Season 3 Overview: The Impact of AI and Outsourcing on Accounting

How can outsourcing and AI revolutionize your accounting practice?

In this episode of Accounting for Innovation, Jody Padar and Matt Tait explore the transformative potential of outsourcing and artificial intelligence in the field of accounting. They discuss how these innovations are reshaping the profession, addressing common fears, and paving the way for a future-focused approach to accounting.
In this episode, you'll learn:

• How AI and outsourcing can alleviate tedious tasks and elevate accounting practices
• The impact of emerging technologies on the overall cost and work structure within firms
• Strategies for accountants to overcome fears and embrace these advancements
• Best practices for managing outsourced teams and integrating them successfully
• The importance of adopting an advisory mindset in the evolving accounting landscape

This episode is sponsored by SysCloud. Get a 50% discount on QuickBooks Online backup. Contact us at https://www.syscloud.com/ to learn more.

This episode is brought to you by Decimal and the Radical CPA.

Transcript

0:00

Welcome to the Accounting for Innovation podcast, where we explore cutting edge strategies and insights into the world of accounting and finance. Presented by Decimal and the Radical CPA, each episode dives deep into industry trends. Whether you're a seasoned professional or a budding entrepreneur, join us as we unpack key concepts and share practical tips to drive success.

Jody Padar: 0:26

So excited to get started with season three, and we're going to be talking about the future of accounting, which is really outsourcing and AI. And that is completely different than I think most accountants are used to hearing about, right? Like, so what do you think that means, Matt?

Matt Tait: 0:45

Well, first of all, I think for older old school accountants, it's like the lions and tigers and It's outsourcing and AI. Oh my. But to me, I think this is, I just was teaching an accounting class at the university of Butler university today. And I'll tell you the same thing. I told them, I think this is the single most exciting time to get into accounting in history. I think with all of the advent of technology, with the implementation and use of AI, as well as the ability to remotely manage a, an amazing and great team, it changes the work and cost structure of accounting in a way that elevates the profession in such, such cool ways.

Jody Padar: 1:32

Totally. And I think what's so exciting about it is that we We're kind of at that very beginning part where we don't know what we don't know, but yet for those of us who are kind of in it and kind of see like what's happening, it's like every day I wake up and I see something new and I'm like, wow, like this is really cool and this is really going to change things. And I think for, for accountants who aren't really, maybe they're a little bit. Afraid of AI or they're afraid of outsourcing. Um, I think what we have to address are the fears and like, like, how do we, how do we make accountants feel comfortable that this is not the end of the world, that this is really a Renaissance and a rebirth for accounting professionals.

Matt Tait: 2:22

I think the biggest key here is accountants and the accounting profession is at its best and happiest when they're advisors. When they are truly advising businesses and people on what to do and what's valuable and how to do it. But I think so much of accounting has been trapped in having to do work, in having to. Enter information on a tax form to do bookkeeping, to pay bills, things that I think technology and outsourcing are overtaking in very quality ways. What it's doing is it's putting the profession in an elevated form in where they, in where they truly shine. And I think that's the cool thing is. AI and outsourcing taking jobs. They're not removing things that people care about. They're taking the bad away and opening up more opportunity for really great things. I don't know. What do you think?

Jody Padar: 3:21

So I think you're totally right. But I also think if you're used to doing something over and over and over again, it's hard for people. To kind of unlearn how to ride that bicycle. Right. And I think that's going to be the hardest part for more traditional accountants who have been around for a while. I think the next gen they'll be fine. Cause they'll graduate and hopefully, and I say, hopefully they'll move into a firm that gets this. And we'll start from the very beginning, helping them to become a better advisor from day one. Right. But I think it's going to be hard for maybe some of those mid level professionals who kind of like doing the bank rec, right, or kind of like doing the work. And kind of shifting to that advisory mindset and saying, look, I have to learn new skills and I'm totally capable of doing it, but I think that's where the fear comes in. But then when you see, I think that the cool thing about it is, is when you see the AI working and you see. See that, you know, I think from a CPA's perspective is we don't want to be wrong. We're so afraid of getting the wrong answer, but when you see how AI can kind of guide that, that expert advisor along and kind of give you your training wheels. To really then Oh yeah, communicate the value of the financial or the value of the data.'cause I will argue that financial statements are gonna go wayside. I know that's kind of crazy talk, but I would say we're gonna look more at data and less at financials. But when you see that AI can really be, I don't wanna say co-pilot,'cause that's Microsoft's thing, but. Like kind of walk alongside you as an advisor and help you kind of give life for storytelling to the numbers for your small business user. That's huge. And that's exciting. And you don't have to be so afraid of, well, I don't know the answer to that because I haven't seen it before. And I think that's where too many CPAs live in that, you know, they're afraid of giving the wrong answer and we have to kind of shift that mindset to an advisory role.

Matt Tait: 5:32

Yeah, I agree. And I think. I do think it's important to recognize that this is going to equal change. And that is hard for a lot of people. And I think harder for accountants as a subset of people in general, and that's okay. And it's okay to be scared and, and uncertain about that. But I do think the reality is it's not an if it's a when and so that just means it's coming and you, you can't, it's

Jody Padar: 6:04

kind of here already. Not it is.

Matt Tait: 6:08

It's conceptually here. I think we're still, we have steps to go to make it truly integrated. And that's why you and I've talked a lot about the analogy of, Look, it's, you are going to have to have a, an advisor, a CPA sitting behind the wheel of the car, even if it's driving itself, just that person to be trustworthy, to double check, to, to do all of that stuff. And then you're also going to need the advisor and the co pilot seat helping look at where to go. But like you said, the nice thing about. These AI technologies is, I think, two things. Number one, from a doing the work quality perspective, truly good AI, which we are, we have a lot of and we're going to get more tells you when it's wrong. Human beings are very terrible at a knowing when they're wrong and be telling you when they're wrong. So from a quality perspective, AI is going to be much, much better at that because it will simply recognize when it's wrong and make the job of not making a mistake easier. Number two is, like you said, that, that assistant, I always joke that Salesforce kind of does a good job in their commercials because they have the, hey, pick up your phone and ask Salesforce and it pops an Einstein hat or hair and mustache on people. And, you know, I think that's what AI gives you is that ability. And for the people that aren't. That haven't done advisory work. It's going to tell you what to tell people. So much of what CPAs and accountants have had to do is first, I got to do all the work to get us there. Then I have to have the financial reports. Then I have to interpret the financial reports. Then I got to tell somebody what the interpretation means. Those are a lot of steps to go through, and AI is just going to help tell you like, hey, here is a difference in this business, or here is a trend line in this business. business compared to the rest of their industry. And those are the types of things you can then advise on and that really help you get there that I think are really tough to come by today.

Jody Padar: 8:12

Yeah. And especially just from a time perspective, right? Most CPAs just, they run out of time when it gets to the advisory part and we're going to learn how to walk alongside, right? Like there's definitely going to be some upskilling. To talent as we learn how to like do this But the cool thing is is like the whole world is changing. It's not just cpas who are being affected by ai, right? The medical field is being I like the whole, like it is across the, the board. Everyone's job is going to be evolving based on these new technologies. And I think that's exciting. So, but the other part of our, our story or our episode is about. It's about outsourcing. How does outsourcing fit into all of this?

Matt Tait: 8:59

Well, what it does is you're, you're going to start to see margin compression on work. And in order to really handle that, well, you have to figure out how to do the best work at the lowest cost. And technology should always be the first layer of that. But to me, the second layer is, is the outsourcing. Is figuring out other cost infrastructures for the doing of the work rather than having a U. S. C. P. A. Entering information in a tax form or doing bank wrecks or processing bills that should be done and can be done in other countries like the Philippines and India. I think are the two biggest ones. You're starting to see a lot in South Africa and in South America as well. What you're finding is, is that that work can be done at high quality. In other countries at costs that also benefit both the CPA and the end consumer in the business. And I think it's, it's the same concept though. It's why I like that we tied these two things, AI and outsourcing together because both are designed to remove bad work from accountants so that they can open up and not, not, not have the time to do the advisory.

Jody Padar: 10:13

Right. And I think the other piece of it that is like really key. Is that, um, we have a hard time finding people anyways, right? Like that, like, and with all these CPAs who are retiring in the next 10 years, the amount, the number of CPAs and everyone says, Oh, the talent shortage and the talent shortage, like we have to look to alternative ways to solve for the talent shortage, and I think that when you look at the AI and the outsourcing, um, it's an opportunity, but I think what's interesting about outsourcing is. People expect it to be just like putting someone in their office and it's not it. You have to think about managing people different. You have to think about cultures different. You have to think about how you're going to hire these people, where you're going to find them, where you're, um, like what kind of business model you want, because there's insourcing, there's outsourcing, there's like, you know, uh, opening a complete office. In another culture. Oh yeah. Like there's all these choices, and I think this is where so many CPAs just kind of get overwhelmed and they throw their hands up in the air and they say, well, I don't know what to do because. You know, I've never done this before and let's be frank It's a little bit scary to hire someone across the country or not just across the country across the world Oh, yeah, and somewhere maybe you've never been or somewhere. You've never like you really don't know what it's like and you know There's fear there. and it used to be, I think the original excuse was, Oh, like I don't want to send my data data overseas, I'm afraid like that, but I really believe a lot of that was just an excuse. It was more like, Oh, I'm afraid because I don't know how to manage a person who's sitting across the world or, Oh, I'm afraid because I I don't know how that culturally is going to impact my firm. Right. So people make excuses all the time.

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Jody Padar: 12:55

Because I think there's a lot of fear holding firms back from kind of jumping in and figuring it out.

Matt Tait: 13:01

I do think there is a lot of fear. And, and, you know, when we started Decimal, the first thing that the, some CPAs told us was whatever you do, don't tell people that you're using people in the Philippines. And okay. We said, all right, in our sales pitch, we said, Hey, and by the way, we have a team in the Philippines. They're doing all the accounting work. And I just, I didn't find that to be a credible thing. And it has not affected our growth at all. And I think now that we've worked with a thousand businesses, we've had one that didn't like it and we fired them as a client, but that's a super small subset. And I use that because I think a lot of these, I use that example because I think a lot of the fears are unfounded. They're valid, but they're unfounded. Here is the tough thing. When I was teaching that class today at Butler, I told the kids, I said, the single most important thing I'm going to teach you today is the value of first principles thinking. And none of them had any idea. So I literally made them Google it and pull it up. And what I mean by bringing up first principles thinking is I do think that when you look at outsourcing and when you look at AI accountants actually have to sit there and think, how do I do things differently and better? to fit this context. It is a harder thing. Like you said, it is not simply swapping a U. S. Staff accountant for a Philippine staff accountant. You have to think about different ways to manage remotely. A lot of us learned how to manage remotely better during the pandemic. What worked well, open lines of communication, more frequent communication, more transparency, more kind of collaborative work at the beginning. Those are the types of things that can really, really help and stand out and Now that we have a team of 45 people in the Philippines, we've certainly learned a lot of things. And I think accountants need to really think about that. The other thing that I will say is I know over a dozen top 50 and another dozen top a hundred firms that are outsourcing to either India or the Philippines, it is not abnormal. So it is a very normal thing. And the other thing that I think I would tell CPAs is. Just start. There are great outsourcing groups that you and I both know and people want to connect on LinkedIn. I'm happy to walk them through some of the ones we've used, but just start. Hire your first person. Do that. The most cost effective, cheap way is to find a company, outsource through them, and then hire them. Work out, understand it's not going to work out well. It's like hiring your first employee, like Jodi, you've had this when you had your own firm. The first time you hire somebody, you kind of suck at it. The second time, you get a little bit better. And it's the same concept. There's a learning curve,

Jody Padar: 15:48

absolutely. There's a learning curve, and I think you have to give it time. And you have to be okay. Like it's, it's an adjustment and it's a big thing and it's okay for it to be a big thing because it is a big thing, right? It's not. Um, but on the other side of it, you're not the first person doing it. The, I mean, there's almost, I don't want to say best practices in it, but there are definitely other firm owners you could talk to. Hear from them what they liked, what they didn't like, what their experience was. Um, and I think there's a commitment to saying like, okay, this is the way we're going to strategically work in our business. And then you figure out how to make it work because. If you don't make the commitment to it, I guarantee like your team will just be, Oh, it doesn't work. And that'll be the end of it. But yet you're still going to have the problem of, okay, who's going to do the work now. And you still have to figure it out. So I think that's, that's the hard part. You know, it's a lot of change. It truly is. And, and how do, how do we approach it with a abundance mindset and saying like, look, the world is changing. It's changing faster than we know it. And we just have to get started and keep moving towards the future. If we want to. If we want to be able to do the advisory work that we know that we're capable of. And if we want to be able to serve our clients at the level of service, they well, not just demand expect should be, should expect, right. I just forget about like, that, that, that is fair to them because we just don't have the resources. Um, In the accounting pool anymore to like to go find those students who are who are here.

Matt Tait: 17:46

You know, I, I talked to a firm owner the other day and, and I asked him a question that I think accountants need to start with. What do I want out of my life? What is my goal personally? If your goal is to make X amount of money and do Y amount of work, great. How do you get there? And that I think is where you start because that's when you can start to say, Hey, I do want to do more advisory, but I just don't have time. Okay. How do you make time? You can make time by outsourcing. You can make time by implementing AI and some of the other technology advancements that are out there. That's how I think you start with that question and you work your way backwards from that. And I think if you do that as a CPA, your life will just generally get better. And, and if you say I like my life as it is great, hold on till you possibly cannot. Why not? You like it as it is.

Jody Padar: 18:46

Yeah. Yeah. I, I think that makes sense. And I think, um, if we start with the end in mind, then we'll, we'll get started and we'll, we'll move towards it. Cause I, I think the worst thing we could do, and this is a choice is do nothing, whether you choose, you know, whether you choose to move forward or you choose to like dig in and say, no, I'm not changing. That's a choice, but I think we were at a point. In the way accounting is the, the landscape of accounting, where we really have to make some decisions on where we, where we want to be.

Matt Tait: 19:22

And I think one of the biggest things that I'm preparing to do in 2025, and there are others that are like me is right now, you and I are talking a lot about why, why should you think about AI? Why should you think about outsourcing? My goal from 2025 on forward. Is to also focus on helping people understand how, how can I implement AI? How can I successfully outsource and, and really helping to build classes and programs and, and even groups that help to make that easier. You're seeing a lot of that start to pop up, and finding those types of things, and starting with connecting with you and I. I know you know dozens of people who are doing the same thing I am, and that I think is a great first step for people, is to find others that are willing to talk about how. Once you've understood and agree with why.

Jody Padar: 20:17

Yeah. I mean, I think the how is, is key because like, otherwise you're just talking up here and at the end of the day, you have to figure out the how, and I would say too, there's no expert, so it's all changing so fast. So the best thing you can do is find people who believe the same things you believe and walk alongside them and learn from each other, because that's the reality. Of the world we're in today. It's kind of like when the pandemic happened and like the tax laws were changing all so fast and nobody knew what to do and PPP was happening. Right. And all these CPAs got on Twitter and banded together and just figured it out. And so we've done it before we're capable of doing it, but that's pretty much similar. I would say the pace is a little bit slower than it was with PPP, but you're going to have to kind of walk alongside people who believe what you believe. And just kind of walk through together and figure it out together because there's no, for sure, playbook. It's just not there. And

Matt Tait: 21:20

I agree,

Jody Padar: 21:20

you know, the people who write or who kind of go through that first, they have the most to gain. They have the most to gain from the opportunity.

Matt Tait: 21:32

I think you're absolutely right. I think there's, there is so much opportunity. This is such a cool time to be in the industry, but it is changing and it is going to change. And, uh, I know you and I both love helping people figure out how to do it. And I think this season is going to be so fun for us as we start to talk about outsourcing AI, some of these changes that I think will also directly improve the lives of a lot of CPAs.

Jody Padar: 22:01

For sure.