Seven Accounting Tasks Singapore SMEs Can Automate Using AI

AI is becoming part of the finance function

Artificial intelligence is increasingly being used by Singapore businesses. According to IMDA, the proportion of SMEs adopting AI increased from 4.2% in 2023 to 14.5% in 2024, with finance and accounting among the most common business functions using AI.

For SMEs with limited finance resources, AI-enabled accounting software can reduce repetitive work, identify unusual transactions and produce information more quickly. However, automation does not remove the need for proper accounting records, internal controls and human review.

Here are seven accounting tasks SMEs can consider automating.

1. Extracting information from invoices and receipts

AI-enabled software can read invoices and receipts and extract information such as:

• Supplier name
• Invoice date and number
• Description of purchases
• Amount before GST
• GST amount
• Payment due date

The information can then be used to prepare a draft accounting entry. This may reduce manual data entry, particularly for businesses processing many supplier invoices.

Someone should still verify the supplier, amount, GST treatment and account classification before the transaction is posted. Businesses should also establish controls to identify duplicate invoices and changes to suppliers' bank-account details.

2. Categorising income and expenses

Accounting systems can learn from earlier transactions and suggest how new transactions should be classified. For example, a system may suggest whether a payment relates to rental expense, professional fees, inventory purchases, repairs and maintenance, staff welfare or capital expenditure.

These suggestions can improve processing speed, but they should not be accepted automatically in every case. Similar descriptions may have different accounting or tax treatments. A computer purchase, for example, may need to be recorded as a fixed asset rather than an immediate expense.

3. Assisting with bank reconciliations

AI-enabled accounting systems can match bank transactions against invoices, receipts and accounting entries. They may also highlight:

• Unmatched receipts and payments
• Duplicate entries
• Differences between recorded and actual amounts
• Unusual descriptions
• Long-outstanding reconciling items

This allows the finance team to focus on exceptions instead of matching every transaction manually. The bank reconciliation should nevertheless be reviewed regularly, as unexplained differences may indicate recording errors, unauthorised transactions or missing documents.

4. Monitoring trade receivables

AI tools can organise outstanding customer balances and help businesses prioritise collection activities. They may produce ageing reports, draft payment reminders, identify customers who frequently pay late and estimate expected collection dates.

Automated reminders can save time, but businesses should consider the customer relationship before sending them. A disputed invoice or agreed extension may require personal follow-up. Management should also assess whether long-outstanding balances remain recoverable and whether an impairment allowance is required.

5. Preparing short-term cash-flow forecasts

AI can use historical receipts, payments and recurring expenses to help prepare short-term cash-flow projections. A forecast may consider expected customer collections, supplier-payment dates, payroll and CPF obligations, rental commitments, tax payments, loan repayments and seasonal sales patterns.

The forecast can help management identify a possible cash shortage earlier. However, it is only as reliable as its underlying information and assumptions. Management should incorporate known events that may not appear in historical data, such as a new contract, the loss of a major customer or planned capital expenditure.

6. Drafting management reports and explanations

AI can help convert accounting information into preliminary management reports. It may summarise changes in revenue, gross profit, operating expenses, cash, customer balances, supplier balances and budget-to-actual results. It can also draft questions about significant fluctuations for management to investigate.

These reports should be treated as a starting point. AI may identify a numerical change without understanding the commercial reason behind it. Management and the accountant should verify the figures and provide the final explanation. Confidential financial information should only be processed using appropriately approved systems.

7. Identifying unusual transactions

AI-assisted analytics can scan a large volume of transactions and flag items that may require investigation, including:

• Duplicate payments
• Transactions recorded outside normal working hours
• Unusual journal entries
• Round-dollar payments
• Unexpected changes in supplier details
• Expenses outside normal patterns
• Transactions posted by unauthorised users

A flagged transaction is not necessarily an error or fraud. It indicates that someone should examine the transaction and its supporting documents. AI can improve the coverage of transaction reviews, but investigation and conclusions remain management's responsibility.

Controls to establish before using AI

Before introducing AI into an accounting process, an SME should consider the following safeguards:

1. Define which tasks may be performed or assisted by AI.
2. Require human approval before transactions are posted or payments released.
3. Restrict system access according to employees' responsibilities.
4. Avoid entering confidential information into unapproved public AI tools.
5. Retain invoices, approvals and other supporting records.
6. Maintain an audit trail of changes and automated actions.
7. Review the accuracy of AI-generated results periodically.
8. Establish a process for reporting and correcting errors.
9. Review the provider's data-security and retention arrangements.
10. Maintain alternative procedures if the system becomes unavailable.

Where personal data is processed, businesses should also consider their obligations under Singapore's Personal Data Protection Act and the PDPC guidance on the use of personal data in AI systems.

AI assists—the business remains responsible

AI can help an SME process information more efficiently, but it does not assume responsibility for the company's accounts, tax filings or financial decisions.

Directors and management remain responsible for maintaining adequate accounting records and reviewing information used to make business decisions. Professional judgement is still required in areas such as revenue recognition, asset classification, provisions, impairment, GST and corporate income tax.

The most effective approach is generally to use AI for repetitive processing, preliminary analysis and exception detection while retaining meaningful human oversight over approvals and important judgements.

How LN Corporate Services can assist

LN Corporate Services can assist businesses with bookkeeping, management accounts, GST reporting, payroll, financial reporting and the development of appropriate accounting procedures and internal controls. Technology and other regulated matters may be handled with appropriately qualified or licensed external professionals where required.