Episode 209: The Noise Around AI and What Firm Owners Actually Need to Know

The noise around AI is getting louder, and most firm owners are not sure what to believe. In this episode of The Wize Way Podcast, Ed Chan draws on 40 years in the industry to cut through the noise and tell you exactly what AI means for your firm, your team, and your client relationships.

You'll learn:
 ✅ How every major technology shift has played out in accounting and what it means for AI
 ✅ Why the relationship with your client is still your most valuable and most overlooked asset
 ✅ How to lead a team that is anxious about being replaced
 ✅ Why communication is now the most important skill you can develop in your firm
 ✅ The difference between visible and invisible money and how to invest in both
 ✅ How to protect the trust you have spent years building as automation increases

If you have been feeling uncertain about where AI fits in your firm, this episode will settle a lot of that noise.

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Transcript

Welcome And Why Ai Matters

SPEAKER_00 0:00

Welcome to The Wise Way, the show for accounting and bookkeeping firm owners who want more time, profit, and freedom in a business that can run without them. I'm Brendan Ward, your host, and each week we deep dive into the real stories, proven strategies, and battle-tested tools from successful firm owners just like you. Our wise mentors want to share their journey of how they've scaled and systemized their way to freedom so you can too. If you're stuck in the grind or you're ready to scale smarter, this is your blueprint. Let's get into the episode.

SPEAKER_02 0:38

Hi everyone, I wanted to say hello and welcome you to another episode of the Wise Way podcast. The topic today is very forward, very on topic for what's everything that's going on today, which I think many of our audience will relate and answer some questions there. And it's related to the AI noise and how it's impacting in accounting firms from the on all of the bookkeeping firms as well, and how it's changing the industry. So, yeah, that's what I want to tackle with it, who's been in the industry for over 40 years. So I want to get his point of view on what used to be and what is now what he's seeing to logo with some questions. So, as I was saying, you've been in this profession for over 40 years. You've watched accounting come to the other side of every technology shift stronger than before, but now everyone's talking about AI doing the same thing. Uh, where does this moment sit for you compared to everything you've already seen? And what does that experience tell you about what's coming?

Four Decades Of Tech Shifts

SPEAKER_01 1:43

Perhaps to give to give it some context, I'll give you some history and uh that and then we can build it from there. I was at university in the late 70s and early 80s, so I came out to work in the early 80s, and back then computers were just coming into the the business world, and people were saying to me, even when I was when I was at uni, don't do accounting because computers will take over your job and there won't be any any paper, you know, it'll be all on the computer. And um, you know, it's it's been over 40 years, and uh in that time, I have I I've seen massive changes. All right. We when I first uh had my first job, we used to do you know a lot of things on spreadsheets, you know, manual spreadsheets on paper. And then that then went to Yeah, then that went, then the main uh the mainframes came in where really large organizations had massive computers. They used to take up, you know, a whole floor of a building. And uh in the accounting world, um, we used to then have a room where there's two girls in there that would do the data, they'll they'll they'll input the data into the computer. So the accountants would do their work, they'll code uh uh a bank statement, for example, or prepare some journals, and they put it in the intray of the uh the the girls that data inputted this information into the computer, and they'd print out a profit and loss, a draft profit and loss balance sheet, and then you'd go through it and you'd put some more journals through and you'd put it back in and it'll come out. Then we had our own computers, uh, you know, desktops. But you'll still it would still be cumbersome uh because um we needed floppy disks to save you know the information onto the floppy disk. And it wasn't in a in a smaller firm, it wasn't readily available. So it was like a computer room, but you'd win you went in there and you you did the work yourself and then you print it out and you take and everyone took turns and that kind of thing with the smaller firms. But that's gone from there to then desktop accounting, like uh myob and then now to the cloud. So in that time, when I first started, we needed around 15 accountants per million dollars in turnover for an accounting firm, and we used to do around inhibitor of around 30 odd percent, uh, 25-30 percent. And then as computers came in, we needed less accountants, so it dropped from 15 to about nine, um, nine per million fees. But the we also used to have a um a secretary or a typist that used to type all the tax returns, so they they would roll it, you know, that you draft up the tax returns manually and and and and they'd type up the tax returns. Today there's no typist, there's not not a single typist. We used to have one uh one typist for every two accountants, so that's now gone. And um and then when desktop accounting came in, it dropped it down to about five accountants per million in fees. And now we're into the next phase, which is artificial intelligence, and it'll drop it down to about two. But in order that time, accounting firms were saving money because they didn't have as many staff. Um but they were still making around 30, 25, 30, 35 percent Ibida. Um, so the profits remain about the same. So and and of course, um the the fees to the clients got more uh well that didn't go up a lot of times it came down because we we were able to do the work much, much quicker. Now with uh artificial intelligence, uh a lot of transactional things will get done. So it's very good at transactional things, but the relationships will still be there with the clients. So they'll always need you know that relationship, someone to talk to, someone to guide them, you know, that kind of thing. I think that relationship will still be there, but it will be less of the grinding, the transactional, and more of the relationship.

SPEAKER_02 6:15

Definitely.

Early Or Late Adoption In Practice

SPEAKER_02 6:17

And you know, it's fair to say that everything has changed ever since you started working while you were at uni and you've gone from computers to clouds off shore. And it's been another you built a whole different firm back to this day. Um, would you consider yourself out of all the technology as a late adopter or an early adopter? And if you understood this, I think you did a long while ago, what would it take someone to be a late adopter and to not want to engage in all of this AI and to not want to get on the basically wagon of you know, technology and embracing all of this in their firm?

SPEAKER_01 6:58

That's a great question because for the for the older accountants who who like myself who was I was more of a middle adopter. I I never came into early because I'm not that way inclined. So I used to surround myself with computer literate accountants, accountants who enjoy that side. So, you know, if you've been part of WISE, you know that we build teams that complement each other. You know, if you've you you don't hire somebody the same as you, but you hire someone that complements you. But if you you everyone has strengths and weaknesses, um, so you know your strength, and then you hire someone to um take up the the the the the your weakness so that you complement each other. So you end up with um you know the the the the product is is more than the sum of its parts, so to speak. Um so for accountants out there at the moment, uh the change is is massive. And uh we've gone from you know, we used to send in our tax returns manually in the mail to lodgement by ELS. And uh a lot of accountants were resisting that. And even up to you know, even five, ten years ago, there was some layer guards that were still sending in tax returns, but not many, but you know, very um only a handful, but but uh the world is changing a lot, and um you've got to be ready with it and um you know be a part of that, otherwise you're getting you're gonna get left behind and you're not gonna you're gonna become less competitive. And um and the world is changing and we need to change with it, and that's just that's just life. And you know, if you look at the world as it stands today, yeah, industries have disappeared, you know, but they're they've been replaced by other industries. And you know, as long as our economic growth, and I'm I'm I'm talking about Australia, of course, you know, if our GDP can maintain, be maintained at about two and a half, three percent, that economic growth will keep unemployment below five percent. And unemployment below five percent is full employment. And uh when that happens, then you know the the country functions well. And we've been we've been achieving that. So, you know, even in our car industry, which you know for years was getting subsidized when when we closed it down in South Australia and 6,000 people lost their jobs, they they got absorbed into other industries because you know there were new industries coming through and and absorbing and absorbing. It's just the change in what we do, and that will continue, and we need to adapt. Um we need to adapt with our environment.

SPEAKER_02 9:51

Yeah, I I totally agree. And I think you kind of answered my next question that I was after listening to you um going to ask. But um you know that these changes create lots of noise and they bring like uncertainty and worry, and you know, that people worry about their jobs and they start thinking that they're they're not skilled enough because there are other technologies that could take over them and that could make them redundant. Um, so you as a leader, as the owner of a firm of an accounting bookkeeping, even a law firm, what would you how would you handle this when your team is is going through that right now with AI? Because that's a very hot topic for everyone listening, that they might have insecurity and uncertainty, and they need to be a leader and take the reins of it. What would you say?

Leading Staff Through Ai Anxiety

SPEAKER_01 10:51

Well, it comes down to the leader. Um, for example, in in my organization, we've not, you know, let anybody go um because um, you know, because of technology, we've always uh been putting staff on, not letting them go. And I'm I'm talking about Channel Nailor now, um because our audience is mainly accounting firms. And I guess it was incumbent on me as a leader to keep growing our firm, to keep growing the size of our firm. So then, you know, it absorbed the it absorbed the it it it created the work that um that kept everyone employed. And I I take that responsibility very seriously because it's it's not just making more money in that, it's it's just that you know as you you could as technology uh is a is upon us, uh we the the skill set that's required from the staff changes, and we need to be able to grow the firm so that um as technology helps us produce work more quickly, that uh the the workload is increased so that the teams uh are maintained, but then their roles might change a little bit. So we move their roles around. Just to give you an example, um, as you know, we we set up the ideal team structure for our accounting firms, and we use the our our ideal team structure to recruit. And we so we have the client manager who's a people person who does all the communication of the clients, and then the production uh client, uh the production manager is someone who manages people, a very skilled, knowledgeable, but manages and trains the team. And then we have the accountants coming through who I call it grind, the grinders, minders, and finders, who are the people that do the work. And in Channanella, we had this situation where um there's a particular, I know I use a name, of course, um, but there was this particular person who's very, very, very, very good at production, at doing the work. And I I had to, and she she was very resistant in moving to a senior production manager role. And I had to sit down and talk to her. That look, the industry is changing. The grinding work that you're doing, it's gonna be taken over by, you know, at the moment, computers, but it would be taken over by artificial intelligence. And the time that you spend on doing the work is gonna reduce. And um, so you've got to progress to managing people and training the young ones coming through. And if you if you don't do that, you're gonna make yourself obsolete. And um, you know, to her credit, she did, she stepped up and then she's now managing people, she's now production manager, but she needed help, of course. She needed training, she needed support and so forth. And that's what we have, we as the leaders of the our organizations have to recognize the changes and to change the positions as we go along and as technology, you know, comes to the forefront.

SPEAKER_02 14:10

Yeah. And I I love your explanation because I do see the value in in jumping or making yourself obsolete is like a choice that you also make. So there's a lot of uh leadership involved in how you handle these conversations and how you either you do it by brute force or you want to take the time and have the conversation and take it as a mostly as a suggestion, but it's also a recommendation that's going to make yourself more useful and just to embrace it and not

CFO Advisory Over Pure Compliance

SPEAKER_02 14:43

resist it. But you said something very important um at the beginning of our conversation that I wanted to really hone in. And it was the fact that the best firms, and you know that um what firms are taking care of is building the relationship and not only transaction. And now that AI is doing the transactional side or coming for that side of things, not completely replacing, but it's you know, kind of wanting to take that part. What do you feel like is is the moment where advisory stops being optional? Would you say that is a truth, or do you think that's still could hang on further?

SPEAKER_01 15:27

Okay, so so let's define, firstly, let's define what advisory is because it's a term that's bandied around and uh can get quite confusing. For accountants, I I see our role as a CFO, a chief financial officer, not as a CEO, chief executive officer for our clients, but we should act as a CFO for our clients. What does that mean? It means that you know we should be getting in front of our clients and doing advisory, but CFO advisory. We should do budgets, cash flows, having AGMs with the clients and tax planning, asset protection, those those kind of things that which are in our area of expertise. And a very uh easy one is that often I see firms uh just doing a transactional service for their clients. They'll prepare the tax return and send it to their clients for signature, but they they won't have a meeting with them and go through their their situation. Don't do they don't do any tax planning, they don't, they're just simply transactional. I think those firms are gonna struggle. And if you continue to do to deliver your service in a transactional way, you're gonna you're gonna really struggle. So you've got to then be able to transition out of that style into more of a relationship advisory, advice-based service. And it's a small change, but it's massive in terms of if you've been doing something in a particular way and trying to change from that way of doing things, that's massive. But also the people that you have within your organization may be the wrong people in the wrong roles, maybe there might there may need to be a lot more training involved to change, but it's gotta be led by the it's gotta be led by the leader. The leader needs to make the change and then implement the change across the team. And if the leader doesn't do it, then it won't happen.

SPEAKER_02 17:28

Yeah, I agree.

Hiring For Communication And Trust

SPEAKER_02 17:29

And you mentioned there's something very, I feel like it's it's crucial for all of this because there's a lot of people who are gonna want to hire in this in this day and age. And you know that now that transactional skills are, you know, being the second best thing that you can do right now, and that you have to be a people person. Um, how does all of this change when you are like practically for health room owners should be hiring and developing their junior staff right now? That they have to be have more people skills rather than technical skills?

SPEAKER_01 18:09

It's it can be trained, that skill. So it's around communication. You know, you you don't have to be a real people person, you just need to be able to communicate. And of course, accountants are very uh is an industry that's that's high on trust. So clients trust accountants. And as long as you're knowledgeable and you can communicate, then then you you can address that that issue. And that can that can be uh accomplished by training and education and uh role-playing, and you know, some staff will learn that quicker than others, but the thing that really is of an advantage to an accountant is because they are trustworthy, yeah, uh, they're conservative, and they generally do have a good relationship with their clients, and the clients um has this bond with them. So it but you know, being able to communicate is not something that's natural, you've got to really educate someone on it. And in our industry, and and this occurs in every other industry, by the way, Claudia. Yeah, it's um sure, you know, whether you're you're a doctor or a computer, probably computer people are the worst, they talk about gigabytes and all that kind of stuff, and nobody knows what they're talking about. And we we talk about debit loan accounts and and and things like that, which you know, which and debtors and creditors, which you know the audience doesn't understand. So that needs to be taught to the staff. So so it's it's not such a big leap forward, really, for for certain people, but there are people who don't like it. So you need to be able to separate those people out because if you put someone into a role that is difficult for them, so it's like you know, swimming against the tide, then they get tired very quickly and they tend not to do what they're supposed to do because it's hard, it's hard for them. So it's it is also true that you've got to find someone that is that likes to talk, likes to communicate. And then those who don't like to talk and don't like to communicate, um, they're not gonna succeed as well.

SPEAKER_02 20:25

Yeah.

Protecting Client Trust In Automation

SPEAKER_02 20:26

I I wanted to ask one last question because I'm curious. Uh, you mentioned trust, and I feel like that is super important when building client relationships. So, with all of this AI and using all of this, you know, um technology and uh getting things more automated and all of that, how do you protect that trust you've spent years building with a client so they don't feel like they're getting an accountant's that they're getting actually an accountant's judgment rather than a machine's output?

SPEAKER_01 20:59

Well, meetings, having face-to-face meetings like we're having we're having now. And uh you've got to, you know, like today's technology is incredible, we can do it on Zoom. So if you if the clients couldn't come into the office, the the best way, of course, is you know, in the office face-to-face, because you can see body language, you can see all sorts of things. But the next best is by Zoom. And you know, you should be able to have a Zoom meeting with an individual, build that relationship. There, there's a bond that gets created by just being in the same room, whether it's a Zoom room or you know, a real room, it there's still a bond that gets builds. Um, so you need to increase that side of your relationship, you know, have more rather than less. The the problem is, uh Claudia, is that most accountants are focused on production and they want to finish this tax return and get on to the next one, and then finish the next one and then get on to the next one, and just and but they're not thinking about the relationship. And and I talk about uh visible money and invisible money. The visible money is doing the tax returning getting paid for it, that's visible money, that's important, of course. I call that the PL play, but there isn't there's invisible money, it's the goodwill that you have with your relationship, and the only way you can invest into that goodwill and maintain that client because you want to increase the lifetime value of that client, the longer they stay with you, the more valuable they are, and that's worth money, although it's invisible, you can't see it. But you know, if they leave you, then you lose all the visible money, yeah. Um, so but we we don't spend enough time investing into that in the invisible money, which is the relationship, and uh you need to do that. I know it doesn't bring visible immediate money straight away, but it brings the investment is long term because they'll refer you friends and you know family members and and so forth. So, but most accountants don't focus on that, they just focus on getting the work done to get on to the next job. And uh, we need to, if you're a client manager, you need to change your focus and be aware that there's both the visible and invisible value to that client.

SPEAKER_02 23:21

Yeah, totally. That makes perfect sense. And I feel like that's a great way to put it. I love the invisible money and the visible money analogy because um there's a lot of people who avoid advisory in a way and just, you know, building a client relationship because they feel like there's just so much technical stuff that they can do, and that's already the help and the job that they were supposed to do, but they don't see the other side of this, which is keeping your client and nurturing your client relationship. But yeah, thank you for answering um my questions for today. I feel like this has been such an insightful conversation and it's going to put a lot of noise to bed because I know that there's a lot of firms out there struggling with AI and feeling like they're they're missing out on something and they're that they're behind. And I feel like it's such a good topic and that we could go on for hours. But thank you for your time and for your wisdom. Always appreciate it.

SPEAKER_00 24:22

You're most welcome. And looking forward to the next

Final Takeaways And Next Steps

SPEAKER_00 24:25

one. Thanks for tuning in to this episode of The Wise Way. If today's episode sparked an idea or helped you see things differently, please don't forget to leave us a review. And if you haven't subscribed to the podcast on your favourite platform yet, please go ahead and do that as well. Let's continue the conversation here through YouTube or any other social platforms that you can find us on. And just remember, if you're not a subscriber of our weekly Friday tip newsletter, you can get that to your inbox every week going forward. Whether you're starting out or scaling up, you don't have to do it alone. Let's build a business that works for you the wise way. We'll see you in the next episode.