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The shape of management accounting to come

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As artificial intelligence worms its way into almost every area of our lives, Makbul Patel looks at how it is affecting management accounting.

20th Dec 2023
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One of the things you must be sick to death of hearing about is AI, and I’m not talking about the Spielberg movie, although the film was an omen of doom.

AI, or artificial intelligence, has infiltrated the nomenclature of industry and street talk. The insidious menace may at one point in the distant future eliminate the need for mankind to exist at all. 

Of course, I am exaggerating but we have been touched by AI in more ways than I care to name. Our mobile phones have adaptive software that personalises according to our habits – the thing even listens in to our conversations. Next time you talk about that holiday to the Maldives in earshot of your mobile don’t be surprised to see flight adverts to the exotics popping up on your Instagram account.

However, on a more focused note, AI has touched the world of management accountancy also, with its icy fingers. The role of the management accountant has evolved and AI has been a greater influence on this evolution.

What is artificial intelligence?

In a nutshell, AI refers to the development of computer systems that can perform tasks that typically require human intelligence. These tasks include learning, reasoning, problem-solving, understanding natural language, speech recognition and visual perception. AI aims to create machines and software that can mimic certain aspects of human mental processes and decision-making. Spooky, I know.

How management accounting is affected by AI

AI has significantly impacted the field of management accounting, bringing about several changes and improvements. Some of these changes you may think are just the usual process of technology improving, but technically it is classified as grounded in AI.

Automation of routine tasks: AI can automate repetitive and routine tasks in management accounting, such as data entry, reconciliation and basic financial reporting. This allows accountants to focus on more strategic and value-added activities.

I remember in my early days as a lowly accounts clerk spending endless soul-destroying days inputting the stock count. How I wished for a fairy godmother to wave her magic wand and make it all disappear.

Data analysis and insights: AI tools can analyse large volumes of financial data quickly and accurately, providing valuable insights for decision-making. Advanced analytics and machine-learning algorithms can identify patterns, trends and anomalies in financial data that might be challenging for humans to detect.

Predictive analytics: AI enables management accountants to use predictive analytics to forecast future financial trends and outcomes. This can assist organisations in making more informed decisions about budgeting, resource allocation and strategic planning.

Cost reduction: Through automation and efficiency gains, AI can contribute to cost reduction in management accounting processes. This allows organisations to allocate resources more effectively and optimise their financial performance.

Well, okay, maybe this is where accountants fear the future the most. If and when it comes down to it most companies will look at the bottom line. Although businesses may want to get more meat off the bone by cutting staff and overheads, any reduction in financial experts may be a shot in the foot.

Fraud detection: AI-powered tools can enhance fraud detection by analysing patterns and anomalies in financial transactions. This helps organisations identify irregularities and potential fraudulent activities more efficiently than traditional methods.

Enhanced reporting: AI can improve the quality and speed of financial reporting. Automated reporting tools can generate customised reports based on specific parameters, ensuring timely and accurate information for decision-makers.

Strategic decision support: AI provides valuable support for strategic decision-making by offering real-time insights and scenario analysis. This allows management accountants to assess the potential impact of different decisions on financial performance and overall business strategy.

Risk management: AI technologies can assist in identifying and managing financial risks. By analysing historical data and market trends, AI can help organisations anticipate and mitigate potential risks, contributing to better risk management strategies.

Personalised financial advice: AI-driven tools can provide personalised financial advice based on individual or organisational financial data. This can be particularly useful for management accountants in offering tailored insights to key stakeholders.

Skill shift in the workforce: The integration of AI in management accounting necessitates a shift in the skillset of accountants. While routine tasks become automated, accountants need to develop skills in data analysis, interpretation of AI-generated insights and strategic thinking.

Welcome change

AI is transforming management accounting by automating routine tasks, providing advanced analytics, improving decision support and enhancing overall efficiency in financial processes. This allows management accountants to focus on more strategic and value-added activities, ultimately contributing to better financial management and business outcomes.

But before we start running to the hills shouting armageddon it must be realised that AI has become a byword for anything a computer can do that takes the routine out of human thinking, which is surely to be welcomed. The danger is when human intervention becomes so minimal that financial reporting merely becomes graphs and numbers automatically printed out without a rosy-cheeked accountant adding context and meaning.

 

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By turchyna582
21st Dec 2023 11:00

"without (a rosy-cheeked) accountant adding context and meaning".
That just about sums it up!
Many Director/Shareholders, still run (even large) SME's with their "One Man Band" dictatorial mentality; believing they are the personal panacea for all the business problems.
Their skill sets are often in production, marketing, sales, etc., but many do not have the necessary Admin (let alone Financial) skills and experience to create the relevant support infrastructure (with or without IT and AI).......nor recognise that it needs paying for.
Yet some still make their Financial decisions without the necessary understanding and application of qualified/experienced human Financial input.
Graphs/Data Tables do not provide the context or meaning; and spending is often based on personal not business needs.
Abolishing the privilege of DLA's would be a start...........too many treat the Corporate Bank Account as their personal piggy bank. That act alone, does not need IT iorAI; it simply needs a change to the morality compass.

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