For years, technologists have promised to “disrupt” accounting (and every other profession) with artificial intelligence (AI). Yet no such thing has occurred. Chief Financial Officers are skeptical of vendors and their lofty promises. Accounting staff see AI as a threat to their jobs. Big companies continue to outsource time-intensive accounting work to cheap labor markets instead of truly turning the work over to AI.
Accounting departments remain ripe for digital transformation and AI disruption. Why now rather than earlier? Because the role of CFO has changed profoundly, manual accounting processes have failed to support the CFO’s new mission, and AI has the potential to make accounting more valuable—not just more efficient.
It’s time to stop talking about AI as a job killer, would-be Terminator, and productivity hack. To move this conversation forward, we need to reconsider how AI can shift the focus of accountants and draw out their real potential. AI can drive incredible amounts of time savings and unlock what your accountants should be doing—analyzing results and providing valuable business guidance.
The CFO’s New Mission
Today, the CFO is a strategic advisor to the CEO. It is not enough to produce reports and stay in compliance. The CFO is like a Minister of Foreign Affairs whose job is to show the CEO and the rest of the world the story of the company and its various activities using accurate data. The controller is the Minister of Internal Affairs, tasked with ensuring that data is collected accurately and granularly so every required analysis can be performed when needed. While the CFO shapes strategic decisions that affect a company’s interactions with the outside world, the controller keeps the accounting engine running.
The CFO’s role adapts to the demands of the business environment. Following the Enron scandal and passing of the Sarbanes-Oxley Act (SOX) in 2002, CFOs focused on compliance, internal financial controls, and reporting. They needed to recultivate the trust of shareholders and the general public. The implementation of SOX was burdensome, but once it was done, CFOs had bandwidth for new challenges.
The Great Recession of ‘08/’09 diverted their attention once again. To ensure business continuity, CFOs became more involved in budgeting and forecasting. Then, as the economy transitioned from recovery to record growth, the CFOs shifted from financial planning to strategic finance. It was all about M&A, capital structure, and resource allocation—more MBA-ish and less CPA-ish. Increasingly, responsibility for reporting, compliance, and recordkeeping fell to the controller.
The Loss of Awareness
Although a division of responsibilities between the CFO and controller made sense, there was a problem. The CFO depended on the controller to produce data that could inform strategic finance. At the same time, the business ethos of the 2010s was to minimize costs and maximize productivity. These were the days of 80-20ing everything, Pomodoro timers, and “hacking” growth. Don’t question why you’re doing something—just do it faster! In that culture, accounting was perceived as an inefficient cost center.
Firms aggressively outsourced manual accounting tasks abroad to reduce costs. Outsourced accountants were often overworked and, like all human beings, prone to error. With this revolving door of cheap accounting labor, coding keys for processes like accounts payable (AP) had to be extremely basic. That way, it would be easy to replace and train staff without an irreplaceable loss of institutional knowledge.
With keys designed to be mistake-proof rather than insightful, firms saved money but lost organizational awareness. The higher-up finance executives still were expected to understand the condition of the business and the profitability of its various activities, both of which are critical to driving educated decisions and communicating with the public.
Mid-level accounting staff who experienced this transition became jaded and felt like the next step was for AI to replace them. They spent too much of their days manually checking work of underlings located abroad. Accounting, performed at its highest level, is investigative, analytical, and complex, but here were accountants with master’s degrees doing rote, unengaging work.
The CFO’s role had evolved to be more strategic and analytic, while accounting functions had remained repetitive and administrative in nature. This disconnect threatened a business’s ability to understand itself.
The Real Value of AI
AI innovators used to position themselves as labor savers and nothing more. In the 2010s, the conversation in every industry was about which jobs AI would eliminate. Accountants (along with lawyers, radiologists, and many others) felt like they were in the crosshairs and therefore resisted AI and automation in general. More recently, AI cheerleaders have positioned it as an “ally” to human beings, but maybe too late.
Why has no one focused on ways AI might make accounting more valuable, engaging, and liberated to focus on the strategic work a CFO actually needs?
Accountants who use AI for something like AP coding are not training their replacements. Rather, they are teaching an algorithm to find patterns and allocate costs in ways that would be too complex for a human being. The AI adds value by discovering relationships that the company has never noticed before. Eventually, AI learns to automate these processes such that the CFO doesn’t have to worry about what’s not being done the right way.
This is radically different from viewing AP departments as a necessary evil for getting vendors paid. Rather, it acknowledges how something rudimentary like coding shapes what the CFO believes about the organization and ultimately advises the CEO to do. Sophisticated coding can produce a more nuanced and useful story about how business divisions spend their money. It reveals where the business is profitable or not.
To take a simple example, how should an accountant allocate the monthly spend on electricity?
She might split the cost between the business divisions that share a building. But what if one conducts R&D on 3D printers and the other creates technical manuals? Clearly, they’re not consuming equal amounts of power. This gets much messier when, for instance, you try to analyze marketing spend, IT expenses, or travel (that thing we used to do before COVID-19).
Oversimplified coding leads to oversimplified thinking. What if accounting, aided by AI, became the department that fought this tendency for businesses to hide reality from themselves?
Curing Organizational Blindness
Is it more important for a CFO to minimize accounting costs or maximize organizational awareness? Wrong question. These goals are not mutually exclusive. If AI disrupts accounting, both will be achieved.
An accounting department that embraces AI—rather than an outsourced team of low-paid staff—will reduce manual labor and its inaccuracies. Additionally, it will produce more sophisticated data and reports that help the CFO be a strategic advisor and public communicator who crafts the company’s story based on accurate data rather than assumptions.
C-level executives are the proverbial blind men who each feel a different part of the elephant and come to a different conclusion about what it is. The CFO is the executive who is supposed to remove the cataracts so that the executives can see the truth. The CFO will struggle to accomplish that mission without the aid of AI.
That is why the accounting world is ripe for this disruption. Instead of fetishizing efficiency, as we did in the 2010s, it’s time to bring accounting back to its roots. This is a profession for investigators, analysts, and problem solvers. And during this recovery from a pandemic, it would be a shame to waste their talents.
AI cannot do what accounting professionals do. However, in capable hands, it can support the new mission of the CFO and give business an edge.
Eyal Feldman is the co-founder and CEO of Stampli.