If you look at an early 1900s photo of an auto factory, you’ll see a line of partially constructed cars being carefully assembled by a string of highly-skilled men in coveralls. If you look at the same sort of assembly line today, the line of cars is still in place, but the rest is unrecognizable. The human workers in their coveralls have been swapped for a tangle of yellow robot arms, resembling something that might have hatched in a sci-fi movie. You may catch a glimpse of a human in there somewhere, overseeing the whole business amidst the forest of robotics, but they are hardly visible. While these changes have become normal in auto manufacturing, most people are dreading the day when robots start to take white collar jobs. Guess what? It’s here. Even the highest glass towers are seeing automation take over. This week, we look at the accounting industry.
We discuss changes in tax law, deciding when and how to outsource accounting, how to keep your employees happy, and how to plan for a future where taxes and accounting are seeing the impact of Artificial Intelligence. Joining me this week are Chris Smith and Chris Peterson of CB Smith & Associates.
Be Aware of How AI Affects Your Workforce
I believe artificial intelligence will be like the internet. It is likely to completely alter the way we live. It is already changing our homes, jobs, education and relationships. In the accounting world, it’s likely, among other things, to alter the nature of entry level positions. When a young accountant enters the workforce they usually cut their teeth doing basic book keeping and tax preparation activities – jobs that are increasingly done by computers. Some oversight by human beings is still needed, but their numbers will be greatly decreased. This eliminates a lot of on the job training opportunities, and makes education all the more important (and challenging) when it comes to the next generation of accountants.
Smith explains, “We just need to understand, where do we re-employ those people, how do we re-employ those people? How do we provide them with the proper skill sets that are going to fit the new economy, as we move forward?”
As Accounting Becomes More Commoditized, Change Your Mindset
With machines doing more of the work, it will be harder to differentiate yourself from your competitors. Says Smith, “As accountants, we’ve got to change our mindset.” Easy for them, right? Everyone knows that accountants are creative, spontaneous, and love change.
The key for them, he says, is to start thinking of themselves as tax advisors who are able to do tax preparation when needed. Already in parts of Europe, the tax process is changing. Explains Smith, “The government prepares the return, hands it to the citizen and then says, ‘If you want to make any changes, here’s your opportunity to make them.’ Otherwise, this is what your tax liability was for the year, and this is how much you need to pay or what your refund is.” We aren’t there yet in the States, but it might not be far off.
Adds Peterson, “The change is going into more of the strategic planning, where you’ve got to be proactive versus reactive. Clients do not like surprises when it comes to taxes.” The value in your accounting department, or in fractional accounting services, will be predictive. Knowing the tax law, and strategizing early on in how to make those tax laws work for your business.
Says Smith, “With that planning, and understanding our clients’ financial position, their financial results, as the year progresses, gives us opportunities to make a small suggestion and really save our clients a significant amount of money. That’s our key role there, and that’s where we can bring value to the table; it’s not in the tax preparation. The tax preparation is just putting the bowtie on the present, but the tax planning is the present itself.”
In addition, relationships, both with customers and employees will be increasingly important in creating a unique customer experience, and in succeeding in an increasingly commoditized industry.
Take Advantage of the Economies of Scale
With AI decreasing the amount of people in your accounting department, it will become increasingly easy to outsource. Whether choosing to utilize fractional services for bookkeeping or higher-level CFO duties, it may prove cost effective to outsource the duties.
Says Smith, “There are a lot of firms that are putting together service packages to help their clients really grow and automate their business processes. When you go paperless, and you have an online accounting system, there are opportunities to really start to automate those processes and allow them to scale at a much higher rate.”
Know How Much is Too Much
“Yes, excessive automation at Tesla was a mistake. To be precise, my mistake. Humans are underrated.” – Elon Musk on Twitter
Good news, human beings. Musk says we’re still in. At least for now. When dealing with AI make sure you don’t run in head first with your tail on fire. Take it slow. Get to know the AI a little before you move in together.
As we discussed above, roles are going to change, and that’s okay. Be prepared for the changes. Start working now to have education in place that will nurture employees in the way that the disappearing entry level positions once did. Human costs will go down, and will only partially be replaced by software costs. Find ways to adjust to lower costs and easier accounting in ways that will differentiate you as a business. And learn from Elon Musk. Humans are underrated. Treat your humans well.