If you’ve ever messaged an online chatbot or asked Alexa a question, you’ve used machine learning. But do you know how machine learning in accounting can make a startup or small business’s processes more accurate and efficient?
Machine learning is the application of computer algorithms to identify data patterns and use them to make more accurate decisions in similar scenarios. ML is generally used in conjunction with
In this article, we’ll look at how machine learning is changing the landscape of business finances, including some machine learning use cases in accounting.
The impact of machine learning in accounting for businesses
Due to the large amount of mundane work and repetitive data patterns, there is a huge opportunity for artificial intelligence and machine learning in finance and accounting to replicate human activities at scale. By using ML-powered software, your finance team can apply these technologies to a range of processes, including:
- Recording data in the correct formats;
- Categorizing transactions;
- Reconciling accounts against bank statements;
- Identifying data in scanned receipts or invoices;
- Tracking changes in your expenses; and,
- Streamlining audit processes or procedures.
Employing ML leads to the following changes in accounting for startups and small businesses:
Machine learning allows accounting teams to focus on complex tasks. Growing businesses usually need to process hundreds of transactions, and basic tasks, such as recording and reconciling all these transactions, can take hours of your accountant’s time each week. However, if you use ML, this doesn’t have to be the case.
For example, manually categorizing each transaction as the right type of revenue or expense could take your business’s accountant or bookkeeper up to 30 minutes every day. An ML-powered platform can automatically categorize the transactions in your accounting software in a fraction of the time, freeing up your finance team to work on tasks that require more nuanced decision-making.
Machine learning makes accounting proactive rather than reactive. When you work with a traditional finance firm that manually completes your accounting tasks on a monthly basis, the time it takes to perform all the necessary tasks means you’ll likely only see financial data 15 days (or more) after the month ends. For example, if your startup or small business’ expenses were 30% higher in February than in January, it would be mid-March before you see this discrepancy. At that point, it may be too late to reduce many expenses in the current month, and you could already be heading for cash flow problems.
In contrast, when you use machine learning to automate accounting tasks, you’ll be able to access reports and insights almost instantly. An ML-powered finance platform will close your books every day, giving you the real-time data you need to identify and address any concerning trends before they become serious issues.
Machine learning results in more cost-effective financial services. Because using machine learning in accounting reduces the human work involved with managing finances, these time savings can then translate to financial savings. Most finance services charge an hourly fee, so the less time it takes them to handle your finances, the lower your monthly bill. In fact, you can benefit from ML-powered services for a startup-friendly flat fee that is only 30 to 50% of traditional finance firm costs.
The rise of ML is also likely to reduce the range of finance tools you need and, therefore, the number of subscriptions you pay. Currently, most finance teams use many different tools to complete individual accounting tasks, such as paying bills and handling payroll. These tools often don’t use ML or use it in a limited way for a specific feature. The future of finance automation is in a small number of platforms that will use AI and ML to handle all your accounting processes, so you’ll only need a single finance tool subscription.
Modern finance firms that use a combination of high-tech solutions and seasoned finance experts can accurately and efficiently handle all your business’ accounting, bookkeeping, and CFO needs. These AI and ML offerings give you continuous accounting and immediate access to reports and key metrics, including net burn, cash balance, and operating expenses — resulting in access to a clear, real-time picture of your business’s financial health.
