How AI is Transforming the Accounting Industry

Sage CTO Aaron Harris shares key predictions on how enterprises and finance teams can prepare for AI innovations. Key areas of focus include improving real-time insights, strengthening risk management, and enhancing strategic decision-making.

AI and finance may not seem like a natural pair, especially with AI's tendency to make mistakes. However, Aaron Harris, CTO at Sage, believes they can work together to provide better insights and take advantage of opportunities with the right oversight. His predictions are based on a Forrester Consulting study of 2,339 finance leaders from small and medium businesses, exploring how AI will impact accounting by 2030.

Instead of replacing finance professionals, AI will help enhance their work and fill the talent gap in accounting. Around 20% of US companies are hiring more accountants, and Sage sees this as a chance to elevate the profession. AI is also making accounting more appealing by allowing accountants to become strategic advisors, not just number crunchers.

Ethical AI Leadership

Around 80% of small and medium-sized businesses (SMBs) have already adopted strong AI ethics policies, and by 2030, it will be essential. Accountants are expected to play a key role in ensuring the ethical use of AI. Aaron Harris believes there are two main ways this will happen.

First, accountants will lead the way in using and managing AI in an ethical manner. Second, as AI becomes more common in business, accountants will be relied upon to ensure it is used responsibly and with trust. Accountants will move beyond simply ensuring the numbers are correct to make sure trust in AI is maintained.

Risk Management Overhaul

Risk management began in finance but has since evolved into more comprehensive governance, risk management, and compliance (GRC) tools. Now, risk management is expanding further to include enterprise-wide concerns like security, environmental, social, and governance (ESG) issues, supply chains, and climate-related risks. Managing these risks effectively can create opportunities and help businesses avoid costs, setting them apart from competitors.

Forrester predicts that over 90% of SMBs are using AI to monitor risks, detect anomalies, and reduce financial errors and fraud by more than 95%. Cloud infrastructure and AI innovations can help bring all these different types of risks into a unified framework. For example, cybersecurity and supply chain risks require different approaches, but AI can provide the insights needed to manage both effectively.

Accountants will also be key in calculating the costs of mitigating risks, particularly with emerging challenges like environmental regulations. For example, companies are increasingly being pressured by regulators to cut greenhouse gas emissions, prevent biodiversity loss, and improve recycling efforts. While assigning costs to these factors can be difficult, this is a skill that accountants excel at. Harris explains how accountants will play a vital role in tackling these complex challenges.

It's not just that accountants are good at managing these tasks—they provide the necessary assurance that the numbers are trustworthy, allowing businesses to make informed decisions based on that data.

For some time, the finance industry explored how to offer better insights to guide investment decisions, beyond just financial performance and ESG, through integrated reporting. While the term fell out of favor, Harris believes the idea is making a comeback. People are now realizing the importance of investing in local ecosystems and communities, alongside financial returns:

"I’ve always believed that the companies we invest in are part of a larger ecosystem, and the health of the entire ecosystem matters. For example, if the community where my company’s headquarters is located isn’t supported by the businesses I invest in, it could impact that company’s long-term success. My view, which is supported by Forrester Research, is that just as we’ve relied on the accounting industry for centuries to build trust in our markets, the information needed to maintain that trust now goes beyond financial results. This includes areas like carbon accounting and ESG commitments, and the accounting industry will be expected to play a key role in supporting that."

Continual Close

A common challenge in many businesses is the stressful monthly close, where finance teams spend long hours organizing and double-checking numbers to ensure everything is accurate. Harris estimates that finance teams currently spend about 25% of their time on closing the books. But what if AI could automate this process continuously, keeping the books always up to date, so businesses could make better, more timely decisions?

Forrester found that about 75% of SMBs are shifting toward continuous accounting practices. However, for this to work, continuous assurance is necessary to ensure the numbers are accurate. AI is also beginning to transform risk management, enabling real-time reconciliation and other assurance functions. By 2030, the expectation will be that all financial data is current and up to date. Harris explains:

To achieve this, it’s essential to ensure that all transactions within a given period are properly accounted for. This can be a complex task because accounting often operates on different timelines than business activities, and ensuring the reliability of report data is crucial. This involves tasks such as reconciliations and verifying that vendor statements align with the vendor ledger. However, there’s a broader suite of assurance activities that also need to be in place. It’s a combination of accurately capturing and accounting for all business activity in the period, while also ensuring enough assurance measures are in place to validate the numbers.

Real-Time Finance Decisions

A natural extension of the continual close is that businesses will be able to make decisions using real-time data. Forrester predicts that over 70% of SMBs will integrate real-time data into their financial decisions by 2030, empowering them to drive growth and innovation.

Harris acknowledges that, currently, not all business activities are captured in real-time.

Existing tools and infrastructure aren’t fully equipped to capture everything with the assurance that it’s accurate. As a result, accounting data can lag behind by a few days or even weeks. The goal is that, with the right technology—particularly AI—this delay will be reduced to zero, ensuring accounting data is always in sync with the business.

New Opportunities

Another key prediction is that AI will automate many routine tasks, allowing accountants to focus on strategic thinking and providing valuable business insights. This will open up new opportunities for accountants to take on roles that contribute to business strategy and foster innovation. Harris sees this shift as a fundamental move up the value chain.

At this point, I had to ask Harris what he thinks an accountant really is. We all know them as the people who handle the books, pay taxes, and deal with vendors. But it seems like he’s describing something a bit different. He humorously responds:

"I’ve never really been asked what an accountant is. One way to look at it is that accountants sit at the intersection of a business and its stakeholders, whether that’s business leaders, investors, creditors, or governments. We rely on accountants to provide accurate data and explain what it really means. What’s changing fundamentally is the digital transformation of business. As businesses become more digital, the way we capture and account for activities is evolving. You’ve probably heard the saying, 'software is the business,' and as businesses digitize, accounting is happening in real-time alongside the business activities. This shift is moving accountants up the value chain, allowing them to focus more on explaining, advising, and interpreting, and less on gathering, counting, and reporting.

There’s also a broader issue: there’s a significant shortage of trained accountants, and it’s getting worse. Fewer students are choosing accounting as a career, and there’s an aging problem in the industry, with more people retiring than new accountants entering the field. To address this, we need to free accountants from time-consuming tasks like data entry, sampling contracts, and calling vendors to check for fraud. Instead, we need to allow them to focus on what probably drew them to the profession in the first place: being the person who understands what the numbers really mean and provides valuable insights to the business."

My Take

Before my recent conversation with Harris, I always saw accountants as number crunchers. But he makes a compelling case that accountants have a unique opportunity to go beyond just building trust in financial data. They can also become key players in trusting AI and taking meaningful steps toward creating more sustainable, just communities and a better world.

Harris explains how this evolution could unfold:

“Accountants will spend more time on strategic tasks, really understanding the business’s implications. They’ll need to figure out the best measurement systems to get meaningful data to make better decisions. Accountants will have to become technologists, data experts, but, at the core, they will focus more on the things that likely first attracted them to the profession."

I’d trust most accountants to shape the future of AI and the world more than the “move fast and break things” mindset currently guiding AI. They’ve earned that trust.