The Role of AI in Financial Bookkeeping Part 2/2: Past and Future
Introduction:
Hello and welcome back! Today we’ll be continuing our conversation about AI in bookkeeping that we started in part 1 of this blog. If you haven’t read part 1 already, CLICK HERE.
As a reminder, the text in black is where AI is responding to my prompts, while the text in blue is where I am writing personally. For those who are ready to continue, let’s get right into the history of how technology has shaped bookkeeping already.
How AI Has Changed Bookkeeping in the Past
Over the past decade, AI has gradually shifted bookkeeping from a manual, labor-intensive process to a more efficient, data-driven practice.
a) Shift from Spreadsheets to Cloud-Based Automation
Before AI, bookkeepers relied heavily on Excel and manual ledger entries. Today, cloud accounting software automates much of this work.
This is one of the most significant shifts that has happened in bookkeeping. Modern finances work on a system called double-entry bookkeeping. Basically, this means that every change made to the books must be accompanied by another change to keep everything balanced. It’s a lot like algebra, where you do to one side of an equation everything that you do to the other side of the equation.
Modern bookkeeping software automates a lot of this double entry bookkeeping so that you don’t have to make multiple entries for every transaction. That is a real time saver! However, bookkeepers often have to make journal entries in cases where the program is unable to automate the entire transaction. It is still important for bookkeepers to know how to do their job when the software can not automatically make adjustments.
b) Reduction in Human Error
AI has minimized mistakes in data entry and reconciliation, leading to more accurate financial statements.
AI has done some good in reducing human error. For example, if you try to print a check for $6,000 instead of $60 by accident, AI may be able to alert you before the damage is done. However, AI is also liable to misread $60.00 as $6000, and thus create a major error. It helps to have AI checking your work for mistakes, but it is also important to check AI’s work.
c) Faster Financial Reporting
Real-time AI processing allows businesses to generate financial reports instantly rather than waiting for month-end closings.
This sentence is so fascinating because it is just wrong. The implication seems to be that with AI, your financial reports will always be up to date and accurate even before your bookkeeper has closed the month. That is false.
Sure, you can generate reports in QuickBooks at any time, but that doesn’t mean the reports will be correct. Month-end closing is the process by which a bookkeeper makes sure that all data is correct so that QuickBooks reports will be accurate. This is a nice demonstration that AI might be able to tell you anything, but what it is telling you might not be true.
How Bookkeepers Can Adjust to AI in the Industry
Rather than replacing bookkeepers, AI is changing their role. Here’s how professionals can adapt:
a) Upskill in AI & Data Analytics
Bookkeepers should learn to use AI tools and understand data analytics to provide deeper insights.
b) Focus on Advisory Services
With AI handling routine tasks, bookkeepers can shift to strategic advisory roles, helping businesses with:
Tax planning
Financial forecasting
Cost optimization
c) Specialize in Compliance & Regulation
Since AI struggles with evolving tax laws, bookkeepers can add value by ensuring compliance and advising on regulatory changes.
This is more so a role for accountants more so than bookkeepers. The AI seems to misunderstand the role of a bookkeeper vs an accountant.
d) Offer Personalized Client Services
AI lacks human empathy—bookkeepers can differentiate themselves by building relationships and offering tailored financial advice.
Let’s imagine an AI powered bookkeeping software that magically was able to do everything that a human bookkeeper could do within a program, and do it perfectly. You still have a major problem, which is that the AI lacks the ability to communicate with clients effectively. Maybe AI can help produce financial reports, but it can’t explain those reports to you. Maybe AI can categorize transactions, but it can’t explain the implications of categorizing something as a fixed asset vs an expense.
As a bookkeeper, communication is a major part of my job. It is as important as anything else I do in my work. My clients, small business owners, don’t just want their books done so that they can never look at them. They want to understand what the books mean.
The whole point of a bookkeeping system is to inform its users. Without a specialty education, you can’t understand what an AI bookkeeping software is doing and why. A human bookkeeper is needed to ensure that the books are lining up with reality, as well as with the owner’s vision for the business, and then explaining to the owner how the system works.
Will Small Businesses Still Need Bookkeepers in the Future?
Yes, but their role will evolve.
a) AI as an Assistant, Not a Replacement
Small businesses will still need bookkeepers to:
Verify AI-processed data
Handle complex transactions
Provide financial strategy
b) Cost-Effective Hybrid Model
Many small businesses will use AI for automation while hiring bookkeepers for high-level oversight, creating a cost-efficient hybrid approach.
Technology in general will definitely make bookkeeping more cost-efficient. Expertise also makes for cost-efficiency. An experienced and smart bookkeeper should be able to work far faster than an inexperienced one. I always work with a mind towards efficiency, and I can promise that certain tasks that took me hours when I first began bookkeeping now take me very little time at all. So don’t think that AI is the only path towards cost efficiency. You can also get a lot of value by hiring the right person with the right expertise.
Conclusion
AI is revolutionizing bookkeeping by automating repetitive tasks, improving accuracy, and providing real-time insights. However, its limitations mean that human bookkeepers will remain essential—especially for strategic decision-making and compliance.
I’m no Luddite. I don’t believe that technology is strictly a bad thing, or that we need to resist change. As a bookkeeper, I expect my industry to be impacted by AI, and I am ready to embrace that change wherever it can create improvements. I do not expect or want the industry to retain outdated practices for the sole purpose of maintaining a demand for labor. That’s because my long-term business model is not one of deliberate inefficiency.
My vision for my business is to leverage whatever modern tools at my disposal to provide business owners with financial knowledge and empowerment. I recognize there will be times that AI can help me in that mission. I also recognize that there are times that AI will fail, and I’ll have to rely on my own knowledge and hard work to make things happen. I’m prepared for both of those situations.
In this case however, I think AI gave us a pretty good wrap up, so I’ll let the robot take it from here.
The future of bookkeeping lies in collaboration between AI and professionals. Bookkeepers who adapt by embracing AI tools and shifting toward advisory roles will thrive, while small businesses will benefit from a hybrid approach that combines automation with expert oversight.
As AI continues to evolve, one thing is clear: The role of the bookkeeper is changing, but it’s far from disappearing.
Well said AI.