In recent years, there has been substantial development in the areas of outsourced accounting and AI. From my experience with both, outsourcing and AI can be good tools to utilize in your business. However, it’s still important to have highly skilled financial oversight for a few reasons.
In its early years, outsourced accounting was a challenge to utilize well, due to language barriers and education gaps in the available outsourced markets. More recently, some new players have entered the market with stronger communication skills and higher education. This has made outsourced accounting attractive again, because you can still outsource for a more competitive wage than US employees. In the past few years, the COVID-19 pandemic has also made people more comfortable with remote work. Additionally, many companies struggle to fill entry level jobs with the increasingly-skilled US labor. Between all those contributing factors, more and more small businesses are outsourcing their accounting needs.
AI is another development that will compete with some job functions of both US and outsourced employees. AI can be utilized to automate some work, and it minimizes human error. At this point, AI can do some basic data entry, reconciliations, and automated financial analysis. Of course, it will only improve from here, and it is the space to watch.
Both outsourced accounting and AI are useful tools to supplement a business’s existing accounting department, with a few caveats. It’s important to make sure any outsourced companies used for accounting are well educated and have good communication skills. Fraud is another risk to be aware of when using outsourced companies, so you need to perform due diligence before handing over your financial information to anyone. In terms of AI, it is still very rudimentary. At the end of the day, AI is based on an algorithm, and you still need a human to check any work completed by AI in case the parameters are outside of the algorithm.
For now, both AI and outsourced accounting firms require oversight by a financial professional. A financial professional will determine if everything makes sense from an accounting perspective. He or she will also be able to extrapolate data, make conclusions based on experience, and come up with creative ideas and solutions. From what I have seen, neither outsourced companies nor AI are performing those functions effectively yet.
Sentinel Finance Group often works with our clients’ outsourced accounting teams, and we view AI as a useful tool. We act as the financial professional to provide expert oversight, and perform the CFO level analysis and reporting.
Sentinel Finance Group is an outsourced CFO firm in Kansas City and provides fractional CFO services and controller services to local businesses.
