How accountants can leverage AI for end-to-end tax management

Historically, the word artificial has always been associated with something that's far from the original version. In most cases, it has therefore got a negative connotation tied to it. For eg - Artificial jewellery, artificial leather, artificial sweeteners, etc. All of these artificial creations imitate their original counterparts and have limited benefit. However, there is one rare case where the artificial version is being seen superior. As you may have guessed by now, it is artificial intelligence. More commonly known as AI, artificial intelligence is playing a role in some way or the other in our day to day life. In today's world, there never goes a day without a mention of AI.

Artificial intelligence has penetrated so deep into most industries that even the accounting industry predominantly known for its traditional processes couldn't escape from it. There is an increasing adoption of AI in the accounting industry with firms constantly looking at ways to deliver more value to their clients.  Once considered a threat, AI has emerged to be a trusted ally for accountants. In this blog, we will explore how AI has been revolutionizing tax accounting  and what else it can do to  empower accountants to thrive.

AI in tax preparation 

AI can simplify the overall tax preparation process by automating a major chunk of accountants' tasks. AI can read data from multiple sources like financial statements, past tax returns, receipts, etc. This data can be collated, and this offers a single view for tax accountants, thereby saving them plenty of time. By minimizing manual input, the risk of unintentional errors is eliminated.

On top of this, AI systems can also be trained to generate requests for client inputs promptly thereby enhancing client collaboration. Guided by preset rules and learnings from past engagements, AI ensures the documents are shared by clients on time, thereby eliminating the need for manual tracking and follow-ups. As and when accountants finish preparing their clients' documentation, AI systems can share it with the clients for their signature and approval. With real time notifications for both parties, AI ensures that no time is wasted in getting work done.

AI for tax compliance 

One major aspect where AI tools can help accountants is staying on top of tax compliance. As and when there are changes in federal, provincial, and other local tax laws and regulations, AI can intuitively detect and flag when major regulatory changes are overseen by accountants during the tax process. This real-time monitoring will help accountants stay ahead, preventing non-compliance risks for their clients' business and ensuring smooth operations. With such a system in place, businesses can quickly adjust their budgeting, reporting, and compliance processes to align with new regulations, minimizing potential disruptions and safeguarding against compliance penalties. Not just that, with automated reminders, AI can also ensure that tax deadlines are never missed.

By automating the tax preparation process, AI-driven tools can identify potential compliance gaps in advance. This helps accountants with sufficient time to take corrective action before any compliance issues arise.

AI in tax auditing 

The word audit can evoke a nerve wrecking feeling for anyone. This is because, despite doing all things right, there is always a chance for businesses and accountants to have missed a tiny aspect that could prove to be costly. Tax audit is another key function where there is plenty of scope for AI to help accountants and businesses alike. In the tax audit process, AI powered algorithms can analyze large datasets and detect anomalies and potential fraud or errors. AI can greatly help reduce the likelihood of human errors in the overall tax management, ensuring everything is in place. During a tax audit, AI makes the process smoother. It is capable of gathering and organizing all the necessary documents and information for auditors, thereby coming to the aid of accountants during stressful times. Additionally, the accuracy and consistency of AI-generated reports strengthen the credibility of a company's financial records, helping build trust with auditors. This paves way to a more efficient audit process and better outcomes for the business.

AI in tax planning 

With predictive intelligence, AI systems can project future tax obligations based on past financial data and help businesses stay ahead of the curve by enabling them to do their tax planning in advance. AI powered tools go a step further by identifying potential areas for tax savings thereby reducing businesses' overall tax liability. This enables businesses to project their budgets accurately and also reassess their overall strategies if needed.

How can accounting firms implement AI?

Implementing AI powered tools can sound complicated for accounting firms, but that isn't the case. Firms around the world have already started exploring AI powered accounting and practice management solutions for their clients and their business. Firms must address certain key prerequisites, before they can start leveraging AI to its truest potential.

Data maintenance - For AI systems to succeed, high quality data is crucial. Just like how automobiles need clean fuel for their operations, AI systems need clean and clear data. Accounting firms need to ensure their data is accurate and free from mistakes.

Integrations - AI tools should be compatible with the existing tech stack of the organization. Data needs to flow between disparate systems seamlessly.

Data security - AI powered tools process highly sensitive data and it is therefore essential that data security measures are in place. Data breaches can be very costly for businesses and can reverse all the benefits AI provides.

Adopt slowly - Accounting firms can begin by implementing AI in one of the functions before rolling it out to all their processes. This ensures they test it out if it works and also doesn't create insecurity among employees.

Learning & training - Accountants shouldn't see AI as their competition but as a useful companion. Training programs tailored towards adopting AI concepts can greatly help employees collaborate better with AI tools.

Conclusion 

AI is making strides in tax compliance and accounting, offering capabilities that range from simple data entry to real-time monitoring of regulations and delivering useful insights. AI in business accounting is still in its infancy, and we've only just scratched the surface of its potential. The advancements so far are impressive, but there's so much more to come as the technology continues to evolve and redefine the industry. By leveraging AI in their processes, accounting firms and businesses can reduce errors, enhance decision-making, save time, and focus more on other vital aspects.

However, AI isn’t a magic solution. Its success depends on a lot of factors, with the biggest being cooperation from the workforce. Far from replacing professionals, AI serves as a powerful ally and empowers accountants. By enhancing the human element, AI enables tax and accounting professionals to deliver greater value than ever before.

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