AI and Accounting: What’s Next?
Platform’s COO, responsible for the operations of 28 boutique firms and counting, weighs in
Salt Lake City, April 12, 2024
Following the transformative changes in artificial intelligence over recent years, tax and accounting has been frequently cited as one of the most immediate areas for disruption. Indeed, the industry’s function of extracting data from documents and analyzing them against a predefined set of rules (e.g. the tax code) seems to be a perfect use case for AI. So, are tax accountants at risk of being replaced? Is the industry facing a pending crisis?
In my estimation the answer is unequivocally no for a few reasons. First, the challenge of gathering, extracting and interpreting the data is far more complex than is often perceived. Second, the ability to fully understand a client’s situation and manage the relationship is critical and extremely difficult to automate. And third, the significant shortage of accountants makes the potential for increased automation a welcome development, not a looming threat.
The Challenge for AI
There is no doubt that the technology is here, or quickly coming, that can scan a document, extract the critical information, and plug that data into a software program to prepare taxes. And where that works, we should take advantage of it. The problem that every actual practitioner knows is that documents require a lot of chasing and when they finally come in, they’re in various forms, including poorly taken images, messy books, and endless unnecessary pages from financial institutions. These create a level of complexity current AI struggles to interpret correctly and requires human collaboration. This is especially true in the boutique accounting space where clients are small business owners and individuals, not large accounting departments. Additionally, quality accounting requires an extremely high degree of data accuracy. If the tool cannot be trusted completely, human workers are required to go back and verify which often creates as much work as doing it manually to begin with. Lastly, accounting is a service business that requires knowing and understanding the clients we serve. This is critical not just for a strong client experience, but also for accuracy of work as it provides critical information that would otherwise not be available through just an AI interaction.
Human Augmentation – Not Replacement
Because of these challenges, the tools that will most immediately impact the accounting space are those that aim to augment human capabilities rather than replace them. VC funding is currently flooding the market to back founders of AI accounting solutions. Many of these will be overconfident in technology and lacking in understanding of how the work is truly done, resulting in solutions designed to replace rather than assist the human worker. The more effective tools will be those that acknowledge the need for human collaboration. This will require a practitioner level understanding of the problems along with elegant design of the user interface. Over time this collaboration will provide further training to the technology and allow for further trust in the technology, but it must begin with a human aided approach.
How to Capture the Benefit of AI – Short Term & Long Term
At Platform Accounting Group, we’ve adopted a multi-pronged strategy to capture both the immediate and long-term opportunities from AI. Over the immediate and short term, we are working to leverage technologies that are proven and readily available – but only with strong human oversight. This includes using some of the common OCR accounting tools for data extraction and entry as well as industry agnostic tools like ChatGPT for email efficiency and clarity. This is particularly easy to use as it’s embedded in Karbon, our workflow and practice management tool. We use these tools to augment human input and improve what our accountants are currently doing. Additionally, we are watching the developments closely and building the processes and structures that will be required to leverage the technologies. We believe that to fully capture the benefits of AI, we’ll need to work differently and be flexible in processes and structure. This includes everything from how we collaborate across teams to how we communicate with clients to how we structure responsibilities across team members internally. Simply plugging in new AI tools to old working models will result in frustration and ineffectiveness.
Creating a Golden Age of Accounting
Far from worrying about the replacement of accountants by AI, we believe it can help save the industry (and the broader economy) from the growing shortage of professionals we are currently facing. According to The Wall Street Journal, 17% of accountants and auditors quit the profession in 2020 and 2021. That’s 300,000 accountants and advisors exiting the profession, with not nearly enough entrants to replace them. Over time, AI can increase the efficiency and effectiveness of accountants and help fill this gap. This will drive favorable economics to the industry and alleviate the negative experiences that have caused many to leave the profession to begin with. At Platform, we’re working to embrace AI through a thoughtful evolution of the work. This means carefully vetting AI solutions and building the infrastructure to implement them in the firm. We believe that AI will augment employee output and allow more time for our people to do what they do best – provide personalized, professional advice to our close community of clients.
About Tyson Chapman
With a background in management consulting, strategy, and operations, Tyson is skilled in building people-first organizations with scalable systems and processes. He leads operations across all of Platform’s offices. Tyson holds a BS in Economics from Brigham Young University and an MBA from the University of Chicago. He’s optimistic about the future of accounting.