Accountancy Age, 23 February 2018

Flexibility will help your practice flourish in the A.I. era

With Inspire Accountants

Artificial intelligence (A.I.) is receiving a lot of coverage in the accounting press at present, as the Big Four, large firms in the next tier and software houses publicise their investment in A.I. and machine learning processes.

Their actions are in response to numerous surveys predicting that A.I. will revolutionise the accountancy profession, although we prefer the theory that this new technology is more likely to promote and enhance the way accountants go about their work.

More realistic global research from Sage, shows that 96 per cent of accountants are confident about their future roles, although 68 per cent see their role changing due to automation. We are in broad agreement with these findings, and believe that smaller practices must aim to study the ways in which they can leverage artificial intelligence, fully accepting that it will alter their business model, in time.

The prospect of developing their own automated programs is remote for a small practice, therefore the preference must be to actively review technological advances in the industry. Attending conferences and seminars to stay on top of developments, while regularly assessing the need to make changes. Off-the-shelf A.I. packages will no doubt, be available from existing market specialists such as Thomson Reuters, CCH (Wolters Kluwer) or IRIS, when a practice feels the need to invest.

One view is that machine-learning systems are a great fit for data-intensive services such as an audit, but currently have less relevance (at present) to the audit exempt small and medium-sized enterprise (SME). Having said that, it is clear that the large accountancy firms are already trying to use bespoke A.I. to commoditise compliance and audit services, driving down costs in order to move into the SME market – firms serving these clients need to be ready for the challenge.

Accepting that compliance and audit services will form less of a smaller practice’s overall revenue is central to tackling the threat. We would expect this type of work to make up less and less of Inspire’s revenue in the coming years, as we increase our focus on value-added advisory services.

Auditing is an area of accountancy in which the opportunities to add value are already minimal; usually only during the final meeting where the auditor presents recommendations. There has always been a squeeze on audit fees, and that is set to intensify with artificial intelligence. Machine learning programmes will be able to look at 100 per cent of transactions, instead of around 10 per cent at present, learning to spot frauds and errors that might be missed otherwise.

This will be an increasingly difficult market to operate in profitably, therefore a focus on advisory work, with supplementary compliance and audit services, will provide a competitive advantage for smaller firms moving forward into the A.I. era. Under this strategic model, the focus should be on using automation to improve the incisiveness and efficiency of tax and business advisory offerings.

To take a practical example, Inspire offers its clients a service called ‘FD on Demand’. It is aimed at smaller businesses that lack in-house finance teams, providing an interim Financial Director able to sit in on board meetings and give insight into performance.

At present that insight comes mainly from the experience of the advisor and how well they are able to extrapolate data from the company’s accounts. Using artificial intelligence to assess the numbers would allow us to have relevant trends highlighted for us rather than working them out, such as changes in the ratio of assets to liabilities, or time taken to pay suppliers; patterns that might indicate weaknesses or opportunities.

Possible financial and business advice ranges from tax structuring, to forecasting or access to funding, and A.I. can help to improve our services in all these areas. In the case of an acquisition, artificial intelligence could be used to assess the target company’s finances, spotting weaknesses or problems with cash flow, and contributing to more accurate valuations.

On this point, it is important to emphasise that accountants in the SME sector need to be proactive in terms of helping clients get their data A.I.-ready. Machine learning systems will depend on well-organised data feeds across all areas of client information in order to work properly. The results will only be as good as the quality of data they are given to work with, and many SMEs lack the internal controls and structures that provide sufficient electronic data points and key performance indicators (KPIs). If the model of A.I. value-added advisory is to work, this is a crucial part of the process.

And, of course, there is still a lot to be said for sitting down with a client, looking into their eyes and reading their emotions. Artificial intelligence will help accountants to approach a meeting on a more efficient and informed basis, but empathy and understanding between advisor and client is extremely hard to replace. Experience shows that clients like to be face-to-face with someone that understands them.

It is clear, that the pace of technological change in the field of accountancy is rapid, and can seem overwhelming to those firms that ignore it. The key to flourishing in this environment, is to remain open to A.I. applications that can genuinely strengthen a firm. This potentially means employing more technologically-savvy accountants in a practice and not being afraid to alter established business models in response to new challenges.

Above all this though, is a requirement to step back and assess artificial intelligence properly before jumping in on the basis of hype. The A.I. era is here for sure, but it’s still some way from revolutionising accountancy – change will be gradual.

Chris Downing is responsible for the tax team at Inspire and delivers bespoke tax advice to a range of clients, working closely with them to achieve their business aims. Andrew Singleton heads up compliance service delivery to Inspire’s corporate clients, and is involved in a number of advisory roles.

Inspire is an award-winning tax and business advisory firm located on South Coast of England. Founded by Warren Munson in 2004 Inspire focuses on enabling ambitious entrepreneurs to succeed.

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