Earmark CPE

Earn CPE Anytime, Anywhere

The Accounting Podcast

Embracing the Remote Work Paradigm in Accounting

· ·

In a world where the nature of work is rapidly evolving, the accounting industry finds itself at a crossroads. As remote work, alternative arrangements, and AI automation become increasingly prevalent, firms must adapt to stay competitive and attract top talent.

In episode 380 of The Accounting Podcast, hosts Blake Oliver and David Leary explore the shifting dynamics of work in the accounting industry and discuss how firms can navigate this uncharted territory to create a more flexible, balanced, and fulfilling work environment.

Navigating the Salary Landscape: Remote, Hybrid, and In-Office Work

A recent study by ZipRecruiter sheds light on the salary disparities between remote, hybrid, and in-office workers. 

David shares the findings: “Fully in-office workers average $82,000 on average. Hybrid workers average $60,000 on average. So basically, it’s almost $22,000 less than in office. Fully remote workers get about $75,000 on average. So, in the office, you’re making more; fully remote you’re making more. But if you’re kind of hybrid, not making as much.”

The study also suggests that high-performing staff prefer remote work and can command higher salaries. This trend underscores the need for the accounting industry to adapt to the changing preferences of top talent and remain competitive in attracting and retaining skilled professionals.

H&R Block’s Successful Transition to Permanent Remote Work

The shift towards remote work is not just a theoretical concept; it’s a reality many companies already embrace. 

H&R Block’s experience provides valuable insights into how a major player in the accounting industry successfully transitioned to permanent remote work. As the company continued to grow, they hired corporate employees who were fully remote. It quickly became apparent that high-performing staff preferred remote work.

Jeff Jones, H&R Block’s CEO, put it simply: “There isn’t a good reason why we would do that. There’s just no reason to have a required to come back to office policy.”

H&R Block’s experience demonstrates that even large, established companies can adopt remote work and benefit from focusing on outcomes rather than micromanaging employee time and location.

The Productivity Puzzle: Debunking Myths About Remote Work

One of the most common concerns about remote work is its impact on productivity. 

However, as Blake points out, “Studies on remote work productivity suggest that it is generally a net zero impact. While there may be some inefficiencies with remote work, these are offset by increased employee satisfaction and the elimination of commute times.”

It’s important to recognize that the true cost of requiring employees to work in the office extends beyond the walls of the workplace. Expenses like gas, car depreciation, and the additional cost of living close to the office can add up quickly for employees. 

By offering remote work options, firms can help their staff save money and reduce stress, leading to a happier, more productive workforce.

The Four-Day Workweek: Challenging Traditional Work Arrangements

In addition to remote work, alternative work arrangements like the four-day workweek are gaining traction. 

Blake notes, “In the UK, a pilot involving 61 organizations implementing a four-day workweek found that 89% continued with the model after a year, with many making it permanent. The study reported positive impacts on staff well-being, lower turnover, and easier recruitment.”

The success of four-day workweeks in other industries raises questions about the accounting industry’s traditional approach to work, particularly during busy seasons. Many firms still require staff to work weekends during peak periods despite evidence suggesting that alternative arrangements can lead to better employee and firm outcomes.

The future of work in accounting is not a distant concept; it’s already here. As the industry faces unprecedented change and disruption, it’s clear that the traditional ways of working are no longer sufficient. To thrive in this new era, accounting firms and professionals must embrace the opportunities of remote work and alternative work arrangements. For all the details, listen to episode 380 of The Accounting Podcast. 

AI’s ‘Killer Function’: Personal Agents That Work for You

· ·

Sam Altman, the creator of ChatGPT, says that helpful agents will be AI’s ‘killer function,’ integrating deeply into our lives and acting as extensions of ourselves.

It sounds like science fiction, but you can start doing this now! In this clip from Episode 383 of The Accounting Podcast, I demonstrate how to create an AI agent using Central, a new feature of Zapier.

AI agents are a massive leap over today’s AI chatbots. Most popular chatbots can’t act autonomously. If you sign up for ChatGPT or Claude, you have to prompt it for everything you’re doing – copy-paste between whatever’s in your life and the bot. It’s a big hassle and wastes a lot of time.

But if you turn a chatbot into an agent, you give it the ability to act independently. Imagine a virtual assistant who can automatically respond to all the daily routine questions you get bombarded with.

For example:

| Hey, can I get an update on my tax return?

| When can I expect my financial statements?

| Please send a copy of your W-9 (or we won’t pay you)

Your AI agent has you covered, firing off personalized responses faster than you can say “accounts receivable.”

Or imagine an AI agent with access to your calendar that responds to meeting requests with the best times for you to meet based on your detailed instructions.

Sure, we have apps like Calendly, but these apps are limited and impersonal. For instance, I like to bunch my meetings, and Calendly doesn’t do that. I could tell my AI agent always to try to fit new meetings before or after an existing meeting. And it could do this by replying on my behalf to emails rather than me sending a link.

This is a big deal. Think about it – how many hours do you spend each week on repetitive tasks or answering questions? Now, you can start to automate them.

Zapier has built a tool, Zapier Central, where you can create your own AI agents triggered by the thousands of apps that already connect to Zapier.

I’ve been experimenting with having Central draft emails for me. I built an agent called “Email Assistant” and gave it access to my Gmail account. Then, I created a “behavior” with instructions to monitor my inbox for emails from our podcast contact form.

We get daily emails from listeners of The Accounting Podcast, and I read and respond to every single one. There are a few things that are annoying about the process.

  • The email comes from a different email address than the listener’s, so I have to copy/paste the listener’s email into the “To” field.
  • I have to add my co-host to the CC field so he’s in the loop.
  • I have to draft the email, which typically includes similar phrases. For instance, I start by thanking the sender for listening and writing in.
  • I tend to sign off in the same way every time, but I still need to type it because I don’t always use the signoff, and I don’t want it in my email signature

To get the Email Assistant to do all this for me, I gave it the following instructions:

When I receive a new email from TAP Contact Form, do the following:

– Create a draft reply in the same conversation thread
– Find the submitter’s email in the body and add it to the “To” field of the reply
– Draft a reply in the voice of Blake Oliver
– Start by thanking the sender for listening and writing
– Sign off with ‘Best, Blake’

Only draft replies to emails from the Tap Contact Form. Ignore emails not related to this.

Here’s what that looks like in Zapier Central:

When I do this task manually, after sending my reply, I copy the sender’s original email into my database of potential stories for my podcast (so I don’t forget to read it during our Listener Mail segment). Fortunately, my database, Notion, connects to Zapier. So, I added the instructions for my Email Assistant to get the AI to do that for me, too:

Then, please create a new database item in Notion. For the item’s name, make a name for the item that represents the topic of the message. Briefly summarize the listener’s question or comment in the notes field, and then put the listener’s name, email, and message in the body of the page.

This behavior triggers when I get a new email from the contact form. Then, it can create draft replies and database items in Notion through actions I’ve configured. Those are the only two things it can do – it can’t send the email to me. But it could if I wanted it to.

Here’s the agent thinking through what to do with a test email:

It worked!

Using AI Agents in Public Accounting

That got me thinking about how you could use AI agents in an accounting firm.

Let’s say that you’re tired of responding to requests from clients for information on how their tax return is going. You could create an agent with a behavior that says, “Every time I get an email asking about the status of a tax return, draft a reply letting the client know the status.”

But how would the AI agent know the status of the tax return? By connecting it to a spreadsheet – or perhaps your practice management software, if it’s sophisticated enough to work with Zapier.

Zapier lets you connect multiple data sources, such as Airtable, Google Sheets, Google Docs, Notion, etc.

Imagine if you had a Google Sheet where you tracked every tax return and the status of that return – not started, in progress, expected delivery date, any issues, etc.

You could then connect that data source to this AI agent and instruct it: “When a client asks about the status of their return, check the tax return spreadsheet and draft a reply with the status, who is working on it, and when we expect to complete it. Also, if the spreadsheet says we’re missing information, reply with a list of what we still need.”

You may need to add more detail about what columns to look in for each piece of information, but you get the idea. You’re programming the AI agent in plain English.

Using AI Agents in Corporate Finance

Here’s an example of how you could use an AI agent in corporate accounting. The Accounts Payable team. How often do they get the same email inquiries from vendors or customers?

Let’s say a vendor is asking about the status of the payment. Your email agent could watch for those emails and then automatically draft replies, letting them know when they will get paid or if something is holding up payment. You just have to connect your AP system to Zapier or sync the data to a spreadsheet that Zapier can watch.

You could create another behavior where if a customer requests a W-9, the AI agent sends an email with the signed W-9 attached. That’s one you could consider fully automating because it is low risk. You could choose to allow the agent to send the email without review.

Potential Uses Go Way Beyond Email

An important thing to note is that you don’t have to use this for email. This is just how I’ve been playing with it. You can trigger these agents with actions in thousands of apps. And these AI agents can then do stuff in thousands of apps.

There’s also a scheduling feature. This means triggers can be time-based, not just based on what happens in another app. You could schedule a behavior to run every day, every hour, every month, or every week.

Maybe that behavior is asking for a status update from your team on a particular project. For example, “If I haven’t received an update in so long, email the project owner and ask for an update.”

Now that I think about it, my own CEO job might be the first thing I automate.

AI Agents Are Happening Now

I don’t want you to think these AI agents are perfect; they are far from it. It’s brand new, so there will be things that don’t work right.

This behavior I showed you here is the one of three that worked well. The other two had some issues. So, don’t lose hope if you create an AI agent that doesn’t work exactly right. It’s going to take some time for these agents to work perfectly.

The important thing to take away from this is that AI agents aren’t just some far-off, futuristic concept – they’re a reality already starting to transform how we work right here and now.

I’ll keep sharing what I learn about AI agents, so subscribe to The Accounting Podcast and follow our LinkedIn page to see what I come up with.

Accounting’s Wild Ride: Private Equity, Burnout, and AI

· ·

The accounting industry is in the middle of a wild ride! Private equity money, work-life balance drama, AI taking over – it’s enough to make your head spin. Blake Oliver and I dug into all these topics in our latest episode of The Accounting Podcast.

Through all the craziness, one thing’s clear: accountants have got to stay on their toes to make it in this business. Embrace the new, take care of yourself, and sharpen those skills – that’s the trick.

Will Private Equity End the Partnership Business Model?

You know it’s serious when a heavyweight like Grant Thornton gets gobbled up by private equity. New Mountain Capital swooping in shakes up the partnership model that’s been the foundation of accounting for decades.

In partnerships, profits end up lining partners’ pockets instead of getting pumped back into the firm. Private equity cash could be just what’s needed to drag firms into the future. Blake nailed it on the show: “The argument in favor of this sort of investment is that private equity can invest in modernizing technology, modernizing the firm in a way a partnership doesn’t.” 

But here’s the catch – private equity folks want their dough, which could mean partners’ paydays take a hit down the road. Accounting firms have to thread the needle – get that sweet private equity money but keep the partner track golden so that staff want to work hard and stick around to get there.

To Attract Talent, Firms Must Improve Work-Life Balance

Speaking of incentives, our discussion on working hours and job satisfaction in accounting was eye-opening. According to a report by Big 4 Transparency, a crowdsourced compensation website, the big cheeses – equity partners – are grinding 50+ hours a week on average.

“Could this be part of the problem with convincing people to stay in accounting?” Blake pondered. “You would think that the longer you stick around, the better off you’d be. You make more money. But you also work more hours, so it doesn’t add up.” 

Could this be part of the problem with convincing people to stay in accounting? You would think that the longer you stick around, the better off you’d be. You make more money. But you also work more hours, so it doesn’t add up.

Blake Oliver, CPA

And get this: No accounting firm had an average workweek of 40 hours or less.

Accounting firms have to tackle work-life balance head-on to keep top talent from running for the hills. Flexible work schedules, using tech to work smarter, not harder – firms need to get creative. Young people want a life outside work, and if we don’t get with the program, we’re going to lose out on the best of the best.

Artificial Intelligence Could Help

AI is about to shake things up big time in traditional accounting. ChatGPT and tools like it paint a wild picture – AI-powered insights transforming how we crunch numbers and dazzle clients.

Blake shared a great example: “When I met with clients as a manager, going over their financials, clients would have a question. And in the meeting, I couldn’t answer their question right then and there because I would have to go and do some research. But if I could use a chatbot to ask the question, I could review the answer real quick and then maybe give them the answer right then and there, rather than saying, I’ll do some research and get back to you. That saves a lot of time.”

The trick is using AI to make us accounting pros look good, not put us out of a job. With AI doing the heavy lifting on numbers and insights, we can focus on the high-value stuff clients need. But to make AI work for us, accountants must carve out time to level up their tech skills.

Navigating the Future

Accounting is at a fork in the road, juggling private equity plot twists, work-life balance meltdowns, and AI’s world takeover. It’s a wild ride! But every stomach-churning dip is a chance to throw our hands up and holler. Stay loose, take care of your crew, and always be first in line for the latest tech – that’s how we’ll come out of this ride, grinning.

To stay updated on the latest in the accounting profession, listen to me and Blake Oliver ride the accounting roller coaster every week on The Accounting Podcast.

Unlocking Premium Valuations: How Proactive Planning Transforms Accounting Firms

· ·

Imagine two accounting firms with similar headcounts and client bases. One sells for a fraction of revenue, while the other achieves a premium valuation and goes for many times that. What sets them apart? The answer lies in proactive exit planning.

In a recent episode of The Accounting Podcast, Charles Bedard, an M&A corporate development advisor, shared how firms often leave money on the table by failing to plan for an optimized exit. We learned that accounting firm owners who proactively plan for their exit can position themselves to achieve premium valuations in an increasingly competitive market.

Keep reading to learn why some firms command high valuations while others struggle to attract buyers. You’ll learn specific strategies accounting firm owners can use to increase the value of their firms and how proactive planning can create optionality and improve the overall exit experience.

The Widening Gap in Accounting Firm Valuations

The disparity in valuations between traditional and modern, digitally-enabled firms is becoming increasingly apparent. As Charles points out, “The range of value depends on the buyer. Each buyer has a different set of metrics that they look at. The valuation ranges depend on whether you are perceived as a traditional services model or perceived as a modern digital model.”

The numbers starkly illustrate this widening gap:

  • Traditional firms may struggle to command valuations beyond 0.3 to 0.4x their annual revenue.
  • In contrast, modern digital firms can achieve multiples ranging from 1.5x to 3x revenue.
  • The difference is even more pronounced in EBITDA multiples, with modern firms commanding anywhere from 3x to 10x or higher.

Interestingly, the same firm can find itself on the receiving end of vastly different offers, depending on the buyer’s profile and perception of the firm’s positioning in the market.

Defining the Modern, Digital Firm

In the quest for premium valuations, it’s crucial for accounting firm owners to understand the key characteristics that set modern digital firms apart from their traditional counterparts. Charles explains, “You have your traditional hourly billing services based firm. You’ve got tech-enabled firms that are more profitable, digital, standardized, and probably specialized in some practice areas and niches.”

But what exactly does it mean to be a modern, digital firm? At its core, it’s about embracing and leveraging technology to transform every aspect of the firm’s operations and client experience. Here are some of the defining features:

1. Tech-Enabled: Modern firms don’t just use technology; they are built around it. From cloud-based accounting platforms to automated workflow tools, these firms harness the power of digital solutions to streamline processes, enhance efficiency, and deliver real-time insights to clients.

2. Profitable: By leveraging technology to automate routine tasks and optimize operations, modern firms can achieve higher levels of profitability than their traditional peers. This enhanced profitability not only benefits the firm’s bottom line but also makes it more attractive to potential buyers.

3. Standardized: Modern firms understand the value of standardization. By implementing consistent processes and workflows across the organization, they can deliver a more predictable and reliable client experience while also reducing the risk of errors and inefficiencies.

4. Specialized: Clients are increasingly seeking out firms with deep expertise in specific industries or service areas. Modern firms recognize this trend and often choose to specialize in particular niches, allowing them to differentiate themselves in the market and command premium fees for their expertise.

5. Innovative: At the cutting edge of the modern firm spectrum are those that have developed their proprietary technology solutions. These “3.0” firms, as Charles calls them, are not just adopting existing tools but are actively innovating and creating new solutions to meet the evolving needs of their clients.

The spectrum of accounting firms is wide, with an estimated 40,000 traditional firms at one end, a few thousand tech-enabled firms in the middle, and just 100-200 leading “3.0” firms at the other. For firm owners looking to position themselves for premium valuations, the path forward is clear: assess where you currently fall on this spectrum and take proactive steps to move towards the modern, digital end.

Actionable Strategies for Enhancing Firm Value

Proactive exit planning is not just about having a vague notion of selling your firm someday; it’s about taking concrete, actionable steps to enhance your firm’s value well in advance of any potential sale. As Charles Bedard emphasizes, “I think there’s so many things you can do to increase the value without having to spend a lot of money.”

So, what are these value-enhancing strategies that firm owners should be implementing? Here are four key areas to focus on:

1. Develop a Clear Corporate Development Plan: The first step in any proactive exit planning process is to develop a clear, multi-year corporate development plan. This plan should outline your firm’s strategic objectives, growth targets, and operational priorities over the next 2-3 years. By aligning your business decisions with your desired exit timeline, you can ensure that every action you take is moving you closer to your ultimate goal.

2. Implement Value-Enhancing Changes: One of the most effective ways to boost your firm’s value is to implement changes that directly impact your bottom line. This could include things like:

  • Shifting to upfront annual billing to improve cash flow and reduce collection risk
  • Implementing strategic price increases to reflect the value of your services better
  • Offering multi-year contracts to lock in client relationships and provide predictable revenue streams

These changes may seem small in isolation, but when implemented consistently over time, they can have a significant cumulative impact on your firm’s value.

3. Benchmark Your Performance: To attract premium valuations, you need to be able to demonstrate that your firm is performing at or above industry standards. This means regularly benchmarking your financial and operational metrics against your peers and identifying areas for improvement. By understanding how your financials look to a third-party buyer and taking steps to optimize your performance, you can make your firm more attractive to potential acquirers.

4. Protect Your Intellectual Property: In today’s knowledge-based economy, your firm’s intellectual property (IP) can be one of its most valuable assets. This could include things like proprietary software, unique methodologies, or even your brand reputation. By taking steps to formally protect your IP through trademarks, copyrights, or patents, you can not only safeguard your competitive advantage but also enhance your firm’s value in the eyes of potential buyers.

Implementing these value-enhancing strategies is not a one-time event; it’s an ongoing process that requires consistent effort and attention. But the payoff can be significant. The key is to start now. Don’t wait until you’re ready to retire to start thinking about exit planning.

Metrics That Matter: Tracking Progress Towards Premium Valuations

In the journey towards achieving premium valuations, it’s not enough to simply implement value-enhancing strategies; you also need to be able to track your progress and demonstrate your firm’s worth to potential buyers. As Charles Bedard explains, “The most common metric used in the investment banking and investor world today is the ‘Rule of 40.’”

The “Rule of 40” is a powerful metric that combines two key indicators of a firm’s health: revenue growth rate and EBITDA margin. These two percentages should add up to at least 40%. So, if your firm is growing at 20% year-over-year and has an EBITDA margin of 20%, you’re hitting the Rule of 40 target.

But why is this metric so important? In short, it’s a way of demonstrating that your firm is not just growing but growing profitably. Many firms can achieve high growth rates by sacrificing margins, but this is not sustainable in the long run. By focusing on the Rule of 40, you’re showing potential buyers that your firm has a healthy balance of growth and profitability, which is much more attractive than one or the other in isolation.

Of course, the Rule of 40 is not the only metric that matters. Here are a few other key indicators to track:

1. Revenue per Employee: This metric is a good way to gauge your firm’s efficiency and productivity. In today’s competitive landscape, top-performing firms are achieving $250,000 or more in annual revenue per employee. If your firm is falling short of this benchmark, it may be a sign that you need to optimize your processes or invest in technology to boost efficiency.

2. EBITDA: While the Rule of 40 looks at EBITDA margin, the absolute value of your EBITDA is also important, particularly if you’re looking to attract private equity investment. In general, firms need to be generating at least $2-3 million in annual EBITDA to be considered an attractive platform investment for private equity firms.

3. Client Retention Rate: Your firm’s ability to retain clients over the long term is a key indicator of the value you’re providing. High client retention rates not only provide a stable base of recurring revenue but also demonstrate to potential buyers that your firm has strong, loyal relationships with its clients.

4. Billable Utilization: This metric measures the percentage of your staff’s time that is being billed to clients. While 100% utilization is not realistic or desirable, firms should aim for a healthy billable utilization rate of 60-80%. This ensures that your team is being productive while still leaving room for training, business development, and other non-billable activities.

The path to premium valuations is not a short one, but by tracking the right metrics and making data-driven decisions, you can methodically build your firm’s value over time. And when the time comes to sell, you’ll have a clear, compelling story to tell potential buyers about why your firm is worth a premium price.

Balancing Exit Value and Personal Goals

When it comes to exit planning, it’s easy to get caught up in the numbers game. After all, the goal is to achieve the highest possible valuation for your firm, right? But as Charles wisely points out, “I think having that plan creates optionality. Increasing the valuation is good. But increasing the overall exit experience is more important.”

This insight cuts to the heart of what truly matters in the exit planning process. Yes, achieving a premium valuation is important, but it’s not the only factor to consider. Equally important is ensuring that the exit aligns with your personal and professional goals.

For many firm owners, the idea of selling their business and riding off into the sunset is appealing. But the reality is often more complex. After pouring years of blood, sweat, and tears into building a successful firm, many owners find themselves grappling with a range of emotions and considerations beyond just the financial aspects of the deal.

This is where proactive exit planning can be incredibly valuable. By starting the planning process early and thinking holistically about your goals, you can create optionality for yourself and design an exit that balances your financial objectives with your personal and professional aspirations.

One approach that can be particularly effective is to structure the exit in a way that allows you to maintain a role in the firm post-sale. As Charles explains, “Owners can maximize exit value by offloading management responsibilities while continuing as a subject matter expert servicing clients.”

This type of arrangement can be a win-win for everyone involved. The owner gets to step back from the firm’s day-to-day management while still maintaining a level of involvement and revenue stream. The buyer gets to acquire a successful firm with a built-in succession plan and continuity of client relationships. Clients also get to continue working with the experts they know and trust.

Of course, this is just one example of how proactive exit planning can create optionality and help balance competing goals. The key is to start the planning process early and be intentional about designing an exit that aligns with your unique circumstances and aspirations.

Here are a few key considerations to keep in mind as you navigate this process:

1. Define Your Personal and Professional Goals: What do you want your life to look like post-exit? Do you want to retire completely, or do you want to maintain a level of involvement in the firm? Do you have other business ventures or personal projects you want to pursue? Clarity on these goals is essential to designing an exit that aligns with your aspirations.

2. Consider Your Legacy: For many firm owners, their business is more than just a financial asset; it’s a reflection of their life’s work and values. As you plan your exit, think about how you want your legacy to be carried forward. What values and culture do you want to see maintained? How can you ensure that your clients and employees are well taken care of?

3. Plan for the Transition: Exiting a firm is not an event; it’s a process. To ensure a smooth transition, it’s important to plan and put the right structures and processes in place. This could include grooming a successor, documenting key processes and relationships, and communicating proactively with clients and employees.

4. Seek Professional Guidance: Navigating the exit planning process can be complex, both financially and emotionally. Don’t be afraid to seek out professional guidance from experienced advisors who can help you think through the various considerations and design a plan that aligns with your goals.

Ultimately, achieving a premium valuation is just one piece of the puzzle when it comes to exit planning. By taking a holistic approach and balancing your financial goals with your personal and professional aspirations, you can design an exit that not only maximizes your financial returns but also sets you up for a fulfilling and meaningful next chapter.

Embracing the Future of Accounting Firm Ownership

Proactive exit planning is the key to unlocking premium valuations for accounting firms in an increasingly competitive market. Firms must implement value-enhancing strategies, track key metrics, and align their decisions with their desired exit timeline to position themselves for success. Proactive planning creates optionality and allows owners to balance their financial goals with their personal and professional aspirations.

As the gap between traditional and modern firms continues to widen, proactive exit planning will become increasingly critical for accounting firm owners looking to maximize their value. The shift towards proactive planning reflects a broader evolution in the role of accounting firm owners, who must now balance operational management with strategic, long-term thinking.

To learn more about the strategies and insights discussed in this article, listen to the full episode of The Accounting Podcast with Charles Bedard. Take the first step towards proactive exit planning by assessing where your firm falls on the spectrum of traditional to modern and identifying opportunities to enhance your value and positioning in the market. The future is in your hands.

Billable Hours vs. AI: The Battle for Accounting’s Future

· ·

Just as cloud accounting revolutionized the industry, AI is poised to be the next game-changer that will redefine the benchmarks for productivity and success in accounting. In a recent episode of The Accounting Podcast, David Leary and I explored the transformative potential of AI and its impact on the accounting industry.

The Cloud Accounting Revolution

To understand the potential impact of AI, it’s essential to look back at how cloud accounting transformed the industry. Cloud accounting reduced the time for traditional accounting and bookkeeping work by 80-90%. It forced firms like mine to adapt their business models and pricing strategies to remain competitive. 

As I mentioned in the podcast, “My career was in outsourced accounting. Cloud-based accounting cuts the time required to do traditional accounting and bookkeeping work by 80 to 90%. I couldn’t bill by the hour. If I did, I would not have a business.”

AI: The Next Frontier of Productivity

AI advancements in banking and accounting already show remarkable potential to boost productivity. JP Morgan Chase and Bank of America’s AI-powered cash flow forecasting tools have cut human manual work by 90%. David Leary highlighted this incredible statistic: “About 2,500 corporate enterprise clients are now using this tool, and they’ve cut human manual work. So you want to care to guess how much they’ve cut it by? 90%.”

The implications for accounting firms are profound. AI could lead to the end of billable hours and timesheets due to significant productivity gains. As I shared in the podcast, “We are using AI to do the base layer of work, and we are going to then have experts who review that. We’re going to turbocharge our staff.”

These advancements demonstrate how AI can dramatically increase productivity, setting new industry efficiency benchmarks as cloud accounting did.

Embracing AI: The Key to Success

Despite the potential of AI, the accounting industry appears hesitant to embrace this technology fully. Despite high awareness, an Accounting Today survey revealed that only 19% of accountants have used AI tools like ChatGPT for work and personal reasons. This hesitancy could put firms at a competitive disadvantage.

And even if they overcome their hesitancy, overwork impedes AI adoption in traditional firms. As I mentioned in the podcast, “The firms that are overloading their people, they’re not going to be able to innovate in this way because it takes a lot of time.” 

The Future of Accounting in the AI Era

AI, like cloud accounting before it, is set to revolutionize the accounting industry by redefining benchmarks for productivity and success. However, the industry’s hesitancy to embrace AI could hinder firms from realizing its full potential. Accounting firms that proactively invest in AI automation and adapt their business models will be better positioned to succeed in the AI era. At the same time, those who resist change may struggle to keep up. 

The future of accounting is here, and AI powers it. Are you ready? To learn more about how AI is transforming the accounting industry and what your firm can do to stay ahead, listen to the full episode of The Accounting Podcast. Don’t miss out on this insightful and thought-provoking discussion!