AI in accounting boosts compliance and fraud detection
Accounting and finance teams are using AI tools to speed document review and other error-prone processes, which gives a boost to fraud detection and compliance efforts.
Corporate finance and accounting teams have always been quick to adopt technologies that help to save time, reduce costs and increase profits. After all, no one knows the numbers better than the corporate finance team.
It's no surprise, then, that accounting departments and corporate finance organizations are turning to cognitive technologies to help provide more value and improve the organization's bottom line. The use of AI in accounting is helping to analyze and automate document handling processes, monitor for potential fraud, and manage regulatory compliance.
Automatically authorize and process documents
Accounting and corporate finance are notoriously document-intensive. From invoices to expense receipts, employee signatures and purchase orders, documents in print or electronic form are a mainstay of finance life.
However, document-centric systems and processes are tedious, time-consuming and error-prone. AI-based systems aim to address these needs by applying natural language processing, content summarization, computer vision and other technologies that allow companies to automatically process a range of documents.
The market is already starting to see many vendors offering products with machine learning that can handle inbound invoices, process purchase orders, handle expense reports and reimbursements, and route everything to the correct departments, saving organizations both time and money. Indeed, in the next few years, we might see AI become a necessary companion to corporate finance departments.
Additionally, these AI systems are helping corporate finance teams process huge volumes of data continuously to quickly detect issues and potential problems with the documents or financial data. These systems can also provide instant reporting on critical financial data.
Rather than waiting for a monthly or quarterly report to present numbers, finance teams now have the ability to do daily reporting with the help of AI. This enables companies to be proactive, instead of reactive, and to take action as necessary to correct financials and identify areas of concern more quickly.
Another area that falls to many corporate finance teams is the need to deal with accounts payable and receivable processing. Currently, companies are still surprisingly dependent on paper-based processes to make purchases or receive payments.
AI-powered invoice management systems can handle much of the invoice processing steps, fixing issues with incorrect or incomplete data or other issues that can slow down invoice processing. Machine learning algorithms can identify relevant data in invoices, such as the date, payment terms or amount due, and apply the appropriate internal codes as needed to move along or flag documents for further investigation.
As AI technologies become integrated into procurement and purchasing processes, companies are seeing time efficiencies and cost savings, as well. By training machine learning systems with purchasing documents and data, AI systems can augment internal workforces to automatically review purchase orders and their supporting documents, check purchases to make sure they comply with corporate requirements, flag unusual purchases for review, automatically send purchases for approval, or bypass further review or approval processes if the purchase matches normal behavior.
Assisting with auditing and compliance
The use of AI in accounting and finance can also help corporate finance stay compliant with federal, state and local regulations, as well as internal corporate compliance measures. With so many rules and laws in place, especially in heavily regulated industries such as healthcare and energy, AI-enabled systems can automatically read and complete compliance documents, file paperwork, and monitor compliance with overall rules and regulations. For companies that face large penalties for noncompliance, these AI technologies are proving to be very valuable.
In addition to external compliance, many companies have their own internal policies that, for a variety of reasons, are not always strictly enforced. AI algorithms are proving useful to help keep a watchful eye on corporate finances, especially around expenses.
According to the Association of Certified Fraud Examiners' "Report to the Nations on Occupational Fraud and Abuse," on average, a company loses 5% of its revenue to fraud each year, with the median loss at $140,000 per year. These losses can quickly add up to millions of dollars and can have a major impact on an organization's bottom line.
One company, the San Jose, Calif.-based software vendor AppZen, is using AI as a component of its expense and auditing software to enable organizations to automatically review and approve or deny 100% of expense reports, ensuring compliance with company policies.
By using AI-enabled systems that utilize computer vision and natural language processing capabilities, companies can now audit every single expense report submitted. These AI systems allow for more accurate and timely processing, with audit trails available as needed. Because no human supervision is involved, companies are able to free their employees from the mundane task of having to manually review hundreds or thousands of expense reports, and it can improve accuracy, as well.
Fraud detection and management
As technology continues to advance, it's becoming more difficult to identify and stop fraud. Many organizations have large amounts of financial data that makes it nearly impossible for humans to sort through it unassisted. AI systems are great at analyzing and digesting large volumes of data fast and using machine learning algorithms to quickly spot trends and detect anomalies.
Machine learning algorithms learn acceptable patterns that help them to recognize potentially fraudulent activity. These records or accounts that are flagged can then be forwarded to the appropriate level of management for further follow up and review.
By quickly sifting through complex data, these systems can detect suspicious behavior that might otherwise be missed by infrequent human audits or less intelligent rules-based systems. The key to keeping a lid on fraud is identifying the fraud before it takes too much of a bite out of the company's bottom line.
Additionally, it's important for companies to put processes and controls in place that automatically audit, monitor, and accept or reject transactions. This way, AI algorithms are providing significant value and ROI.
The use of AI in accounting and finance will only continue to show its overall benefits to corporations in the years ahead, helping with compliance, accuracy and trust.
In a study conducted by MIT Sloan Management Review and The Boston Consulting Group, almost 85% of executives said that AI will enable their companies to obtain or sustain a competitive advantage. For this reason, CFOs and other corporate leaders in charge of financials should look to these technologies to augment their human workforce.