Artificial intelligence (AI) has arrived in the accounting profession in a big way. The good news is it’s streamlining accounting tasks, finding patterns in data you can take action on, and generally making things better. Here are just a few places we’re seeing AI and machine learning impact accounting.

Transaction Coding

Most systems have incorporated some form of machine learning into transaction coding. When bank feeds are imported, each transaction needs to be coded to add the account code in the chart of accounts.  Class, tracking codes, and other custom data may need to be added as well. Rules can be set so that the accounting application can pre-code the transactions; in this case the accountant simply approves or corrects the entry.

Invoice Fetching

It starts with a picture of a receipt. Invoice fetching applications can turn pixels into data using sophisticated OCR (optical character recognition). The data is then turned into a business transaction that can be imported into an accounting system.

Auditing

The books of many government agencies, nonprofits, and large businesses need to be audited on a regular basis. Auditing is an expensive process. Smart programs can review a company’s data and assess where the risks and anomalies are so that the audit program can be modified to focus on the more important parts. This reduces risk and cost for everyone involved. 

Accounts Payable

Artificial intelligence can help to speed up the matching of purchase orders, packing slips, and invoices so that accounts payable tasks are streamlined.  It can also automate approvals and look for duplicate invoices to avoid overpayments. 

Accounting Tasks That Are Clerical

Robotic Process Automation (RPA) is a platform that allows users to create automation without involving the IT department. Think Excel macros or Zapier on steroids. Any workflow with a mind-numbing set of clerical steps is a candidate for RPA. 

AI allows accountants to spend less time on routine tasks and more time on higher-level analysis work. As AI becomes more affordable for small businesses, everyone will benefit from this long-term trend.

In small business, accounting refers to a set of tasks that revolve around maintaining a general ledger – your books — and preparing financial statements. Beyond small business accounting, there are many more aspects to accounting. In this article, we’ve prepared a glossary of accounting terms so you can discover the larger world of accounting.

Cost accounting. This type of accounting looks at the cost of items for sale. It’s especially useful in manufacturing, construction, or even restaurants where dozens or even hundreds of components are purchased and assembled to make the items that are for sale. Cost accountants account for and evaluate these costs to determine when they are too high or low and need to be repriced or purchased in a different way. 

Cost accounting can be applied to small businesses to help them with pricing, determining breakeven points, controlling costs, and budgeting.

Government accounting. Government accounting is simply accounting that’s done for government entities. Government accountants are concerned with maintaining government regulations as well as learning a different way of keeping books.

Nonprofit accounting. Nonprofit accounting is unique to nonprofit organizations in that they often need to track and mark specific donations, manage grants and meet reporting requirements, fulfill public disclosures and reporting, and maintain a fund accounting process.

Financial accounting. Financial accounting is the preparation of financial reports for external use and includes providing financial statements. 

Attest. Attest accounting is where a CPA goes through a process of verifying financial reports of a business to interested third-parties, such as banks and the public. The three main services in this area include compilations, reviews, and audits. Only a CPA can perform these services.

Fraud or forensic accounting. A specialty role in accounting, forensic accountants can help a company that has been the victim of fraud. There are also services available to help reduce the possibility of fraud. 

Tax accounting. Tax accounting can be many things: the preparation of federal and state income tax returns for businesses, individuals, and other entities like estates and trusts; state and local tax assistance with collection, filing, remittance, and compliance; franchise tax support; and payroll tax collection, filing, and payment. There are more, but these are the big ones.

Budgeting. Making a revenue and spending plan is an important accounting function.

Internal auditing. Large companies have internal audit departments that maintain checks and balances for the company. In small companies, having someone in charge of monitoring internal controls would be the equivalent function.

Accounting systems. Some accountants are technology-savvy, and this type of accountant can help solve technology issues, integrate accounting system modules, and streamline workflow.

Fiduciary accounting. A fiduciary is someone legally responsible for financial responsibilities in an organization. Fiduciary accounting typically refers to accounting for trusts, but can have a much broader meaning.

Public accounting. Public accounting is practiced by employees in a public accounting firm, which is one that serves many businesses with varying accounting needs.  This is opposed to private or industry accounting where an accountant goes to work for one company in their accounting department. Public vs. industry accounting is really referring to an accountant’s career experience. 

Managerial accounting. This type of accounting focuses on internal numbers and how the organization can reach its goals. It’s broader than cost accounting, but there is an overlap. Accountants who serve in an advisory capacity to businesses will focus on this area. 

Did we get all of the terms you might be wondering about? If not, ask us, and we’ll add it here.