Hype vs. Reality: AI in Finance and Accounting

“Success in creating effective AI (Artificial Intelligence), could be the biggest event in the history of our civilization. Or the worst. We just don’t know. So we cannot know if we will be infinitely helped by AI, or ignored by it and side-lined, or conceivably destroyed by it”

                                                                                                                                   Stephen Hawking

In the wise words of the dearly departed Mr. Hawking, we stand at a turning point in the course of humanity. What once seemed like a distant dystopian future, found only in movies like Terminator, has become a reality.

Of course, we are nowhere close to AI taking over the world, but as Mr. Hawking said, it is a subject we do not know nearly enough about. For now, we can say that AI is rapidly being integrated into various fields, and finance is no exception. In fact, AI is predicted to book into a $90 billion financial services industry.

So, is AI in finance worth the hype? Let’s learn the AI hype vs. reality in finance accounting.

AI in Finance Hype

Ever since ChatGPT took the world by storm in late 2022, AI has been on the mind of every businessman and woman. The revolutionary technology is creeping into every business process, including finance and accounting. Viral videos of people performing hours of workload in minutes thanks to AI are floating around the web.

But are things ever so simple? 

This is why we chose to discuss AI hype vs. reality while also sticking to EA’s expertise in accounting and finance. The technology is very new, and everyone has been treating it as the cure to every problem. But this is not the case, and we believe that it is very important for everyone to remember that just because something has a lot of hype, there is no reason to throw your hat in with it. 

We need only look back a few years and see what happened to the cryptocurrency and blockchain technology market. The technology gained unprecedented hype before ending up short of everyone’s expectations. Leaving those who invested everything in it with nothing to show for their troubles. 

AI (Artificial Intelligence) in Accounting and Finance

AI plays a significant role in the accounting sphere. Just flip open the Journal of Accountancy, and you will see major players like Sage sing the praises of AI in developing APIs. Similarly, veterans in the tax and audit industries have also cited their success with AI implementation in accounting and finance. 

Automation and process streamlining is the number one use-case for AI, with businesses replacing redundant parts of the accounting team with AI. Or equipping professionals with AI to greatly boost their productivity. This is where AI is at in 2023 when it comes to accounting.

Just a few months ago, we revisited the subject of AI in accounting and finance and demonstrated some real-world applications of AI in areas such as tax reporting, financial reporting, and analysis. You can read all about our experience and opinions on AI accounting here

But despite all of these seemingly resounding success stories, there is still a lot of uncharted territory when it comes to AI. And this is precisely why we will be tackling three prevalent hype factors surrounding AI and bringing things back down to reality.

AI Hype vs. Reality in Accounting and Finance

AI like GPT-4 Can Collect and Process Immense Data Sets Flawlessly

Sweeping statements are an unfortunate part of marketing these days, leading to such broad and un-evidenced claims being touted as reality. While it is certainly true that GPT-4 is rumored to be able to process as many as 1 trillion different parameters, the idea that this makes it any less prone to mistakes is laughable. Data processing is only as good as the data inputted. No matter how strong the program’s processing power is, it is ultimately a learning technology. 

For GPT-4 or similar AI solutions to truly live up to the hype, they will need perfect, highly accurate data to work with. And not just once. A consistent flow of such data, especially in accounting, is challenging. Business can and will end up making a mistake here or there, and the model will always end up with some form of incomplete or incorrect data. On top of this, it is ultimately a program. Programs are also not infallible, as generative AI has already shown us, with reports of AI hallucinating information that never existed. 

The Speedy Progress of AI Will Bring About a New Age of Productivity

While it is true that AI is progressing at an unfathomable rate, this is nothing to be hyped about. With the billions and trillions being invested into AI, new technology, hardware, and other breakthroughs are constantly happening. But this rapid change is not a sign of a new age of productivity. 

Yes, productivity does get boosted a lot, thanks to AI. But with the pace at which AI is developing, we can consider it to still be in its infancy. Businesses cannot and should not invest in AI right now because what will most likely happen is rapid obsolescence. Technology already gets old a month after it is released these days, and with AI, things can change drastically in a matter of days. So, instead of buying into the hype and going all in on implementing AI into your business’ accounting and finance, wait and see where the wind blows. 

For all we know, AI might hit a natural roadblock somewhere down the line, and everyone who hopped on the bandwagon might regret the choice. So, the wise option is to leverage AI in small doses, but nothing big like firing your accounting staff and replacing it with AI. We are still very far away from that future. 

AI Has Revolutionized Every Aspect of Business

This is yet another glaring case that must be addressed when discussing AI hype vs. reality. People are treating AI as a revolutionary innovation that has changed everything, but in reality, it is just another useful tool available to us. Making AI out to be more than it is will not end well. AI is still a very new technology and, as such, is very volatile and unreliable. 

We still need accounting professionals on the job, looking over everything and managing it all. AI is just another tool these professionals can use, but it is nowhere close to what humans can achieve. At this moment in time, we might even liken AI to a glorified search engine. A complimentary tool that can yield tremendous results when used in the right circumstances. Not a business-landscape-defining breakthrough. In the future, this statement might be closer to the truth, but here, at the tail end of 2023, it’s safe to say that we are a long way from the finish line.