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Most of us do not think of accounting as a separate line of business. But accounting is a big business, and in itself.
The global accounting services market is expected to grow from $ 544 billion in 2020 to ચ 573 billion in 2021 at a compounded annual growth rate (CAGR) of 5.4%, according to a global report by Research & Markets’ Accounting Services Market. The market is expected to reach $ 736 billion in 2025 at a CAGR of 6%.
This is a huge market and a target for digital transformation. According to Values Reports, the size of the accounting software market is projected to reach $ 22.9 billion by 2027, up from $ 14.2 billion in 2020, up from 7.1% (CAGR) during the forecast period between 2021 and 2027.
The account software market includes companies from Microsoft, Oracle and SAP to Intuit and Xero and many more. However, there is something that does not apply to any of these names, says Isaac Heller: AI in Accounting. That’s why Isaac Heller and Amir Bolt co-founded Trillion in 2019.
Trillion is “trying to unify the unorganized and structured world of accounting by reading PDF or Excel-based contracts and translating them into financial workflows linked to data sources.”
Trillion has more than 100 clients, ranging from pre-IPOs to multinational Fortune 500 and audit firms that make direct purchases for their clients, and has crossed the seven-digit mark in recurring revenue.
In February, Trilio announced it had closed 15 million in Series A funding, led by ELF and Third Point Ventures, with current investors including Graycroft, and veterans including Bob Mylod, Artie Manson, Jodi Peder and Guzel Lumpkin. With partnership.
Heller met with VentureBeat to discuss the use of Trulian’s AI to innovate the accounting software market.
Accounting is disconnected
Heller lives in the world of finance and accounting. After earning an MBA and working as a teaching assistant and guest lecturer at the University of Texas at Dallas, he learned about the General Accepted Accounting Principles (GAAP) and how those big standards are used. He then entered the corporate world.
This is where he ran into more challenging standards and business models – things like income identification, income accounting and lease accounting. After working on a visual lease, a lease-optimization software provider, Heller was inspired to do the same for accounting. Heller describes accounting as three parts that are disconnected:
The first part is the world of corporate accounting. They are probably doing some of their processes in a spreadsheet or offline. The other part is ERP – SAP, Oracle and WorkDay. And then the third part is the audit leaders and the audit team.
There are many reasons why ecosystems are becoming more manual and dangerous. “The question is, how can you make it more accurate and transparent? And the way to do that, in our opinion, is to find ways to connect the three parts, meaning that everyone on all sides can connect to one source of truth, “Heller said.
“But to do that, if you try to come to market with a heavy tool that did all this, it will not succeed. Or you just have to spend $ 100 million to get started. So what we do is focus on the pain point. In this case, we focus on things like lease accounting and income validation, “said Heller.
Accounting and finance teams are still bound by legacy processes, including manual data entry, spreadsheets and PDFs, meaning they are at high risk for serious and costly errors. Meanwhile, ever-evolving standards – including new lease accounting standards – are estimated to bring $ 2 lease liability to the S&P 500 balance sheets, adding to the complexity and inaccuracy of potential data.
Trillion emphasizes standards developed as a way to raise awareness, innovate and create a sense of urgency. Heller compared specific accounting standards, such as ASC 842 and IFRS 16, to GDPR in that regard. The ultimate goal, he said, is more transparency in the balance sheet.
An in-depth diving on ASC 842 sheds light on the reasons why Trillion is considering implementing AI in accounting and lease accounting in particular is a good idea. ASC 842 defines a lease as a contract or parts of an agreement that provides “control” of identifiable assets for a specified period in exchange for payment.
Trillion notes that this means that the contract must be carefully scanned to identify the lease as defined above. It also includes contracts that cannot be about per-leasing. That poses an interesting problem, for which AI can help.
Applying AI for Accounting
Before reaching AI, there are a lot of data pipelines and data stores that should be in place – in other words, creating the “source of truth” specified by Heller.
Often, when you rely on ERP or an old database as a source of truth, there is no real source within it, Heller said. With source-based accounting, that means more than just PDF documents, he said. It can also mean Excel files or a system like Salesforce or QuickBooks. Trillion ingests data from all those sources and generalizes it into a single source-based accounting system.
Of course, it’s not as easy as it sounds. Relevant data from all those sources will have to be analyzed. In many cases, it involves scanned handwritten documents, which is why Trillion has worked to honor its OCR. But the agreement requires some sophisticated technology to do things like identify lease definitions.
Trillion’s White Paper cites the name Entity Recognition (NER), a technique used to identify specific instances of interest in data sources. To create this, and to generalize the ingested data to a single source of truth, a domain entity model is needed. Trillion’s White Paper refers to the connection of deep learning with domain-specific ontology.
In fact, trillion co-founder and CTO Amir Bolto has confirmed that it takes longer than NER to be able to identify a lease in a contract. Bolto mentions pre-processing, which helps identify data by running it through multiple steps such as data cleaning, data integration, data transformation and more before it passes through the NER.
Bolto said this helps improve accuracy and reduce errors in the end result, although there is currently no publicly available display metrics or ontology to share. Trillion’s solution for identifying leases in contracts has been in development for almost a year.
“There are a lot of startups that do sales software, and marketing software and, customer support software, and these are cases that we all have experience in early stage companies. But accounting – it’s a big business. They are mature companies. It doesn’t go well with startups, “said Heller.
There are some usage cases where AI is applied, such as payable accounts and invoice automation which is more common for us. “I don’t really know why, but we haven’t seen much AI right now. We saw a lot of people talking about it. People wrote some really nice papers about it, but we haven’t seen them put into practice. It’s definitely harder than everyone thinks, “said Heller.
Trillion does not claim to wield a magic wand and get 100% from the document. But if you can connect to the real financial workflow and get something like 70% improvement, that’s still a big deal, Heller said.
Heller said what Trillion does is complementary to solutions like Quickbooks, Zero and ERP software, in the sense that lease accounting is a gap in their ecosystem. The difference with more specialized vendors is the use of AI. Trillion, which has a presence in New York and Tel Aviv, Israel, will use its Series A funds to accelerate various engineering, sales and marketing roles, as well as product development.
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