Machine Learning – A Change in the Accounting Horizon
The Accounting and finance segments of many businesses have usually been in a gray world, occupied with full of gray-suited aristocrats who did things in black and white (for instance recording the transactions multiple times). Times have changed and so is the accounting Industry, taking new shape with emerging technology trends.
Small and Medium Sized Enterprises (SMEs) pay less attention to accounting when compared to sales and marketing departments. Even though it is important to keep track of regular day-to-day transactions, the routine costs and revenue estimates, it is challenging for SMEs to maintain all of these support functions. Presently, the accounting sector is engaged in a moment of great transformation that might completely swing the scenario for the SMEs.
Nowadays, SMEs can also stay ahead of the curve and compete with the large firms, all credit goes to the Machine Learning (ML). While Artificial Intelligence (AI) helped in increasing the efficiency of the firm in accountancy, but there was no standard algorithm followed to make faster and better decisions. The two subsets of AI, Machine Learning (ML) and Deep Learning (DL) would have enormous impact in standardizing a particular formula and applying it to the huge data sets.
As already mentioned in our previous blogs about the AI – is a game changer for accounting sector, is acclaimed as the ability of machines to mimic human intelligence. ML is a specific subset of AI, is the ability of a machine to learn from the data, it can distinguish the patterns and make better decisions based on a predetermined set of instructions. ML enables the accounting software to learn and analyze the result of series of tasks and records how a human being can respond to it manually in order to speed up the same task for the next time. Taking this a step ahead, DL is another subset of AI, is based on the structure and function of a human brain, the interconnection of neurons. Artificial Neural Networks are algorithms which can mimic the biological structure of the brain to think what humans can think.
Adoption of ML in Accounting
Repetitive, manual and tedious jobs can be entirely eliminated so that accountants spend less time on updating their financial records and more time on strategic planning. Enterprises are adopting ML in accounting jobs to perform the monotonous tasks such as day sales outstanding (DSO) calculation, fraud claim projection, invoice payments and free up accountants to focus on analyzing, enhance decision making and can offer practical recommendations to the clients.
The Big 4 accounting firms are already on the lead as they have sufficient resources to invest in research and development, tons of data to test and decide what works and what doesn’t. KPMG uses IBM’s ML platform, Watson to help leasing companies comply with accounting standards. Delotitte introduced a ML tool named Argus, to review documents such as employment agreements, contracts, sales agreements, lease documents, financial statements and legal letters for key accounting information.
Accounting advisors spend 80% of their time in data processing and ML can reduce this amount of time to 10%, which allows them to supervise the ML algorithms and add more value to their customers. ML will transform the whole century-old accounting system and revolutionize the expensive business models and forecast the scenarios well ahead of time to make smarter and well thought out decisions.
Machine learning is no longer a tiny dot on the horizon, it is the big change in the accounting horizon.