Real world ready | Next Gen accounting
Tech missteps and how to avoid them
Technology such as AI and cloud accounting can take a lot of the heavy lifting out of modern-day accounting processes, but such advances are not completely foolproof. Here’s how you get it right
Words Jessica Bown Images iStock
Overreliance on technology brings significant risks, many of which have costly consequences if things go wrong.
Here, we explore the risks involved in using tech to perform everyday accounting tasks and what measures you can take to avoid them becoming a problem for you or your business.
Data security and privacy
The risk
To work effectively, AI systems require access to large amounts of data, much of which is sensitive in nature (think personal financial records and confidential business information).
This data allows them to perform a range of useful tasks, from fraud detection to risk assessment, but could result in a huge fallout if it ends up in the wrong hands.
The solution
Data breaches can leave you on the wrong side of the law, and can also destroy your reputation and credibility.
In today’s world, a robust cyber security policy is therefore a must-have for accountants of all kinds.
Steps you can take to ensure data security include:
- Using secure data storage solutions and keeping them updated
- Investing in encryption to prevent unauthorised access to sensitive data
- Training staff to be on their guard against cyber attacks
Four pitfalls to look out for
And ways you can address them.
1
Data security and privacy
The risk
As AI becomes increasingly integrated into business processes, it is vital to ensure your systems comply with the GDPR data protection laws, which impose strict rules on how client information can be collected, used and stored.
Accountants are also bound to adhere to Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS).
Failing to comply with these regulations can lead to significant reputational damage and potentially financial penalties.
The solution
It is vital to stay abreast of regulatory changes such as the EU AI Act, which came into force on 1 August 2024, and how they affect your business and its use of technology.
It is also sensible to conduct regular, human-led audits to make sure your everyday practices are compliant with the regulations governing you and your clients.
After all, technology has no moral compass and is no substitute for the thorough understanding of accounting procedures and professional ethics accounting professionals can provide.
2
Technical failures
The risk
When dealing with technology and computerised systems, you can never be sure when they will be affected by external or internal issues that can bring your business to a standstill in seconds.
Common mishaps that can cause major shutdowns include:
● Power outages
● Wifi problems
● Viruses
● Physical damage (from a flood to coffee being spilled over a computer)
The solution
Having your systems taken out for any reason is very frustrating, but losing swathes of important data is worse.
That’s why so many firms use cloud-based platforms and instant, automatic back-ups to ensure information is safely stored.
When choosing such a platform, check online to see how they rate for customer service as a rapid, helpful response can make all the difference when things go wrong.
3
Inaccuracy and unintended bias
The risk
AI can learn bias just as quickly as other patterns, often due to out-of-date or insufficient data.
This can result in inaccurate predictions and financial reports, ultimately leading to missteps and loss-leading decisions.
Machine-learning systems also struggle to cope with rapidly evolving circumstances such as volatile financial markets and economic downturns.
The solution
Proper planning and installation can go a long way towards mitigating the risk of unintentional bias slipping into your AI reports.
However, it’s still important to audit and update machine-learning systems regularly to ensure the data they are working with is of the highest possible standard.
Thoroughly and consistently checking the information produced by AI and software programmes is also a no-brainer, as not doing so often leads to expensive mistakes.
4
Client relationships
The risk
Customising financial strategies for specific clients or business arms can be challenging for AI systems, which cannot understand the nuances of a situation in the same way as a human accountant, especially one who has a long-term relationship with a business or individual.
Forecasts and proposed solutions may, therefore, be too simplistic or fail to take into account an important factor the AI system does not know about.
The solution
Remember that, despite its numerous benefits, technology cannot replace human judgement and reasoning, both of which are important tools in an accountant’s kit.
Demonstrating a willingness to test tech-driven reports using back-up strategies and manual processes also provides businesses, stakeholders and customers with valuable peace of mind.
Accounting and technology are a great team, but technologies such as AI and blockchain are not perfect. Using them can result in inaccurate predictions and results, especially when they are provided with insufficient or incorrect information.
The key, therefore, is to make the most of the advantages today’s tech can offer, while monitoring operations and overseeing results with a sharp, human eye.
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