Chat GPT and Artificial Intelligence will transform the accounting industry forever.
What is Chat GPT?
Chat GPT (Generative Pre-trained Transformer) is a chat bot developed by OpenAI. It’s a text chat bot that’s been trained on massive datasets including books, articles, and websites available to the public on the internet. It differs from prior versions of chat bots due to a few primary differences. The breadth of questions it can answer is unprecedented. It can answer questions about Accounting, Finance, Microsoft Excel, and even perform Computer Programming.
The way people interact with Chat GPT is through a chat interface. Chat GPT provides answers to questions in the same way that a human can. After it answers a question, you can ask follow-up questions and it has an understanding of the past context of questions. This makes it even more useful to gain insights and clarification of past questions.
Future capabilities include integration with Microsoft Office products like Power BI, Excel, Word, SharePoint and will likely some day be able to integrate directly into accounting software.
You can sign up for an account through the OpenAI website to give it a try for yourself: ChatGPT: Optimizing Language Models for Dialogue (openai.com)
How can Chat GPT be Used for Accounting?
As a quick test, we asked Chat GPT How to record the journal entry for the sale of a car for $10,000. We were expecting a simple answer but were pleasantly surprised when it described how to record a disposition of an asset. To test it out further, we responded that we are in the business of selling cars and it gave a follow-up set of journal entries for cash, revenue, cogs and accounts receivable.
While this is a fairly simple use case, it highlights the flexibility of the technology. By describing a transaction and having a minimal understanding of the context that it occurred, Chat GPT is able to accurately describe the set of journal entries needed to appropriate record the transaction.
Using Chat GPT to Explain Complex Accounting Treatments
As a more advanced test of Chat GPT’s knowledge base, we asked it to explain the differences between IFRS 16 and ASC 606. It quickly identified that we were asking about differences in FASB and IFRS revenue recognition rules. (It even recognized that we mis-spelled ASC 606 as 6060 and pointed out the error while giving us the correct information anyway)
In the response, it breaks down the key variances and provides a brief history of the accounting treatments. Chat GPT makes accounting treatment research nearly effortless.
Note: Chat GPT has only been trained on data up through September of 2021. Any changes to accounting standards after this point will not be available. Systems such as Google Bard, have similar capabilities as Chat GPT but are trained on up-to-date data available on the internet. Even with up-to-date information we would caution people on making critical decisions using an AI chat bot at this time.
Chat GPT Can Answer Questions from the CPA Exam?
Yes, Chat GPT can answer questions from the CPA Exam. It has not been directly tested with a live version of CPA exam but it is highly likely to pass. The latest version of Chat GPT, GPT-4 scored in the 90th percentile for the Bar Exam and in the 80th percentile for the GRE Quantitative Exam. As the technology evolves, the results will only improve over time.
For our own test, we asked Chat GPT to answer one of the more difficult accounting and audit questions that you might find on the CPA exam. It returned answers with a surprising level of detail. While reading this, keep in mind that Chat GPT has been generally trained on large datasets. It has not specifically been trained on accounting training material.
Example CPA Exam Question: Provide a summary of what is considered part of the required supplementary information for general purpose external financial reporting of a local government?
Chat GPT-4 Answer: The Required Supplementary Information (RSI) for general purpose external financial reporting of a local government typically includes the following elements:
- Management’s Discussion and Analysis (MD&A): A narrative overview of the local government’s financial performance, financial position, and significant changes during the fiscal year.
- Budgetary Comparison Schedules or Statements: A comparison of the original and final budget with actual revenues and expenditures for the general fund and major special revenue funds with a legally adopted annual budget.
- Schedules of Funding Progress and Employer Contributions: Information about the funding progress of defined benefit pension plans and other post-employment benefit (OPEB) plans, as well as the annual required employer contributions.
- Notes to RSI: Additional information or explanations to help users understand the RSI schedules and tables.
- Infrastructure Reporting (if applicable): Schedules and disclosures related to the condition and maintenance of infrastructure assets for local governments using the modified approach for reporting infrastructure assets.
These elements provide users with essential information to better understand a local government’s financial condition, performance, and accountability.
It’s an impressive answer. We had to ask the chat bot to provide a summarized answer for the sake of this post because it went into too much detail.
Tip: One of the most effective ways to use Chat GPT is to provide it with additional information about how you would like it to respond. It will adjust when asked to provide summaries, formula only, 5 examples of a solution, etc.
Using Chat GPT to Automate Financial Reporting
One use case for accountants is to use Chat GPT as a resource in areas that you may not be as familiar with. The accounting industry has changed drastically over the last couple of decades. Accountants are increasingly being asked to automate their processes.
We absolutely believe that automation is the future of accounting. The elimination of manual data entry and manual financial report preparation reduces errors and improves the ability of management to make decisions with closer to real-time data.
However, these systems can be a lot to learn. They have gotten more approachable over the years but still require a level of technical knowledge on top of accounting knowledge. Chat GPT can be used as a resource for many popular business intelligence and analytic automation tools such as Power BI, Tableau, and Alteryx,
For example, you can use Chat GPT to help you create automated financial reports in Power BI:
Microsoft 365 CoPilot for Chat GPT Excel
CoPilot 365 is the brand name that Microsoft is giving to its effort to integrate ChatGPT into the Microsoft Office Suite of tools. There are clear use cases like using Chat GPT to create rough drafts of documents and helping people to quickly respond to e-mails, but the most exciting use case for accountants is the integration of Chat GPT with Microsoft Excel.
Microsoft provided the following example video: Microsoft 365 Copilot in Excel – YouTube In it, they show a use case of asking questions about data and asking Excel to complete tasks without having to know which buttons to press.
This will be a revolutionary change for accountants. It will both make advanced Excel skills accessible to less skilled users and will also eliminate the need to create many ad hoc reports. Microsoft CoPilot 365 is also being integrated into many other key business systems such as SharePoint, One Drive and Microsoft Teams.
Financial Questions Could be Answered by Robots
The technology behind Chat GPT could be used to answer questions that a financial analyst or accountant may have previously been asked to put together. In this case, a bot could be trained to respond to common questions while referencing a company’s own data set.
What are the top 10 selling products this month? Which products are typically purchased together? Why was operating cash flow down this quarter?
Microsoft was an early leader in the space of allowing people to ask questions about their data in the Power BI Business Intelligence platform shown in the screenshot below.
The more exciting use cases will come in the near future when Microsoft releases CoPilot 365 that integrates PowerBI, Excel, SharePoint, One Drive along with other business specific data sources to answer questions based on the files that are available within your organization’s local network.
We have many questions about data governance and how access controls for sensitive topics will be controlled. A second concern will be determining how Microsoft will differentiate between a set of Power Point slides that are a work in progress vs a document that went through an approval process and became finalized policy.
Using Chat GPT for Tax Accounting
Tax practices add a lot of value to clients by performing legal research and providing opinions on various tax strategies to their clients. Training a Chat GPT solution on a legal dataset, and tax case law is not a far stretch. Once trained it could provide tax suggestions, or potentially be plugged into an ERP to identify opportunities that a tax practice may not initially be aware of.
It may also be used as a replacement for e-discovery. Companies often have to prepare documentation and record requests for anything from local sales and use tax to IRS audits. The process of capturing this information can be very time consuming. An AI trained on your internal data may be able to surface the documents that you need in a much timelier fashion.
While we think it’s a pretty far stretch to have an AI like Chat GPT represent you in tax court, The National Law Review recently published an article exploring the use of GPT as a replacement for lawyers. ChatGPT First Artificial Intelligence Lawyer in the Courtroom (natlawreview.com)
For the time being it doesn’t look like lawyers have to worry about being completely replaced. Chat GPT is still struggling to pass the bar exam. Craig Ball: ChatGPT Proves a Mediocre Law Student – EDRM but, these tools do have the potential to at the very least help Tax and Legal teams prepare for cases, respond to requests for information from the IRS and maybe even be a reference point for potential tax strategies at your business. At the very least, we can hope that they will bring down the billable rate of tax lawyers
Will the IRS embrace AI for Audits?
It’s no secret that the IRS is suffering from a massive staffing shortage that they’re trying to cope with. Long term, it may be more likely that these jobs become increasingly automated. Most personal tax returns that are fairly straightforward are already audited for fraud and errors by machines. More complex returns are audited by IRS Agents or IRS Special Agents. It’s likely that as AI improves, an increasing number of tax returns will be fully audited or at the very least flagged for suspicious activity.
Can Chat GPT do Your Personal Tax Return?
As things stand today, we would not be recommending chat GPT for personal tax advice for a number of reasons. In the future the technology behind Chat GPT and Natural Language Processing will likely be incredibly useful though. Companies like TurboTax and H&R Block are leaders in their field and spend millions of dollars a year staffing call centers to answer tax questions. Their online products are based on walking people through filling out tax forms by asking common personal tax questions about life events and filling out forms.
Here are the reasons we would not use Chat GPT for personal tax returns.
- The dataset isn’t up to date. It was trained on a dataset up through 2021
- The dataset wasn’t tax focused. Tax return services spend countless hours researching the latest tax laws.
- Tax returns can be subjective. A great tax accountant will provide you with options and understand the risks around various tax approaches.
- Answers are not 100% accurate but can sound accurate.
How to Use Chat GPT for QuickBooks and Other ERPs
One of the biggest time savings that an accounting department can achieve is from better utilization of their accounting software. QuickBooks Online is one of the most widely used accounting solutions that can benefit from Chat GPT.
Finding out if you can import data into accounting software is always the top of our list of things to do to save time in an accounting department. It’s a go to first step, as many companies don’t integrate systems or have high levels of process automation which means that people are left typing data in from one computer system into another.
These are the top 5 ways that QuickBooks recommends to input data into QuickBooks faster. If we were to ask more clarifying questions, we could get even more precise results to take action with.
Try asking Chat GPT about how to automate your accounting software, with in depth knowledge of Python, SQL, and advanced programming languages it could also be a great resource for Oracle, SAP, and significantly more complex accounting systems.
What are the limitations of Chat GPT?
Luckily Chat GPT hasn’t replaced all of our jobs quite yet. While testing it out, we found a few limitations.
- Answers can be so high level that they’re not useful. For example, we asked why we get an error when using the Alteryx to SharePoint connector, and while some of the answers were useful, others included restarting your computer. It’s possible that restarting your computer could help, but likely not the case of why there’s a bad connection.
- Some answers can be incorrect but look correct. We were using it to create Python scripts that looked like they would run but failed to compile. It then took a bit of time to figure out why it wasn’t working which may not have been a huge time saver compared to writing it from scratch.
- You need a decent technical knowledge to know when it’s incorrect. A lot of responses seem reasonable and look like they will work. However, if you have no background in Python it might be impossible for you to go back and figure out why a Python script didn’t run. Chat GPT is a great starting point, but your own personal depth of knowledge will be needed to ensure the results are what you need.
- Chat GPT only has data through September of 2021. Not having access to recent information is the biggest limitation of ChatGPT. They have recently announced ChatGPT plugins to eliminate these shortcomings, and will allow ChatGPT to access other systems and current events. While it hasn’t been released to the general public at this time, solutions like Google Bard may be better solutions in the interim.
Chat GPT and AI Tools are Only as Good as the Dataset
Even though Chat GPT is incredibly impressive, the chatbot developed by OpenAI was trained on a very broad dataset with some additional depth related to computer program languages, such as Python.
For Chat GPT and tools like it to have a bigger impact on the accounting field, it would have to be trained with a depth of knowledge in the accounting field to be able to offer up more nuanced answers.
Another limitation is that so many answers in accounting become judgement calls or are contingent on outside circumstances. A program like Chat GPT may be able to give general guidance, but it would be difficult to train it to understand all of the outside circumstances that may impact a decision.
How will AI impact our Accounting and Digital Transformation Jobs?
Like any new technology, it will displace the easiest things first. In the world of accounting and digital transformation it’s transactional accounting, and low-level programming and
These are our predictions for the not-so-distant future.
1.) AI will replace transactional accounting
The digitization and elimination of transaction accounting processes is already well underway. Artificial Intelligence and Machine Learning techniques are becoming increasingly more approachable. Companies can deploy AR and AP automation with minimal technical knowledge with solutions like Microsoft AI Builder.
The advanced techniques that these solutions use are still not 100% accurate. There can be errors reading an invoice that then have to be routed to humans for further review and to fine-tune the automation model. Solutions like Chat GPT might be the missing link to move these solutions from being 70% accurate to closer to complete automation.
2.) AI will replace low level computer programming
Computer programming has become less and less specialized over the last several years with the advent of low code computer platforms. You can now make an application by dragging and dropping interface elements and using relatively straight forward.
Github Copilot has already been around for a while and can write large parts of complex programs on behalf of programmers. Once it’s upgraded and infused with the latest version of GPT technology, we expect that the opportunity for job displacement will only increase. You can learn more here: GitHub Copilot · Your AI pair programmer · GitHub
Chat GPT style Automations are already available in Microsoft 365 programs today! Learn how to build process automations by converting plain text descriptions into processes.
Lear how to you can start using these features today
Are we at the AI tipping point with Chat GPT?
Ethan’s article goes straight to the core of the recent buzz and asks whether or not we are at an AI tipping point. We believe that Chat GPT may indeed mark the beginning of a new era where generally trained AI becomes approachable and cheap enough that it will have a significant impact on the way that humans interact with computers and have a massive economic impact changing every facet of the way that we do business. Artificial intelligence is permeating business at last | The Economist
Will Chat GPT Replace Accountants?
No, Chat GPT will not fully replace accountants. Lower level jobs like Accounts Payable and Accounts Receivable clerks have been moving towards being fully automated for years now. What used to take a team of 10 can be completed with a team of 3. Chat GPT will improve AR and AP automation, taking it to the next level. But even this level will only have a marginal impact on the level of automation that is already available to businesses today.
The next set of accounting jobs that will be eliminated are those related to business intelligence and ad hoc report generation. Microsoft along with many of it’s competitors are hard at work figuring out how to use AI to answer financial questions in programs that millions of people already use, such as Microsoft Excel.
A third set of jobs that are at risk will be staff accountants focused on reconciliation of accounts. As it becomes easier to integrate systems, create web forms, and limit the number of errors that come from manual data entry, the number of reconciling items will decrease. This reduces the number of manual journal entries needed and decreases the close time at month-end.
However, even if these jobs are eliminated there will be new opportunities for accountants to focus their skillsets on new challenges. For example, Artificial Intelligence is often criticized for being a black box. A prompt goes into a chat bot like Chat GPT and it provides an answer. Even PhD’s in Machine Learning have a difficult time deciphering how it comes up with the answer that it does.
New opportunities may arise in auditing machine learning models and proving that the financial answers that Chat GPT provides are actually accurate. Accounts Payable and Accounts Receivable clerks that don’t need to process data will still be needed to reach out and contact customers and vendors when there’s a discrepancy. Governments are planning to regulate AI and have many real privacy concerns about the technology. An industry will arise around enforcing and auditing compliance to these regulations that accountants have a skill set that is uniquely suited to adapt to the coming AI revolution.
Our advice is to invest in yourself, improve your skills and stay a step-in front of the changing career landscape.
Here are some other helpful articles to keep you informed on other creative time saving ways to use Chat GPT.