Posted in Accountants | by: Caleb Newquist

How to Stop Worrying, Love Artificial Intelligence, and Transform Your Accounting Firm

For some time, it’s been clear that artificial intelligence and machine learning would have an impact on accounting. Going Concern started half-joking about robots taking all the accounting jobs as early as 2014, even hinting at the possibility in 2011. This means that the AICPA probably caught on sometime in late 2017.

The point is, if you’ve been paying attention, you’ve been wondering what impact AI would have on the accounting profession, and just how big it would be for a while now.

As it turns out, the impact will touch virtually everything in accounting, and it will be bigger than most people could have imagined, so, it must be time to freak out, right? Are we only a few short years away from a world of super-intelligent cyborgs displacing professionals to a white-collar wasteland where lawyers and accountants do battle for the chance to pore over dense contracts, tax regulations, and fill out timesheets by hand?  

No, we’re not, although I think that might be the setting for my next dystopian novel. In reality, “artificial intelligence” is a pretty broad label that means a lot of different things. Nearly all the “artificial intelligence” we’re experiencing in this day and age — including every instance in the accounting world — consists of “weak AI” or “narrow AI.” Examples of weak AI include your virtual assistant or that telemarketer who doesn’t quite sound human. By contrast, “strong AI” and “artificial general intelligence” are the types of AI that you see in movies that give you the creeps.  

However, that does NOT mean the technology being developed can’t replace humans for a large number of tasks. In the oft-cited 2013 paper “The Future of Employment: How Susceptible Are Jobs to Computerisation?” by Carl Benedikt Frey and Michael A. Osborne of the University of Oxford, accountants and auditors score 0.94 probability (on a scale of 0 to 1, where 1 = certain) that job losses will occur in the next two decades. Tax preparers landed in the top ten most probable for jobs losses with a score of 0.99. More recently, a recent study from Atherton Research predicted: “by 2020, accounting tasks — but also tax, payroll, audits, banking — will be fully automated using AI-based technologies.”

Naturally, this has people worried. Yes, the American Institute of CPAs wasn’t exactly all over the advent of AI, but then one of the executives saw a Jetsons rerun and remembered that things like robot slave labor were possible. Over the last couple of years, the AICPA has repeatedly warned its membership to prepare for a future where their firms would be unrecognizable. The catalysts of this change have almost always been technology flavor of the week: From BIG DATA to The Internet of Things to the cloud to blockchain to, yes, artificial intelligence, the accounting profession never lets a good technology crisis go to waste. These advancements are described with words like “change” and “disruption,” implying that there’s something to fear; and that something is obsolescence and irrelevance.

Although there is no shortage of accounting firms who are boldly going where accounting has never gone before, many more probably haven’t considered what AI means to their firm in a broader context. This means thinking about your firm in a more holistic way; at its core, what is the firm? Is it more than just crunching numbers? If so, what does it really do? What are you trying to accomplish? If you can easily answer these questions, then you’ll be fine. Firms that are unsure, might have some work to do. Either way, you should read on.

There’s nothing to be afraid of 

This anxiety about the future isn’t entirely unfounded, however. Some of the predictions in Frey and Osborne’s 2013 paper are slowly manifesting themselves right before our eyes. Businesses are more complex than ever, making data analysis crucial to understanding them; the Internet is creeping into every facet of our lives; distributed ledgers have huge potential; everything is on the cloud, and AI and automation are taking over repetitive tasks from humans. So, yes, there are lots of things changing.

But when has change not been pervasive throughout business? Has our economy ever been wholly stable and resistant to disruptive forces? I think most people, upon short reflection,  would confess that that’s never been the case. “Oh, but this time it’s different,” you might say. But isn’t that obvious? Of course the change we’re experiencing now is unlike any change we’ve ever experienced before; if we were experiencing something we’d seen previously, we’d use a different cliche: History repeats itself.

The lesson here, I think, is that we’re always experiencing change and repetition simultaneously, and to get worked up about any of it is a questionable use of energy.

What to do instead 

Get excited about it. AI will help you do the routine things better, leaving you to focus on the important stuff.  

Wait, but what’s the important stuff? Once you’ve made up your mind to not worry about all the change that’s happening and not happening, it’s worthwhile to think about what your firm should be doing. AICPA executives want accounting firms to “disrupt themselves” and “reimagine” their field, and that kind of amorphous advice is not all that helpful. Cutting the electricity to your office would be disruptive and you could reimagine your accounting firm as one that only serves hipster coffee shops but you’d just be torturing yourself with moves like that.  

Their advice isn’t entirely useless, though. Getting comfortable with discomfort is probably the best thing you can do for your business. By accepting the fact that your firm will have to change, probably continually, you’ll hopefully resist the temptation to worry about it at all and, as mentioned above, get down to business.

Here are several ideas for transforming your firm into a fluid operation that won’t get spooked when the machines show up to do the grunt work.  

Focus on your niche 

We’ve talked about building niches before, and it bears repeating: Your firm should focus on a particular industry, stacked with people who know that industry really, really well. Those people might even be experts in a providing a specific service to that industry like HR advising, IT consulting, financial planning or strategy. We’ll chat more about services below.

If your firm has already chosen a niche, then now is a great time to check on its development. Are you still spending lots of time on non-niche clients? Can you — gasp — fire them or transition them to another firm? Have you done any research or business development around the niche recently? If these questions have sent you scurrying into the broom closet out of shame, then perhaps take the time to recommit to your niche and take some action.  

Advisory services 

Accounting firms have been offering advisory, aka consulting, services for decades, but historically, only larger firms had the resources to provide them with significant value. In recent years, as traditional accounting firm services like tax and assurance have become increasingly commoditized, advisory and consulting work became an imperative for firms of all sizes who want to survive. The advent of AI and automation has allowed smaller firms to grow their businesses in new ways including offering new advisory services.

Here are a few services to consider:

  • Virtual CFO/Controller Services — If your clients are growing, accounting and finance types are often some of the last people small businesses hire. By acting as your client’s outsourced CFO or controller, you’ll be their go-to numbers person.
  • Coaching — This is beyond just mentoring your clients’ owners or top employees. Coaching can be therapy, dreaming, exorcism, brain-mining, and more all rolled into one. Professional coaching has become such a massive part of learning and development that there’s even an international organization dedicated to the practice. The International Coach Federation issues a trio of credentials, connects coaches with coachees, and offers training courses.
  • Consulting — Consulting gets a bad rap because it can be an obscure, sometimes meaningless, term. Firms that approach “consulting” define it into relevant, valuable services. Maybe your clients need to establish their own niche, consider new products or services, or acquire or merge with another company. If you’re positioned to help them with this type of work, you’re consulting the right way.

This short list is just a taste of things your firm can do. Obviously, if you’re handy with tech, that’s a bonus, and more firms are making non-traditional acquisitions, meaning you’re only one expensive, complicated transaction away from breaking ground on a new endeavor.   

Learn (or create) something new 

Speaking of new endeavors, there’s one thing that artificial intelligence will not be able to do anytime soon: Make up new things to do. As I mentioned earlier, the AI that’s emerging right now is designed to perform specific tasks, and although it can “learn” things, it doesn’t possess general intelligence or sentience that would allow it the expand its capabilities beyond its predefined range.

A recent Vox article touched on this topic, noting that making stuff up to do is an exquisite human activity:

A hundred years ago, or 400 years ago, people did much more useful jobs — huge swaths of the human race, for instance, were directly involved in the production of food and the collection of water.

Compared with those ancestors, humans today are a massive useless class. What sort of job is “editor of an explanatory journalism website” next to “farmer”? Would our ancestors value the work of psychologists or customer service representatives or wedding planners or computer coders?

But this, to me, is the story of labor markets in the past few hundred years: As technology drives people out of the most necessary jobs, we invent less necessary jobs that we nevertheless imbue with profound meaning and even economic value.

Once upon a time, I went to college to become an accountant, and after learning to be an accountant, I did accountanty things for a while after that. Accounting for things has been around for quite awhile, so I suppose it’s a useful job. Then I became a “blogger” or perhaps more accurately, an “editor of a gossipy, irreverent website for accounting professionals.” Which, yes, some might just say is a kind of “writer” or a “journalist,” but the point is, I wound up being paid to do something that didn’t really exist when I was in college and certainly didn’t exist 100 years ago, and, some might say, could be incredibly useless.

It’s this kind of attitude that you should take with you when you’re building out the capabilities of your firm. I’m serious! Through trial and error (a euphemism for screwing around) you’ll discover what your clients find to be valuable, and after you land on something that one person wants to pay for, it’s possible that other people will want to pay for it too.

Imagine the firm you want and build it 

There are a couple of ways you can think about the RISE OF THE MACHINES or whatever you’re calling this age of technology alarmism.

  1. Use the tech available to help provide your traditional services in a whole new way, embrace the opportunity to make significant changes to your firm; or 
  2. Take cover until everything blows over.

I wouldn’t recommend option 2 unless you’re ready to go on a permanent vacation which, admittedly, sounds really nice. However, if you’re even the least bit intrigued about the possibilities that AI might bring about, then stop reading this, get out there and make it happen. Besides, it’s perfect timing; you’ve reached the end.

 

About Caleb Newquist

Caleb Newquist is Editor-at-Large at Gusto. In 2009, he became the founding editor of Going Concern, the one-of-a-kind voice on the accounting profession, serving in the role for 9 years. Prior to Going Concern, Caleb worked as a CPA for nearly 6 years in New York and Denver. He lives in Denver with his wife, daughter, and two cats. You can follow him on Twitter at @cnewquist.