape the future of accounting for years to come. It will further enhance automation, enable more sophisticated data analysis, and improve predictive capabilities.

AI accounting software solutions will learn and grow their ability to handle increasingly complex tasks, from advanced financial modelling to strategic planning support. Plus, AI’s ability to integrate and analyse diverse data sources will help it generate more comprehensive financial insights and foster more accurate forecasting.

No one can predict exactly where AI accounting will take us next, but with the adoption of AI accounting on the rise, one thing is certain: those who blaze a trail by implementing AI tools sooner rather than later will reap the benefits.

According to the report, accounting practices that consistently use AI tools expect to grow 3 times faster in the next 3 years, increasing their revenue by 18 percentage points more than those with no plans to use AI. And, perhaps most importantly of all, AI can have a massively positive effect on wellbeing, with over half (51%) of practices using AI reporting improvements in wellbeing, including reduced workload stress and improved job satisfaction.

Find out more in the full report

If you want to learn more about how to implement AI in your accounting practice, and the benefits this innovative technology can bring to the accounting sector, you can read the full “Going for Growth: Creating an AI-first Future in Accounting” report. But accountants won’t be the only ones pouring over these findings.

“These unique insights are primarily aimed at policymakers and show the huge prize for the UK economy that AI in bookkeeping and accounting can create,” said public affairs director at UKI, Sage, Chantelle de Villiers, “as well as some of the challenges and policy solutions that will help to unleash the full potential of AI in the accounting industry.

“We’re excited to present the findings to the new UK Government and work together to put in place the right policy environment that allows bookkeepers and accountants to take full advantage of AI technologies that will allow them to focus on high-value tasks, and, in turn, unlock significant value for the wider economy.”

Chantelle de Villiers, public affairs director at UKI, Sage

The good news is that the new Labour government is expected to advance current policy to help accountants effectively harness the full potential of AI. Until then, you can download the report and learn how you can implement AI in your accounting practice and get ahead of the curve.