Accounting is notoriously tedious, requiring long hours spent doing both high-value and low-value work. The level of effort and the associated costs of engaging the services of a Certified Professional Accountant (CPA) and, or firm will depend on several different factors.
These factors will include, in part, the type of services being provided, such as completing and organizing bookkeeping, preparing and filing tax returns, and drafting financial statements that are either audited, accountant-reviewed, or notice-to-reader. Even the most diligent and competent CPA is prone to human error and spends too much time on low-value work technology, and AI can automate and make more efficient.
In this article, we will review the potential cost of human error in accounting that can be materially reduced with the use of AI, specific areas CPAs can use AI to free up their valuable time, and how CPAs can use this time to provide more value to their clients.
Cost of Human Error
Financial reporting accuracy is paramount in the modern business environment. Regardless of stature, no business entity is immune to the ramifications of accounting and financial oversights — be they accidental or otherwise. The economic repercussions can be staggering, and the public nature of such declarations can send ripples through an organization’s reputation and erode investor confidence.
One such example?
The Molson Coors Brewing Co. saga of February 2019. The company, home to notable brands like Coors Light and Blue Moon, was required to restate its fiscal reports for 2016 and 2017 after a discrepancy amounting to $248 million, attributed to accounting errors related to deferred tax liabilities, came to light.
This misstep, attributed to an acquisition miscalculation, led to an immediate 6.4% plummet in share value. Such instances underscore the vital importance of financial diligence and precision.
Why do we tell you this?
Because AI has the potential to dramatically reduce the likelihood of errors due to human oversight or simple incorrect calculations. While the AI learning and implementation curve can be steep and costly, the potential savings through reduced human error and the negative financial knock-on effects, such as a drop in market capitalization, far exceed the upfront efforts and costs.
AI and Financial Innovation
Today, more than ever, CPAs need to innovate. Integrating Artificial Intelligence (AI) into accounting and finance functions is one avenue that can provide a transformative approach whereby CPAs can increase their value to their companies, firms, and clients.
How CPAs Can Use AI to Increase Their Value
CPAs can automate routine and lower-vale tasks using AI and reallocate their efforts towards more strategic, value-added services we will explore in more detail below. Let’s get into some specific ways CPAs can use AI to increase their value.
1) Bookkeeping
In the past decade, AI’s advancement in bookkeeping has been revolutionary. With accounting platforms like QuickBooks Online, AI analyzes and suggests transaction categories based on historical data and patterns. Intuit’s future plans involve enhancing AI capabilities to provide automated transaction processing and detect anomalies like duplicate journal entries.
2) Payroll
While AI’s penetration in payroll is still in its infancy, its potential is evident. AI can streamline payroll processes and automatically flag discrepancies for human review.
Advanced AI payroll systems delve deeper into data, detecting over-reported hours or other inconsistencies and offering unprecedented oversight and efficiency. Think of the time it takes a CPA to do this deep dive on their own. Then imagine what it could mean for you to have that time back to focus on higher-leverage tasks that will help drive the businesses they support forward.
3) Tax preparation
With its 80,000+ words, the U.S. tax code is a daunting read for any professional. Barring a photographic memory, remembering every single line of that book and not having to refer to it during your business operations is virtually impossible.
The good news is, according to PWC, “more and more tax professionals are turning to AI to leverage its capabilities and effectively manage tax operations, in general.”
When leveraging AI-enhanced tax software, machine learning algorithms work tirelessly (so you don’t have to) to identify deductions, credits, and other avenues for potential tax savings, offering a holistic manual understanding that’s nearly impossible for a human to achieve.
4) Financial planning and analysis
AI-driven tools are redefining financial planning and analysis. They enhance forecasting accuracy by deciphering intricate patterns and trends. Furthermore, real-time insights foster agile decision-making, positioning companies to stay ahead in their market. Anywhere you can get a competitive advantage is worth exploring, and in this case, that advantage can be game-changing.
How AI Helps You Offer Clients Greater Value and Increase Your Revenue
AI doesn’t just offer efficiency; it allows CPAs to scale their operations and offer enriched, higher-value services. In turn, they can grow their business by charging more for higher-level services and further increase their revenue by servicing more clients.
Next, we’ll explore some of the many ways AI helps CPAs provide their clients with greater value.
1) Tax Advice and Strategy
In the complex financial landscape of the U.S. and global economy, businesses consistently grapple with tax liabilities and compliance challenges. Tax and ancillary advisory services consume a significant percentage of engagement hours.
This is where AI can play a transformative role.
Instead of CPAs being bogged down by tedious, manual processes, AI can efficiently manage these tasks. By reducing the time spent on routine and low-value activities, CPAs can focus on tax strategy’s more intricate and high-value aspects. This frees them up to guide clients with nuanced advice tailored to their unique business contexts.
For instance, understanding the tax implications of a proposed merger, acquisition, or even a simple business expansion becomes easier. Moreover, by using AI-backed tools, CPAs can provide insights into potential tax savings, ensuring their clients remain compliant while optimizing their tax obligations.
Read this post next to learn how AI can help with regulatory compliance.
2) More Clients and Engagements
Every CPA firm operates under the constraint of time. No matter how proficient or experienced, there are limits to how many clients they can serve effectively. This is especially true during peak tax season when the number of returns to be processed skyrockets.
Enter AI.
By integrating AI-driven solutions, CPA firms can drastically reduce the time spent on each tax return. Not only does this automation ensure a higher degree of accuracy through reduced human error—errors that might lead to penalties or restatements—it also speeds up the process significantly.
This efficiency means CPAs can manage a more extensive client base, leading to increased revenue through a larger client base.
A quicker turnaround time also boosts client satisfaction, potentially leading to more referrals and a solidified reputation in the market. That’s right: CPAs can get ahead of those “When will my tax return be done?” messages with the help of artificial intelligence. AI doesn’t just augment the CPA’s toolkit; it amplifies their capacity to serve and grow.
3) Leveraging Data Insights
Finally, AI-driven solutions can help CPAs access and process data more quickly. By leveraging the latest technologies, CPAs can easily gain insights from large datasets, helping them identify trends and potential growth areas for their clients.
One example is how AI-backed tools can provide advanced analytics on sectors or industries a client may consider entering. Such insights could be immensely valuable to any strategic decision-making process.
Conclusion: How CPAs Can Use AI to Increase Their Value
Integrating AI within the accounting and finance function isn’t just a trend—it’s a transformative shift that is here to stay. For CPAs, embracing AI means unlocking untapped potential, offering greater value, and shaping the future of business.
In summary, if CPAs leverage AI’s power to automate mundane tasks and streamline workflows, They can free up time to focus on higher value-adding services. Then, they not only have more time to increase their portfolio of clients, but can also engage more with the strategic aspects of their role.
In turn, they can provide clients with greater insight and help them make informed decisions that are both tax-efficient and financially sound.
Ultimately, AI won’t replace CPAs but rather allow them to focus on higher-value tasks, create more impactful solutions for their clients, and provide high-value services to more clients, thereby increasing service revenue.
If you want to stay current on the latest accounting, finance, analytics, and AI trends, be sure to check out other Datarails blog articles.
Frequently Asked Questions (FAQs)
Now let’s get to some of your burning questions about leveraging AI for CPAs.
How can CPAs use AI?
Artificial intelligence offers many applications for CPAs. To begin, AI can automate time-consuming, repetitive tasks such as data entry, transaction categorization in bookkeeping, or preliminary tax calculations.
Beyond automation, AI’s predictive capabilities can be leveraged for advanced financial forecasting, identifying trends, and detecting potential anomalies in financial statements.
Machine learning, a subset of AI, can assist in tax preparations by analyzing vast datasets to provide insights on potential tax savings and optimize deductions. AI-driven chatbots can even handle initial client inquiries. That way, CPAs can focus on more complex client interactions.
How will AI affect CPAs?
While some fear AI might replace traditional accounting roles, the truth is more nuanced. AI will predominantly take over routine, manual tasks, allowing CPAs to delve deeper into strategic advisory roles.
The analytical capabilities of AI will provide CPAs with richer insights, allowing them to offer more value-added services like strategic financial planning, detailed tax strategies, and business advisory services.
This transition means the modern CPA must blend their financial expertise with technological adeptness, understanding, and leveraging AI tools to maximize their service offerings.
In the long run, AI will actually elevate CPAs’ role, making them strategic partners for businesses.
How can AI add value to the company?
AI’s value proposition for companies is multifaceted.
It brings unparalleled efficiency, significantly reducing the time taken for data processing, financial analysis, and reporting tasks.
How does AI benefit accountants?
Accountants stand to gain immensely from the advent of AI. For one, the drudgery of manual data entry, reconciliation, and basic calculations can be entirely handed over to AI tools, allowing accountants to focus on more complex and intellectually stimulating tasks.
This enhances job satisfaction and allows accountants to engage more with the strategic aspects of their roles. AI can assist in detecting fraud or anomalies in financial statements, acting as an additional layer of oversight and ensuring the integrity of financial reports.
With AI handling routine tasks, accountants can also continuously learn, upskill, and focus on areas like tax advisory, financial consulting, and business strategy.
With the efficiencies brought in by AI, accountants can manage a larger portfolio of clients, leading to increased professional growth and revenue streams.