Tag: Accounting

AIs Impact on the Accounting Industry

Posted on by dsp64

Brace for Impact

Tech entrepreneur Mark Cuban stated in recent years that artificial intelligence (AI) will dominate the landscape of the business world, so much so that entire industries could be relegated to near obsolescence.

One such industry he mentioned happens to be near and dear to our hearts: the 7,000-year-old accounting industry. After taking a few deep pulls from my handy hyperventilation bag, it got me thinking: is that truly possible? Far be it from me to spit in the face of the “experts,” but the accounting industry as a viable employment option will most decidedly not be disappearing any time soon. Will AI change our industry? Undoubtedly, and with great benefit to us and our clients, assuming we allow it.

AI has already entered our space in numerous manifestations, freeing up accountants at all levels to engage clients better and offer the expert advice we are hired to dispense. Here are some ways the accounting industry has benefitted and will continue to benefit from AI:

Easy access to financial information – most, if not all, accounting systems now have the ability to integrate data from various financial institutions and products, both historical and real-time. This allows for up-to-the-minute reporting, benefiting management and internal/external accounting staff in decision-making and forecasting. As Matt Bontrager, founder of Bookkeeping Blueprint writes in Entrepreneur, “…analyzing historical data, industry benchmarks and market trends, AI-powered systems can offer tailored recommendations and insights based on a business’s specific goals and objectives.”

Security – you know those texts you get from your bank when there is “suspicious activity?” That’s AI working for you. Our systems now have the tools to analyze patterns and red-flag irregularities. Incorporating AI systems into accounting software has dramatically enhanced fraud detection at the personal and business level, giving accountants another tool to protect the integrity of their financial information. Rather than going line-by-line through a general ledger and losing our minds in the process, we can utilize the tools AI provides to seek out oddities that may save a company some severe distress.

Improved audit efficiency – looking at the first two items above, it’s not a long leap to see that AI also benefits the auditing side of the accounting industry. Being able to set parameters and quickly search through a data set for anomalies has reduced time spent on various audit procedures compared to audits of years past. Similarly, having access to real-time client financial data allows for more efficient procedures around subsequent events (e.g., disbursements and receipts subsequent to year-end). In an article for becker.com, Jim Eicher noted, “As a result of big data and streamlined auditing, accountants are able to execute predictive and prescriptive financial analytics for their clients, which can make their clients’ financial processes more efficient, accurate and profitable. Centralized access to vast amounts of data previously dispersed across individual spreadsheets, PCs, mainframes and servers will promote faster, more efficient client audits.”

This small sample of how AI can assist accountants in their roles should inject at least a small dose of confidence in the sustainability of the accounting industry. AI should not be considered a monster coming to destroy our livelihoods; it should be viewed as a tool to make ourselves more valuable to our clients than we ever have. It’s already dramatically impacted our daily routines, even going unnoticed as we weave through newly implemented software or hidden in an update.

Accountants, however, can’t just sit back and let AI do all the work. We will need to study and understand the assistance it can provide. Resources abound related to AI. Whether taking one of the many AI-related CPE courses available or simply researching and garnering the knowledge on your own, it behooves accountants long-term to dive into this new world headfirst and learn how to harness its power.

Before long, if not already, the client will expect their accountant to offer advice and guidance related to AI tools that can benefit their business. Advancements in AI will most certainly lead to the more mundane and monotonous bookkeeping tasks being automated. As a result, greater opportunities will open for those in the industry to develop their soft skills developing strategies and truly advise their clients.

Cuban’s prediction of AI dramatically changing the business world’s landscape appears very much on point. However, where this takes respective industries remains to be seen. History has proven time and again that the future is nothing if not unpredictable, and only that change will be a constant. How this all plays out long-term will be determined later. Still, with some willingness to adapt and learn the capabilities AI offers our industry, we can continue to help our clients and ourselves sustain continued success for the foreseeable future.

A Few Predictions for 2022

Posted on by dsp64

Hold on to Your Hat

As we approach the end of 2021, we find ourselves two years into a “once-in-a-century” pandemic. Unfortunately, at the time of this blog, there is no apparent clear path to an end. Instead, the virus seems to have a life of its own, as evidenced by its various mutations. The pandemic, and our response to it, has precipitated business closures, supply chain disruptions, travel issues, employee shortages, work stoppage, interruptions in the education of our children, anger, and, most tragically, the loss of life and health. On the macro level, collectively, this has led to inflationary pressure that is likely to continue deep into 2022. In response, the Federal Reserve has indicated the likelihood of interest rate increases for the coming year.

World of Accounting. The accounting profession has not been immune to the impact of the pandemic. The profession had its hands full addressing responses to federal programs designed to ease the burden of the pandemic. Such programs included the Paycheck Protection Program, recovery rebate credits, expansion of the child tax credit, and the employee retention credit.

The new lease standard has been in discussion for several years. Despite that, we predict that many companies will be surprised by its impact. It will be impactful in two areas:

  • The amount of time it will take to capture all necessary information to properly account for leases under the new standard, and
  • The change in the balance sheet. Essentially all leases will now be capitalized on the balance sheet, both operating and finance leases.

Companies should not underestimate how labor-intensive it will be to identify all leases the company may have. That’s because leases may be scattered in several departments. Additionally, certain leases may be “embedded” in other contracts and will have to be dug out. So the advice is to not delay implementation any longer. There will also be added complexity in determining the lease term subject to capitalization and other data points necessary for capitalization and extended disclosure.

Under the legacy lease standard, operating leases were not presented on the balance sheet. Instead, the future obligations were disclosed in footnote presentation. Under the new standard, the asset and the debt will be classified on the balance sheet. This may be shocking to company management when looking at the hard numbers for the first time.

Be sure and look at our blog posted May 18, 2021, on leases. Also, consider discussing lease accounting and presentation with your accounting professional.

Federal Income Taxes. It may come as no surprise, but we predict that corporate and individual income taxes will become more complicated, not less complicated, in 2022. There is a tendency among politicians to attempt to correct economic and social ill through tax legislation along with well-meaning attempts to incorporate fairness into the code. As righteous as this may be, it often has unintended consequences. Those consequences are corrected by further legislation, which results in incomprehensible and complicated tax law.

Working Remotely From Home. The pandemic accelerated the trend of working remotely from home. For many people, working from home was not an option. However, those who could work from home, instead of the office, found both pros and cons to the arrangement. The pros included:

  • No commute. No fighting traffic to and from work.
  • Eliminating the commute frees up more time for work without extending the workday. For the period I worked remotely in 2020 and part of 2021, I found that eliminating my commute made available an additional eight productive hours per week.
  • Working remotely provided greater flexibility to handle personal matters that required attention during the workday.

The disadvantages of working remotely from home included:

  • Working remotely results in a disconnect with those working in the office. It’s the old “out-of-sight, out-of-mind” thing.
  • Remote internet meetings are great for many situations. However, there are numerous occasions when it’s a poor substitute for face-to-face interaction. For example, I have found no viable replacement for a live, person-to-person interface for training.

I predict that 2022 will move toward a balance regarding working remotely from home. The concept is not all good – nor is it all bad. Faster home internet connections and cloud computing have enhanced the possibilities of working from home. However, good old-fashion face-to-face interaction will never go out of style.

Show Buttons
Hide Buttons