By Roman H. Kepczyk, CPA.CITP, CGMA.
Each February, CPA Practice Advisor pulls together twenty of the top thought leaders (TLs) to the accounting profession to take a deep dive on topics impacting accountants. Participant are drawn from a wide variety of disciplines, demographics, and work environments to encourage as diverse a discussion environment as possible. This allows all participants to noodle over different ideas from a wide range of viewpoints. This year’s program focused on the impacts of AI, Private Equity, Staffing, CAAS, and Security. Below are my “takes” on what I’m advising my firms to do.
Artificial intelligence (AI)
All participants were seeing AI change the accounting game, not only for the firms but also for the vendors (who are scrambling to respond to the influx of AI start-ups) that are streamlining “real change” in firms. Startups such as BlueJ and Aiwyn are challenging the status quo vendors for tax research and practice management, and the TL group only sees this accelerating. This rapid evolution is creating new challenges for firms, many of which continue to block (or ignore) the reality. So, what can your firm do to advance an AI initiative?
- Implement an AI policy and educate users on acceptable use (and prohibited use).
- Identify AI-interested personnel in each discipline and make them responsible for monitoring vendor and industry activity (provide them with a weekly budget [time/webinars] to actively learn and share). Think about your cyber/phishing training model (which should also be ongoing).
- Continuous learning/education is essential for ALL personnel, so create a learning environment where firm members are regularly exposed to proven AI capabilities that will save them time.
- Monitor rules on AI privacy and IP (intellectual property) as concerns were raised by some TLs as to attendees using AI to transcribe their webinars.
- Be wary of end-user license agreements. It came out from one TL that users of QuickBooks CANNOT opt out of having Intuit use AI to access your client’s accounting/payroll/company data that you manage for them (which they can share that information with their partners …hmmm, did YOUR clients authorize such access when you signed them up?).
Private Equity (PE)
The continuous tidal waves of PE money hitting the profession have not slowed down and will “change the profession forever.” While many firms will strive to remain independent, the reality is that PE is providing the funding for buy-outs, technology, and growth, presented in an increasing diverse range of finance models that are becoming attractive to those that have been sitting on the fence and saying “not me.”
While the positive benefits to the firm owners are often touted, the reality is that PE forces the entire organization to be seriously accountable (and no longer letting mediocre partners get a “by”). If independent firms want to compete with PE’s “corporate” business model, they will need to enforce accountability to everyone (especially underperforming owners), eliminate client “hoarding” and promote a “one organization” concept.
One TL member stated that the PE model is raising the average production target to $400,000 per FTE, which will be necessary to pay competitive salaries, upgrade technology, and hit the revenue growth required by the PE groups. Is your firm producing enough revenue to keep your people and compete with these revenue targets?
Staffing
The TLs agreed that staffing will continue to be an ongoing concern as starting accounting salaries are still not as competitive as other finance or technology majors to attract more students to the profession. Some firms were experimenting with the “apprentice” model and bringing college juniors and sophomores into the office to get them interested, acclimated, and hopefully excited about working in the firm.
In the short term, all firms were looking to technological automation, pushing work to administrative staff when possible, and of course, outsourcing. Interestingly, while overseas outsourcing has been utilized by firms for decades, this topic polarized firm owners towards either a “hard YES” or a “hard NO.” Thought Leaders however pointed out that the staffing shortage did provide some advantages to personnel.
Employees in those firms that forced RTO (return to office) found this was an opportunity to jump to another firm, while some of the TLs pointed out RTO was used to “cull” staff without having to go through the firing process. My belief is that building an advisory-focused team, targeting specific niches or areas of expertise, and automating the process with “proven” technology will be the most effective model for firms in the future (and that just like today-there will be many firms that continue to struggle because they won’t evolve).
CAS, CAS, or CAAS?
The title sums it up: is it client accounting services, client advisory services, or client accounting and advisory services? TLs pointed out that firms adopting a more advisory role with their clients are clearly more profitable. The issue lies in that many firms do not have a clear understanding of what advisory is and look at it from the lens of increased bookkeeping services (which many owners unfortunately see as services performed by less professional staff with lesser oversight). My take is that as many traditional services (including tax preparation) become increasingly automated and commoditized, that accountant’s unique ability to direct business decisions will be the highest value, …which is advisory.
Cyber Security
The discussion on cyber security quickly turned to AI and the myriad of ways that hackers are utilizing to boost their attacks. AI is generating sophisticated phishing emails that are on parity with what a very clever criminal would generate, but at a significantly larger scale. Cybercriminals are taking advantage of AI to identify vulnerabilities in systems and to automate attacks.
One study pointed out that the number of successful “zero day” breaches tripled in the last year. (Zero day=vulnerability the hackers have figured out in hardware/application and the vendor has NOT yet patched). Also, AI generation of deep fake audio and video was also increasing. All attack methods were evolving at a faster and faster pace and the consensus was that all businesses needed to increase their cyber security team or partner with managed security providers that had enterprise level people and tools, which was beyond the scope of most firm’s internal IT personnel. In addition, we recommend firms mandate the use of multi-factor authentication and password wallets to promote unique/complex passwords).
Throughout my entire career, I have never seen the variety and pace of change that firms have to adapt to be as rapid as it is today. AI IS impacting everything, Private Equity IS forcing firms to adapt their business models, and we are all trying to figure out how to bring our personnel along (and determine if we even have the right staffing mix). All this is happening in an accounting firm environment where we are expanding our access to our client’s financial data both inside and outside our firms, which is being targeted by increasingly sophisticated cyber criminals.
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Roman H. Kepczyk, CPA.CITP, CGMA is director of Firm Technology Strategy for Rightworks and partners exclusively with accounting firms on production automation, application optimization and practice transformation. He has been consistently listed as one of INSIDE Public Accounting’s Most Recommended Consultants, Accounting Today’s Top 100 Most Influential People, and CPA Practice Advisor’s Top Thought Leaders
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