Beyond Spreadsheets: Generative AI's Role in Reshaping Modern Accounting

Generative AI is transforming the accounting industry with innovative approaches to task automation, error reduction, and professional time management. Finance departments facing staff shortages and mounting workloads are turning to this technology to address their challenges. For instance, generative AI can process invoices five times faster than manual methods, freeing up to 70 percent of accounts payable staff time for strategic activities, according to the IOFM white paper "Augmenting Your Finance Team with Generative Artificial Intelligence." This shift allows accounting professionals to focus on higher-value tasks like optimizing vendor relationships, onboarding new divisions, and identifying new revenue streams, ultimately increasing productivity and optimizing activities that directly impact the balance sheet.

What is generative AI in accounting?

Generative artificial intelligence (GenAI) in accounting goes beyond typical conversational chatbots or generation tools for content or images. This sophisticated technology leverages machine learning algorithms to analyze existing complex financial data to generate new novel insights, forecasts, and solutions. Unlike traditional AI, which merely processes existing information, GenAI in accounting can create detailed financial reports, provide real-time financial advice, and tackle intricate problem-solving in finance departments.

In the accounting realm, GenAI's capabilities extend far beyond basic automation. It can handle nuanced tasks such as interpreting complex tax regulations, conducting thorough audit preparations, and performing advanced financial modeling. This allows accounting professionals to shift their focus from routine data entry and reconciliation to high-impact activities like strategic financial planning and risk management. According to a KPMG survey cited in the ICONIQ Growth State of AI report, 83 percent of respondents use AI for financial planning, including predictive models, scenario creation, and budget insights. This widespread adoption illustrates the significant impact of AI on core accounting processes, allowing finance teams to focus on strategic activities that drive business growth.

How are companies already using generative AI in accounting?

Companies are leveraging GenAI in various ways to transform their financial operations. According to a Deloitte survey, 42 percent of CFO organizations are already experimenting with GenAI, while 15 percent are incorporating it into their business strategies. Some key applications include:

1. Document processing and analysis: GenAI efficiently handles large volumes of financial documents, extracting key information and summarizing complex data. This capability allows finance teams to quickly analyze contracts, invoices, and financial statements, leading to faster decision-making and reduced processing costs. For example, a company could use GenAI to review thousands of vendor contracts, identifying cost-saving opportunities and potential risks, ultimately improving profitability through better supplier management.

2. Conversational finance: AI-powered chatbots using GenAI provide natural, context-aware responses to financial queries. This technology can handle both customer inquiries and internal communications, reducing the workload on finance staff. For instance, a GenAI chatbot could assist employees with expense report submissions or company card requests, decreasing processing time while also freeing up finance personnel for more strategic tasks that drive growth.

3. Financial question answering: GenAI interprets complex financial queries and generates accurate, coherent responses based on extensive datasets. This capability enables finance professionals to access critical information quickly, enhancing decision-making processes. For example, a CFO could ask the GenAI system (or agent) about the potential impact of a market trend on the company's revenue, receiving instant insights that inform strategic planning and potentially uncover new revenue or market opportunities.

4. Financial report generation: By automating the creation of structured financial reports, GenAI allows for customized, user-specific outputs. This not only saves time but also enables more frequent and detailed reporting. A company could use this technology to generate daily cash flow reports or tailored investor presentations, improving transparency and potentially attracting more investment.

5. Financial analysis and forecasting: GenAI analyzes historical data to identify complex patterns and make predictive analytics about future trends, asset prices, and economic indicators. This deep analysis can uncover hidden opportunities and risks, informing strategic decisions. For instance, a retailer could use GenAI to forecast demand across multiple product lines and regions, optimizing inventory management and maximizing profitability through more accurate supply chain planning.

State of the market and potential impact if adoption is delayed

The adoption of GenAI in accounting is gaining momentum. Deloitte's CFO Signals Q4 2023 report highlights a significant disparity: while only 10 percent of finance departments surveyed were using AI in production, 80 percent of CFOs intend to incorporate more automation and digital technologies, including GenAI. This gap between current adoption and future plans underscores the growing recognition of AI's potential to transform finance operations.

For organizations yet to invest in AI, this trend marks a pivotal moment. Delaying adoption could lead to a competitive disadvantage, as these companies may struggle to match the efficiency and insights of their AI-equipped counterparts. Late adopters might also face difficulties in attracting top talent, as skilled professionals increasingly gravitate towards roles that utilize cutting-edge technologies.

Moreover, organizations slow to embrace AI risk falling behind in crucial areas such as fraud detection, real-time financial analysis, and predictive forecasting, which are quickly becoming industry standards. The ICONIQ Growth State of AI report further emphasizes this shift, noting that 75 percent of surveyed companies have already applied generative AI to at least one product use case.

In the finance sector specifically, a KPMG survey revealed that 83 percent of respondents are leveraging AI for financial planning, including predictive modeling, scenario analysis, and budgeting insights. Companies hesitating to adopt AI may soon find themselves playing catch-up in an environment where data-driven decision-making and automated processes are becoming the norm.

How enterprises are leveraging and adopting generative AI in accounting

Enterprises are implementing GenAI in their accounting processes through a methodical approach. The IOFM white paper outlines key steps for successful adoption:

1. Define clear goals for GenAI implementation.

2. Evaluate current tech infrastructure and workforce capabilities.

3. Select appropriate AI tools considering functionality, user-friendliness, and integration potential.

4. Clean and organize data to optimize AI learning.

5. Train staff and revise hiring practices to prioritize AI and digital technology expertise.

6. Test GenAI tools in pilot programs before full deployment.

7. Set up ongoing performance monitoring and measurement systems.

8. Create governance frameworks to manage AI usage and data handling.

To guide this implementation process, organizations can also leverage AI maturity models. These models provide a structured framework for assessing an enterprise's current AI capabilities and charting a course for advancement. For instance, the Finance AI Maturity Model from Gartner outlines five stages of AI adoption: Reactive, Proactive, Optimized, Intelligent, and Autonomous. By identifying their current stage, finance teams can develop targeted strategies to progress through each level, ultimately achieving a state where AI systems can independently manage complex financial processes and decision-making.

Use cases for generative AI in accounting

Generative AI offers numerous applications in accounting, particularly in Accounts Payable (AP) processes. Some notable use cases include:

1. Invoice processing: GenAI can automate end-to-end invoice processing, from data ingestion to payment execution. For example, Vic.ai has processed over a billion invoices with up to 99 percent accuracy, helping clients achieve significant cost and time savings.

2. Compliance and risk management: AI tools can improve compliance in contract management, run background checks on suppliers, and identify potential risks.

3. Fraud detection: GenAI can process massive amounts of data in real-time, flagging anomalies and preventing fraudulent activities.

4. Supplier inquiry resolution: AI can automate responses to supplier questions about invoice and payment status.

5. Vendor performance tracking: GenAI can analyze vendor data to identify areas for improvement and optimization.

6. Financial forecasting: By synthesizing vast amounts of financial data, GenAI contributes to more accurate and comprehensive financial forecasts.

The impact of GenAI on accounting professionals

Generative AI is not just about improving processes; it's also about empowering accounting professionals. A significant portion of an AP practitioner's day is consumed by manual, repetitive tasks, creating a fertile ground for burnout and job dissatisfaction. According to IOFM, 84 percent of a typical AP practitioner's time is spent on such activities. This aligns with findings from Ringover, which reports that 82 percent of finance and insurance workers have contemplated leaving their positions due to the tedious nature of their work. GenAI presents a promising solution to address these challenges and improve job satisfaction in the accounting field.

By automating routine tasks, GenAI allows accounting professionals to focus on more fulfilling, strategic work. This shift is particularly appealing to younger generations entering the workforce, with one-third of employees stating they would switch jobs for an opportunity to use GenAI.

As Brian Cassidy, Audit & Assurance partner at Deloitte & Touche LLP, notes, "GenAI can be a powerful tool for professionals to more efficiently prepare effective analysis or documentation and enhance their judgments in a variety of areas, including financial planning and research."

Generative AI is set to revolutionize accounting operations at their core. As CFOs increasingly adopt and integrate GenAI solutions, this technology is becoming essential to finance functions. By automating routine tasks, delivering real-time insights, and facilitating more strategic decision-making, generative AI in accounting is not merely a passing trend – it's the cornerstone of future financial operations. Importantly, leveraging AI can help organizations scale during acquisitions or expansions without necessarily expanding their team size. This means companies can handle increased financial complexity and volume as they grow, potentially maintaining efficiency with their existing workforce, thereby optimizing resources and improving overall productivity.