By Anil K Sharma, Director, FINAC by AKSSAI ProjExel: MSMEs in India contribute to about 30 % of the GDP and directly employ more than 110 million people, but still, many of them are dependent on manual accounting, billing, compliance, and auditing systems.
The situation is currently evolving with the emergence of AI-driven solutions, which allow these small companies to act with increased precision, efficiency, and certainty, and at the same time remain compliant.
One prime direct effect of AI is automating regular accounting work that would use up a hefty portion of time and personnel.
In India, for example, an estimated 46 % of accounting could be repurposed to generative AI in the near future, such as data entry, reconciliation of banks, and processing of invoices.
Similarly, smart automation solutions that use OCR and machine learning are capable of auto-extracting invoice information, automating transaction categories, and account reconciliation, saving days of processing to a few minutes.
Tax compliance and detection of fraud are also another transformative advantage. AI programs optimize GST returns, validate input tax credits, point out anomalies, and ensure that the small business runs in line with the ever-increasing regulatory and auditing requirements.
Real-time risk monitoring software may identify anomalies in payment patterns, vendors that an organization has never used before, or deviations, thus averting losses to fraud, which is estimated to be in thousands of crores each year.
Preparedness and compliance reporting in audits are also refreshed with AI. AI eliminates manual effort and error by auto-tagging documents, keeping audit trails, and certifying statutory checklists like GST e-invoicing submissions, TDS/TCS rates, payment deadlines, etc.
It has saved MSMEs time and costs because the processes that would take hours before can now be achieved in a few minutes.
In addition to operations, AI-led analytics gives MSMEs foresight. AI tools can look at the history of transactions and other external data and predict cash-flow shortages weeks in advance, identify seasonal trends, and suggest how to make savings.
This allows the owners of smaller companies to be much more certain when making active decisions like how to manage working capital during festival times or how not to overdraft.
The use of AI in India is still relatively low. The use of AI by SME accounting professionals today is about 3 %, though more than 52 % expect increased sales due to automation.
Obstacles in this direction are old data systems, scattered document storage, low budgets, and a shortage of. Moreover, the implementation of AI would have to operate within a regulatory environment that is changing in nature, such as GST, TDS, corporate law, rules on data privacy that require the adoption of transparent data governance, and regulatory laws
Even with such barriers, the future is in favor of a human-AI symbiosis. Intelligent automation is far superior at repetitive data processing and identifying patterns, whereas human accountants offer strategic insight, exercise judgement in difficult situations, make sure regulatory compliance is achieved, and offer account management services to clients.
The anomalies are flagged by an AI-based system, or the draft returns are generated and reviewed by professionals and filed.
Indian early adopters are already achieving huge benefits: error reduction of up to 90 %, an average 30 % decrease in the processing time, and enhanced audit results with granular traceability.
Audit logs are generated automatically, immediate invoice registration, threshold approval, and built-in checks of compliance are proving to make it easier to address the problematic compliance issues manually.
First, it is necessary to start with pilot projects: to clean up the financial data, to choose a certain workflow to be automated, e.g., invoice-to-payment or a GST filing, and establish clear supervision practices.
Such a gradual method enables squads to develop confidence in machine output, optimize internal governance, and regulate expenditures. AI offers the opportunity to transform the finance teams with proper management into strategic advisors.
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