Does Gen AI in Accounting Live up to the Hype?

A new study from Stanford University and MIT is shedding light on whether adopting generative artificial intelligence (AI) is worthwhile for accountants at small- to medium-sized companies. The short answer: Yes.

In a survey of 277 accountants and proprietary data from 79 small- and mid-sized firms, the researchers found that gen AI makes users more productive and lets them finish tasks faster — time they use to meet with clients.

But there are fears as well: The top concern is accuracy, security of the data and also job loss if the AI ends up replacing accountants.

The most striking finding: Accountants using AI handled 55% more clients per week than those who did not use it. They also worked 8.5 percentage points less in data entry and transaction coding tasks, which amounts to 3.5 hours saved per week.

In a sign that they didn’t use the extra time for idle activities, AI-using accountants also logged 21% more billable hours. This shows that they were engaged in activities that boost revenue.

In practice, this meant accountants could spend more time advising clients, addressing complex issues and reviewing work for accuracy.

“AI is augmenting accountants’ capacity by taking over low-level tasks and allowing them to focus more on advisory and analytical work,” the authors wrote.

According to a PYMNTS Intelligence report, CFOs are gaining confidence about using AI to optimize financial processes. Accounts receivable is a particularly promising target for AI investment, with 55% of CFOs in middle-market companies willing to spend on solutions that would automate invoice approval and payment.

See here: CFOs Eye Accounts Receivable as New Direction for AI Investments

In the study, the authors used gen AI for lower-level accounting tasks such as data entry, categorizing transactions and preliminary information processing. They used software provided by an AI accounting firm whose system can “understand” receipts, invoices, bank statements and other similar inputs.

The technology’s benefits extended beyond time savings. AI adoption was linked to a 12% increase in granularity in the general ledger — the number of unique accounts used to classify transactions — resulting in richer and more informative financial statements.

It also sped up reporting cycles. On average, AI-using accountants closed their monthly books 7.5 days faster than non-users. They finalize monthly financial statements within two weeks after the end of the month, while non-users take at least a week longer. For many small- and mid-sized businesses, that speed can mean earlier detection of cash flow issues, faster tax preparation and more timely reporting to investors or lenders.

These improvements did not hurt quality of the work, according to the study. In fact, the data suggested quality improved. 

Human oversight remains essential to making AI effective in accounting.

The AI system used by the partner firms provided “confidence scores” indicating how certain it was about a transaction classification. Experienced accountants were more likely to intervene when confidence scores were low to catch potential errors. By contrast, less experienced accountants sometimes accepted AI outputs even when the system was uncertain, which could allow mistakes to slip through. 

The authors concluded: “AI augments, rather than replaces, human judgement.”

Read more:

Intuit Upgrades QuickBooks as Small Businesses Tap AI for Accounting

AI in Accounting Services May Level Playing Field for Small Businesses

Accounting Firms Aim Higher as AI Handles the Heavy Lifting

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