AI in Accounting: The Future of CPA Firms and Human Collaboration
The accounting field is about to be extremely shaken up with AI being part of the everyday core function of accounting through automated or computerized bookkeeping, tax preparation, predictive financial planning and analysis.
As the shortage of high-level talent within CPA firms across the United States develops due to a high cost of providing services, a lack of availability/expertise in the marketplace, and a continued increase in client expectations, AI has become an important factor in defining how CPA firms deliver services.
However, the discussion of how AI vs. the accounting profession will affect the profession should not be framed as an "us vs. them" type of dialogue. The future of the accounting profession will be an integrated model of technology and accountants working together to deliver higher efficiency, provide more value-added advisory services, and provide significant growth opportunities without incurring payroll-related costs.
Accounting's future will be a hybrid of technology + people.
The Growth of Artificial Intelligence in the Accounting Sector
The use of artificial intelligence (AI) in the accounting industry has been increasing significantly over the past five years. Automation and machine learning tools are allowing firms to handle multiple, time-consuming tasks that require high volumes of data with increased accuracy and efficiency. What used to take many hours or days to complete can now be accomplished in a fraction of the time.
AI tools are being used to:
- Automatically assign categories to expenses/revenue.
- Identify errors or discrepancies in financial records.
- Compare and verify bank statements for accuracy.
- Produce management reports and customized financial reports.
- Assist with tax preparation services.
- Forecast trends in revenue or expenses.
- Identify instances of non-compliance with regulations.
AI is not just a tool for improving productivity; it also provides an opportunity for CPA firms to dedicate their time and resources to strategic work rather than being bogged down by routine compliance tasks.
Previously, accountants spent a great deal of their time doing manual data entry and performing reconciliations. However, with AI taking care of both processes, accountants can concentrate on interpreting financial data, providing analysis of trends, and offering consulting-related services.
This change is redefining the accounting profession into a technology-enabled environment where technology assists accountants in performing their duties rather than taking away from them.
Why Human Accountants Cannot be Replaced by AI
Although technology is making advancements at an astonishing speed, the human accountancy sector continues to have plenty of roles that cannot be fulfilled by machines. In fact, accounting is so much more than just accounting numbers. It encompasses everything from using harnessing good judgment and understanding how to apply that judgement, building relationships and developing strategies to make informed decisions.
While AI may process large and complex amounts of data, it cannot interpret those numbers into meaningful data about the business environment. Accounting firms work with their clients to determine which may be the best tax strategy, develop their financial plan, assure they are compliant with laws and other regulations, and help with building or growing their business.
All these phases of providing service require professional judgement, work experience, effective communication, and have been guided by high ethical standards.
The characteristics that separate human accountants from the machines include:
Exercising Professional Judgement
AI can evaluate and analyze financial data, but it lacks the creativity and complexity to make decisions that require evaluating business goals or strategies, understand regulatory compliance, assess a business risk (by determining the risks involved with going forward), or to evaluate regulatory compliance.
Building Relationships with Clients
Trust is an essential component to all accounting practices. Clients look to their accountants for direction during times of financial need (taxes, business decisions, regulatory compliance, etc.). Because AI will never be able to relate to or establish that relationship with a client through developing their compassion, it has no way to comfort or assure clients when they are in tough financial positions.
Having the Ability to Think Strategically/Having Business Acumen
The accounting industry is expanding towards other service lines. To continue providing quality services and remain relevant in our ever-changing business environments, surround yourself with professionals that have extensive experience with strategic decision-making, problem-solving (more so than traditional accounting) and long-term planning; areas where human talent is invaluable.
Responsibility in Ethics
Ethics and compliance are part of the accountant’s world. Humans are responsible for accuracy, transparency and compliance with laws and regulations. AI tools will still require the supervision of and monitoring by a licensed CPA.
The evidence shows that AI is an aid to the accountant’s work but cannot completely substitute for human effort.
AI Technology Helps CPA Firms Operations
AI is changing day-to-day operations of CPA firms. AI is not a replacement of accountants but rather changes the way accountants do their jobs.
Automation of Repetitive Functions
Repetitive functions such as bookkeeping, data entry, and reconciliation are becoming more automated. This will help reduce workloads and increase productivity. It will help CPA firms be able to complete work in a timely fashion and still provide accurate and consistent service.
Decreased Turnaround Time
Since AI will handle repetitive tasks, CPA firms will be able to provide financial reports and tax filings more quickly. Increased timely delivery of financial reports and tax filings will help increase client satisfaction and allow CPA firms to increase the number of clients they can serve without increasing staff.
Improved Compliance and Accuracy
AI will reduce human error in processing financial information and calculations. This will lead to improved compliance with tax laws and the provision of reliable financial information.
Improved Decision Making
Using AI enabled analytics will allow CPA firms to analyze financial performance and identify trends and assess risk. CPA firms will be able to provide better guidance for their clients based on this data.
As a result of this transformation, CPA firms will transition from providing services primarily focused on compliance to providing primarily advisory services.
The Partnership of People and Technology in Accounting
Accounting as an industry is evolving to facilitate collaboration between people and technology. Accounting firms need to stop thinking of technology as a competitor or hurdle and start using it as a partner.
The collaborative model will resemble the following:
Technologies, such as AI, will accomplish
- Data Entry
- Bookkeeping
- Reconciliations
- Transaction Processing
- Financial Analysis
- Reporting Automation
- Risk Assessment
Accountants will handle
- Tax Strategy
- Advisory Services
- Direct Client Interaction
- Compliance Oversight
- Financial Planning
- Decision Making
- Managing the Client Relationship
This division of responsibilities creates an environment in which CPA firms can operate more efficiently without sacrificing quality.
While the technology will perform repetitive tasks, the accountants will be focused on and serve their client's needs through strategies and added value.
How Outsourcing Contributes to the Partnership Between People and Technology in Accounting
Outsourcing will continue to play an important role in the partnership between people and technology in the accounting profession. More often than ever, CPA firms are utilizing AI technology in conjunction with offshore accounting teams to create a scalable and efficient operational structure.
There are many benefits to this model.
Lower Cost
Outsourced accounting services allows firms to reduce labour costs while also ensuring that quality remains high. When combined with technology, CPA firms can see a significant increase in their profit margins.
Scalability
Using offshore teams gives CPA firms the ability to upscale their operations quickly during peak seasons without having to hire all local staff.
Hours of Operation
By utilizing employees in different time zones, CPA firms can have their operations open 24 hours a day due to either offshore companies are more than capable of producing consistent and quality output in today's global economy.
Emphasis on Advisory
CPA firms can outsource everyday repetitive jobs and automate many of their processes using AI technologies, so they can spend more time working with clients in an advisory capacity.
With this model, you have a level structure that brings together technology and human know-how to generate growth.
Combating The Problem Of The Fear Of AI In Accounting
Many accountants have expressed fears of being replaced by AI in their jobs. Although these fears are justified, they are in fact quite common among people who work in technology across many different industries throughout history but have generally created opportunities instead of removing jobs.
When computers first became widely available for accounting work many accountants were worried that they would lose their jobs to computers. The industry continued to grow, however.
Similarly, when cloud accounting started becoming popular, many believed that all traditional accounting careers would no longer exist. Instead, they have found ways to operate with increased efficiency and profitability.
The same is true for AI.
AI will not eliminate accounting professionals but instead it will change the role of the profession. Once data processors, accounting professionals will now move more into the role of advisors and strategists.
Overall there has been a significant shift from manual processes to intellectual and analytical processes.
This is not a danger, rather it is merely an evolution.
The Future of a CPA Firm: AI-Driven with People-Powered
The CPA firms that will be successful in the future will also leverage AI, while at the same time enhancing the technical knowledge and skills of their employees.
The future CPA firm will operate according to the following model:
- AI-enabled automated solutions for repetitive tasks
- Highly skilled accountants to assist with strategic business functions
- Offshore staffing/deployment to help minimize operational costs
- Utilization of data analytics in support of the firm’s decision making process
- Develop and maintain high quality client relationships
- Focus on providing high quality, value-added advisory services
- Flexible/scalable business operations
This model will enable CPA firms to achieve faster growth, deliver more value to their clients, and ultimately reduce their cost structures.
Obstacles CPA Firms Must Confront
As a result of AI's many advantages, CPA firms must overcome a variety of obstacles.
Embracing technology
The use of AI successfully requires that firms acquire the necessary technology and tools.
Needed education and skill enhancement
In order to provide payroll services and analysis, technology and consulting services, accountants will require training to acquire the appropriate skills.
Protecting data
When utilizing AI and/or cloud-based systems, safeguarding client data is imperative.
Organizational change
A shift in mindset and company practice is needed in order for firms to implement AI.
Firms that successfully address these obstacles will ultimately achieve a competitive edge.
Why Working Together Is the Only Path Forward
The debate regarding whether AI or a human accountant will ultimately win, is not really the question. Rather the question is "how can CPA firms effectively utilize each other to develop a more powerful and efficient business structure?"
AI cannot provide entities with strategic consulting.
Humans cannot efficiently manage the ever-increasing volume of work.
However, when AI and the human factor are combined, you are developing an incredible platform to accomplish the following:
- Increase service efficiency
- Increase profits
- Enhance client service
- Increase operational capabilities
- Become focused on consulting
- Remain viable in an uncertain world.
The future of the accounting profession will be accomplished through a partnership between AI and humans.
For CPA firms to lead tomorrow, those that adopt AI & outsourcing will do so
The following will be characteristics of CPA firms that have made the transition:
- Reduced expenses
- Increased EBITDA margins
- Improved relationships with clients
- Quicker delivery of services
- Ability to "scale" teams
- Superior technology
By having a strategic advantage over other CPA firms, these firms are entering into a market that is increasingly competitive.
Firms delaying adoption of A.I and outsourcing will fall further behind as their competitors become more efficient and technologically advanced.
Now is the time to act.
Final Thoughts: Building The Future of Accounting
AI is producing a transformation in the profession, however, it is not eliminating human accountants, but creating opportunities for CPA firms to develop and expand.
Collaborating with A.I. to do repetitive work, utilizing offshore teams to help with operations, and have human accountants focus more on strategy and on building relationships.
Using a balanced approach, allows CPA firms to provide improved services, a higher margin of profit, and grow in a sustainable way.
While the accounting profession has entered a new chapter, the CPA firms that take advantage of A.I. and work with A.I. will create the future.
Looking to Establish a CPA Firm Using AI Technology?
To remain competitive, CPA firms have to adopt AI, outsource services, and work together through strategic partnerships.
By utilizing technology and expert accountants together, firms will be able to cut costs, optimize performance, and concentrate on providing high-value consulting services.
By partnering with Xconcile, CPA firms can build a cost-effective offshore accounting workforce that can seamlessly be integrated with AI technology helping firms grow more quickly and operate more efficiently.
Are you ready to Re-invent Your CPA Firm?
Contact Xconcile today and learn how you can grow by combining both human collaboration and AI technology.
