How to use AI in accounting to run your firm efficiently

I’m not an AI expert. But, I use AI tools every day to run my agency.

And there’s no shadow of a doubt in my mind that the benefits of AI are real — especially when it comes to accounting automation.

The AI accounting firm of tomorrow will most likely be a smaller firm that can handle the same workload as some of the largest accounting firms today.

Automating repetitive data entry tasks, reducing human error from financial processes, reconciling client books, and categorizing transactions are just the tip of the iceberg when it comes to what AI will do for CPAs and accounting firms.

In essence, the accounting profession will change — for the better. CPAs, CFOs, and firm owners will all have their own AI assistant improving their productivity tenfold.

In this article, I’m going to walk you through what I’m currently seeing other accounting firms do to leverage AI. I’ll also go over how to incorporate AI into your existing workflow and talk about tools that are leading the way right now. Alright, let’s get into it.

How is AI used in accounting?

With artificial intelligence (AI) on the rise, it’s fairly obvious that this new technology is going to completely change the way we provide services and get work done. Everything from accounting, law, marketing, tech, healthcare, and much more will be impacted by AI.

And it’s currently hard to tell exactly what will happen. 100 years ago, no one would have ever thought that being a virtual bookkeeper would even be a thing. Similarly, AI will change the accounting landscape in a way that will bring new jobs and workflows we have yet to even think about.

But, with where we are today, and where we are headed in the next few years, it’s evident that AI is going to help a lot of accounting firms become more productive. AI will also reduce human error and help with our decision-making process. This makes it very promising when it comes to automation, filing, and reporting of financial data.

Here are three ways accounting firms can leverage AI:

1. Automating repetitive tasks
2. Enhancing data accuracy and client reporting
3. Improving financial forecasting

Alright, let’s take a deeper look at each of these.

Automating repetitive tasks

One of the tried and true ways AI is going to help accounting firms is by automating repetitive tasks. We are already seeing this in tools like Copilot Automations — where accounting firms can automate their client onboarding process and documentation.

Many AI-powered solutions can handle data entry, invoice processing, and account reconciliation, freeing up your staff to focus on more strategic and client-facing activities. For example, AI tools like Xero and QuickBooks Online use machine learning algorithms to automatically categorize transactions, saving countless hours of manual work.

It’s something we’ve already seen in the AI space for some time now. But, we will continue to see this across every aspect of our workflows — from finding clients to retaining them for a long time.

Enhancing data accuracy and client reporting

Besides just automating time-consuming tasks, AI will also help reduce human error — especially when it comes to accounting. AI can help improve the accuracy and consistency of financial data by identifying and correcting errors in real time.

By leveraging natural language processing (NLP) and machine learning, AI tools can analyze large volumes of financial data, spot anomalies, and provide alerts when issues arise. This leads to more reliable financial statements and reports for your clients. AI-driven insights can also help you provide more valuable and actionable advice for your clients, like identifying cost-saving opportunities or highlighting areas for growth.

Improving financial forecasting

One of the biggest areas of opportunity in AI is to use any historical data to help you make data-informed decisions for the future. In accounting, this can be seen when providing financial forecasting.

Whether you’re working with startups to help them with their bookkeeping and taxes, or you’re working with individuals, helping clients understand the health of their finances is critical to building trust with you and your firm for the long run.

AI algorithms can analyze vast amounts of historical data to identify patterns and trends, enabling more accurate financial forecasting. By considering a wide range of variables, such as market conditions, customer behavior, and seasonal fluctuations, AI can help your firm provide more reliable and timely financial projections. This empowers your clients to make informed decisions about their financial future, such as planning for investments, managing cash flow, and setting realistic growth targets.

Beyond these core areas, AI is also being used in accounting for tasks such as fraud detection, risk assessment, and compliance monitoring. As AI technology continues to evolve, it's likely that we'll see even more innovative applications in the accounting field.

Will AI replace a CPA?

AI will not completely replace the need for a CPA. It's important to note that AI is not a replacement for human expertise and judgment. Instead, AI should be viewed as a powerful tool that can augment the work of accounting professionals, allowing them to provide more valuable and strategic services to their clients.

By embracing AI and leveraging its capabilities, your accounting firm can operate more efficiently, deliver better results, and stay ahead of the curve in an increasingly competitive industry. While it's true that AI can automate many tasks traditionally performed by accountants, it's unlikely that AI will completely replace the role of a CPA in the foreseeable future.

The role of a human CPA in an AI world

Human CPAs bring a unique set of skills and qualities that cannot be easily replicated by AI. These skills include:

1. Judgment and decision-making: CPAs use their professional judgment to interpret financial data, assess risks, and make strategic decisions. This requires a deep understanding of the client's business, industry, and goals, as well as the ability to consider qualitative factors that may not be captured by AI algorithms.
2. Emotional intelligence: Accounting is not just about numbers. It's also about building trust and relationships with your clients. CPAs use their emotional intelligence to communicate effectively, provide empathy and support, and navigate complex interpersonal situations.
3. Creativity and problem-solving: While AI can analyze data and identify patterns, it lacks the creativity and lateral thinking that human CPAs bring to problem-solving. CPAs can think outside the box, develop innovative solutions, and adapt to unique challenges faced by their clients.

So, don’t worry. If you’re a CPA, your role is still needed. However, it’s important to note that AI will most likely make it so that humans focus on the highest ROI tasks. As in, we’ll likely see large firms shrink down in headcount as those who performed manual tasks will be replaced by automation.

In the future, it’s likely that a 100-employee firm and a 20-employee firm (leveraging AI) will be able to get the same amount of work done.

Using AI to provide higher-value services

Rather than replacing CPAs, AI is more likely to change the nature of accounting work. By leveraging AI to handle routine tasks and provide data-driven insights, CPAs can focus on offering more strategic and advisory services to their clients. For example:

1. Business strategy: CPAs can use AI-generated insights to help clients make informed decisions about their business strategy, like identifying growth opportunities, optimizing pricing, or expanding into new markets.
2. Risk management: AI can help CPAs assess and monitor financial risks more effectively, allowing them to provide proactive advice on risk mitigation and compliance.
3. Financial planning: By combining AI-driven forecasting with their professional judgment, CPAs can offer more accurate and personalized financial planning services to their clients, helping them achieve their long-term goals.

While AI will undoubtedly change the accounting landscape, it is unlikely to replace the need for human CPAs entirely. Instead, AI will augment the work of CPAs, allowing them to provide more valuable and strategic services to their clients. By embracing AI and adapting to the changing industry, CPAs can position themselves for success in the era of artificial intelligence.

Can AI do my bookkeeping?

One fear many accounting firms may have is that their clients may just end up using an AI bookkeeping tool to manage their own finances. But an important thing to remember is tools like QuickBooks didn’t replace the need for accounting firms and CPAs.

However, bookkeeping is one of the most time-consuming and repetitive tasks in accounting — making it a prime candidate for automation through AI. In recent years, AI-powered bookkeeping solutions have become increasingly sophisticated, offering businesses a more efficient and cost-effective way to manage their financial records.

So, this is actually great news for accounting firms.

AI will allow you to speed up your workflow for your clients by automating many of the bookkeeping tasks you and your team may currently be doing. Here are a few things AI bookkeeping tools can take off your plate:

1. Data entry: AI can automatically extract data from receipts, invoices, and bank statements, eliminating the need for manual data entry.
2. Transaction categorization: By learning from historical data and user feedback, AI can accurately categorize transactions into the appropriate accounts, such as revenue, expenses, or assets.
3. Bank reconciliation: AI can match transactions between bank statements and accounting records, identifying discrepancies and keeping the accuracy of financial data.
4. Invoice processing: AI-powered tools can generate, send, and track invoices, as well as automatically record payments received.
5. Financial reporting: By integrating with other accounting software, AI bookkeeping solutions can generate real-time financial reports, such as balance sheets, income statements, and cash flow statements.

There are tons of opportunities for AI in bookkeeping.

But, as mentioned at the start of this section, QuickBooks didn’t replace CPAs. So, keep in mind that the most effective approach to bookkeeping in the era of AI is likely to be a collaborative one — where AI-powered tools are used to automate repetitive tasks and provide real-time data, while human accountants focus on reviewing, interpreting, and acting on that data.

By combining the efficiency of AI with the expertise of humans, accounting firms will be able to keep the accuracy and integrity of their financial records — while also gaining valuable insights to drive growth and profitability for their clients.

Choosing the right AI software for your accounting firm

As more accounting firms recognize the benefits of incorporating artificial intelligence into their operations, the market for AI accounting software will grow. And, it already has!

With so many options available, it can be challenging to determine which solution is the best fit for your firm. There are tons of opportunities to incorporate AI into every stage of your client journey.

Some tools will help you automate repetitive bookkeeping tasks. Some will help you automate your client onboarding and invoices. And some will help you with filing and reporting. Once you identify what areas of your business you want to automate, it’s time to look for software that fits those needs. Let’s go over that.

What to look for in AI accounting software?

Because there are so many AI accounting tools out there, and more that will continue to pop up, it’s important to have discernment and know what tools make the most sense for your business and clientele.

Here are some key factors to consider when evaluating AI accounting software:

1. Security: Given the sensitive nature of financial data, security should be a top priority when selecting AI accounting software. Look for solutions that offer data encryption, secure cloud storage, and regular security audits. Security should not be taken lightly.
2. Functionality: This one is obvious, but assess the specific features and capabilities you’d want from a tool. The best place to start is to look at areas of your business that you could easily train someone else to do. Think about things like automated data entry, financial analysis, and reporting. These can help you see an immediate ROI by “outsourcing” your most time-consuming, repetitive tasks.
3. Integration: Evaluate how well the AI software integrates with your existing accounting systems, such as QuickBooks, Xero, or Sage. Seamless integration is crucial for ensuring data accuracy and minimizing manual data transfer.
4. Scalability: Choose a solution that can grow with your firm. As your client base expands and your needs evolve, your software should be able to accommodate increased data volumes and new functionality requirements.
5. Customer support: Evaluate the level of customer support provided by the software vendor. Having access to responsive and knowledgeable support can be invaluable when implementing and using AI accounting tools.
6. Ease of use: Consider the user interface and overall ease of use of the software. Your team should be able to quickly adapt to the new tool without extensive training or disruption to their daily workflow.

These six factors are essential. Things like pricing will vary based on the tools. But regardless of what AI tools you use, make sure they are secure, have the right features you need to fulfill your services, and have a support team that can help you when you need it.

Copilot: A tool used by thousands of AI accounting firms

With so many tools out there, and so many new ones to come out, it can become overwhelming trying to manage your tech stack. While not specifically an AI-only tool, thousands of accounting firms use Copilot to manage their business.

Copilot is a comprehensive practice management platform that integrates with various AI-powered tools, making it easier for firms to streamline their operations and leverage the benefits of artificial intelligence.

Some of the key features of Copilot include:

• Centralized client management: Copilot provides white-labeled client portals for managing client information, communication, payments, and collaboration — all through your website. This includes secure document sharing, task assignment, and progress tracking.
• Seamless integration with AI tools: Using Zapier, Copilot can integrate with a wide range of accounting tools, such as automated bookkeeping solutions and financial analysis software. It can also integrate with other tools you already use in your firm like meeting schedule software or project management software. Check out the full list of integrations here.
• Customizable workflows: Copilot enables firms to create customized workflows that align with their unique processes and client needs. This includes automating repetitive tasks like client onboarding, setting up approval processes, and defining standardized procedures.
• Real-time insights and reporting: With third-party integrations, you can embed real-time data and analytics dashboards into your clients’ portals. This empowers your clients to log into their client portal and view, download, upload, or ask questions related to their documents.
• Scalability and adaptability: Copilot is designed to grow with your firm, accommodating increasing client loads and evolving technology needs. As new AI tools emerge, Copilot can easily integrate them into your existing stack, making sure your firm stays at the forefront of innovation.

By using Copilot as your main control panel for your accounting firm, you create a great experience for your clients while also streamlining your own admin tasks and responsibilities. With Copilot’s ease of use, and ability to integrate with other tools, you bring all of your existing accounting tools under one roof — helping you make better business decisions for your firm.

If you want to see what Copilot can do for your business, be sure to play around with the demo portal designed specifically for accounting firms.

The future of AI in accounting

As we’ve gone over in this article, it’s pretty evident that AI will have a positive impact on the accounting industry. The future of AI in accounting is bright, and its influence is set to grow even more significantly in the coming years.

However, I should also preface by saying that it’s tough to tell exactly what advancements we’ll see. Right now, we can look at the tools that already exist (as we’ve done in this article), what types of jobs are at risk of automation, and predict trends for the future. Beyond that, it’s tough to tell exactly how AI will impact not just accounting but all industries.

Here are a few trends I currently see with AI in accounting:

1. Increased automation of routine tasks: AI will become more sophisticated, automating a wider range of routine accounting tasks, such as data entry, transaction categorization, and financial reconciliation. This will allow accounting professionals to focus on higher-value activities, such as strategic planning, advisory services, and client relationship management.
2. Enhanced data analysis and insights: AI-powered tools will excel at analyzing large volumes of financial data, identifying patterns, and generating actionable insights. This will enable accounting firms to provide more proactive and data-driven advice to their clients, helping them make informed decisions and optimize their financial performance.
3. Greater integration with other technologies: AI will be increasingly integrated with other emerging technologies, such as blockchain, cloud computing, and the Internet of Things (IoT). This integration will create new opportunities for automating and streamlining accounting processes, enhancing data security, and enabling real-time financial monitoring and analysis.
4. Personalized and predictive services: As AI learns from previous client data, it will provide more personalized and predictive services to your existing and future clients. For example, AI could analyze a client's financial history, market trends, and industry benchmarks to generate tailored financial forecasts, risk assessments, and investment recommendations.
5. Collaborative intelligence: The future of AI in accounting will be one of collaboration rather than replacement. Human accountants will work alongside AI-powered tools, leveraging their respective strengths to deliver superior results. AI will handle the bulk of repetitive and data-intensive tasks, while human professionals will provide strategic guidance, emotional intelligence, and ethical oversight.
6. Continuous learning and adaptation: AI systems will continuously learn and adapt as they are exposed to more data and feedback, becoming more accurate and efficient over time. This will require accounting firms to adopt a culture of continuous learning and innovation, staying up-to-date with the latest AI developments and best practices.

To prepare for the AI-driven future of accounting, you should start by educating yourself about how AI is impacting the job landscape, asses the core needs of your clients, developing a roadmap to automate some repetitive tasks in your business, and collaborating with AI software and service partners.

By proactively adopting and integrating AI technologies, accounting firms can position themselves for success in an increasingly automated and data-driven world. Those who embrace the future of AI in accounting will be better equipped to deliver value to their clients, stay competitive, and thrive in the years ahead.