The Accounting Revolution: How AI and Outsourcing Are Reshaping Firm Operations

Are you ready for the accounting revolution?

In this episode of Accounting for Innovation, Jody Padar and Matt Tait reveal how the synergy between outsourcing and AI is reshaping the future of accounting firms. They highlight strategic integrations that maximize efficiency, agility, and value, setting the stage for a transformative era in the industry.

In this episode you'll learn:

• The transformative impact of combining outsourcing and AI in accounting firms
• Opportunities for small firms to compete with larger ones using innovative technologies
• How AI democratizes information and changes the economics of work
• Strategies for shifting accountants' roles from work execution to advisory services
• The importance of staying human in an increasingly tech-driven landscape

This episode is sponsored by SysCloud : Go to 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: 0:24

All right. So we're already at episode five. In today's finale, we're going to explore how the combination of outsourcing and AI can create the powerful synergy for accounting firms. And we're going to talk about the strategic integration of both approaches to maximize efficiency, agility, and value. And basically all the things we've been talking about this season, Matt, like how much is outsourcing and AI automation going to fundamentally change how accounting firms operate in the near future?

Matt Tait: 0:54

I think, I mean, you and I geek out over this stuff all the time, and we could spend hours diving into each one of these topics, but I think the intersection of all three is extremely important, because you're right. The, the economics and the execution of work in accounting is going to look very different today than it will in five, ten years. And I think that's really important to understand. Because if you accept that, you're ready for the changes that are coming. If you don't, it's going to be hard. And really what I mean by this. is accountants will always be there. They are exceptionally important to small businesses, to people, but trying to get accountants out of doing some of the more basic work and higher level work and moving into higher level work is so much of what this is about that it's such a cool Time and a cool thing for the industry. Don't you think?

Jody Padar: 1:52

Oh, for sure. I mean like there's never been a more Like a bigger time for opportunities to happen. It's really we're almost in a renaissance, right? It's like going to be a blank slate And we're going to be able to build all kinds of new things of what that looks like now I've always been talking about a million dollars for Full time equivalent and who knows, maybe it will be even more. But when you look at the tools that are going to be available, especially, you know, you think, okay, these tools will be. The cloud was really the great equalizers for the small firms because prior to that, like you really had to have like these big servers and all this stuff to like kind of high computing power to do things right. And then the cloud leveled the playing field for a lot of small firms. Well, AI is going to lay level it even more for, I would even say. Like the solo practitioner or the person of one is going to be able to do so much more across the board, not just in accounting, but in customer service and emails and all the things that maybe they always had to have a specialist to do. That generalist is going to be able to do it good enough. It may not be perfect, but they're going to be able to do it good enough, especially at the small firm level. And I think that's what's really exciting about how AI is going to change. Um, and, and it's going to be for everyone at a fair price. It's not going to be something that is. Oh, crazy expensive. And only the big firms are going to be able to afford it. And I think the other piece about it is, is we're going to have the agility, the small firms are to move fast enough. Whereas the big firms are, it's hard for them to move. They have too many policies. They have too many like rules. It's going to be hard for them. To change, to adjust to this. And I think this is where smaller firms who have the ability to be more nimble are really going to be able to kind of outshine bigger firms, at least in the beginning.

Matt Tait: 3:52

Yeah. And I think, look, what, what AI does is it fully democratizes information. It has made it so that information is there for everybody anywhere. And there's a lot of security that's built in. There's a lot of need, but as far as like doing stuff in general, your access to information is much greater than it ever has been. Number one, number two, the world has shrunk. Which means that you can now hire people anywhere in the world and communicate with them the same as you would communicate with somebody that you hire for an office job. And that's huge because what both of those two things are doing, AI, outsourcing, or hiring out of country, is it's giving you the ability to start to change the economics of work. It used to be so much, and Jody, you and I have talked about this when you started your career, so much of owning a firm or working in tax was burnout, was I've got to grind, I've got to work so hard. Now you can have a great work life balance as a partner or principal in a big firm or Owning your own firm and outsourcing and implementing AI and automation. It gives you the ability to create, create new economics, which I think are really, really important to accountants in general is the economics of the profession is changing dramatically.

Jody Padar: 5:16

And I think the big deal is too, is like, as we think about the talent shortage or, you know, hard time finding team, all these, um, boomers, they're going to retire, right? Like the majority of the profession is retiring over the next number of years. Right? Like you, you hear about everywhere. It's our opportunity to automate and to say, look, we can't replace this with a person because there isn't a person to hire. How do we change our process? How do we change our business model? How do we automate it? Something so that we can be sustainable in the future and we can continue to grow and expand. And I think because it's this perfect storm, it's exciting, right? Like, because if it wasn't the perfect storm, then. I think the, the adoption would be slower, but I think because, and the technology is changing so fast. Um, but because of that, I think there's really an opportunity for CPAs who are curious, accountants who are curious, anyone who's not afraid to learn, because I guarantee however we do our jobs today is not going to be how we do them tomorrow. So we have to be open to learning and open to experiencing new things. But if we have that open mind, the sky's the limit for what you can do.

Matt Tait: 6:33

Oh, I think it's, I think it's such a cool time to get into the industry, to be an accountant. I was just teaching an accounting course at Butler University here in Indianapolis. And that's what I told them. I said, I honest to God, and I'm not an accountant. So. Don't quote me on too much, but this part's true. This is the single most exciting time to get into the profession because you can start to rethink about what you find joy out of, what you like to do. And you can start to move the other pieces away from you while still doing that. And it used to be, you had to do all of it. And so now you can look, and if you, if you take work. And you break it into small buckets and you say, Hey, we've broken this one large task into 10 things. I like doing free. You can now look at outsourcing. You can look at technology automation. You can look at artificial intelligence and you can say, I am going to find places for the other seven buckets. And that's a really, really cool thing. You don't like writing emails. Great. Get a tool that writes AI emails for you, edit and tweak them to make sure it sounds like you get it done. All of a sudden your emails are now written. Find a tool that helps you write blog posts. Find a tool that helps you review things or inputs, uh, flat data. Um, whatever it is, find ways to outsource that. To other people and I think that or to technology. I think that's why it's such a cool time to get into the industry is so much is changing and so many young accountants are going to come into or or newer accountants are going to come into a profession that the work that used to happen for them. No longer does and so they get into advisory even faster. And I think that's really cool as well

Jody Padar: 8:17

Yeah, and I think the other thing about it is for the people who have been around for a little bit longer And maybe there's a little bit of fear here that you have to remember that Like we've been through so much change over the years that we've been in our, in our own careers that this is just one more thing that we have to adjust to. It's not the end of the world. It's like, it's exciting. And we just have to go into it with the right mindset. And if we have that right mindset, then we can evolve. And I think, you know, I'll come back to pricing as all of these things change. And as your business model is going to have to change because how do you build two minutes for AI? You can't, how do you build two seconds? You're going to have to relook at your pricing model as well and think about pricing and outcomes and all the other things that, that happen as well. So I think what's interesting again is, We've been talking about automation. We've been talking about cloud tools. We've been talking about pricing for years, especially me. It's like 15 years now, but now truly now is the time where all of it can come together because of the outside forces pushing the profession or pushing the industry together. Right? So you have the retiring boomers, you have the new technologies, You have, um, this next generation who has a different idea of work. There are so many external forces pushing it that, you know, we, we really have the opportunity to rethink what we want to be when we grow up.

Matt Tait: 9:49

Well, and isn't that, I think that's scary and cool at the same time. I mean, it's scary because typically you come out and people tell you generally what you're going to do. Now you get to start choosing a little bit more and it's awesome because you get to choose more. And that's where I think both of when we talk and this whole season has been about AI and it's been about outsourcing two ways to start to change the profession to give you to put you in a position to find more joy and more balance in your work if you want to keep working long hours. That's great. That's ambition, how you see it. But if you want to work less, you can create leverage to do that. And these tools and outsourcing provides you with the ability to create that leverage. And you have to rethink how you do things, rethink how you manage things, but that's okay.

10:42

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Jody Padar: 11:15

Well, right. And I think it also goes to the fact that you can decide what What you want to do. Do you want to take on more work and grow your firm, or do you want to work 20 hours a week and make the same amount of money that you used to make when you were working 40 hours a week? Right. So you now have a choice as to what's important to you and figuring out what that is. And it's not going to be the same for everyone. There are definitely people who want to grow these big firms and scale and you know, that that's their cup of tea and that's good. But if you want to say. Hey, I'm going to use these tools differently and I'm going to allow myself to work 20 hours a week and I'm going to take up knitting or do something else that's okay too. And I think that's, what's cool about this choice that we now have the opportunity to, to kind of rethink, reinvent, um, that's why it's such a Renaissance.

Matt Tait: 12:09

Number one, I cannot wait to take up knitting. It's going to be great someday. But number two, one of the things we hear a lot and you and I both hear it is AI is going to, or outsourcing is going to, remove the role of an accountant. I don't believe that. I know you don't believe that, but why?

Jody Padar: 12:28

So it's because the more tech you have, the more human you have to be. And ultimately as an advisor, you should be walking alongside your customer. And if you think about what happened in, 2020 with the pandemic and PPP loans and how quickly all of those things changed and did, you know, Um, you know, the small businesses, who did they look to? They look to their financial first responders for help. And if you think about yourself like that, and again, it doesn't have to be in a dire situation where, you know, it has to be a financial first responder, maybe just a financial responder. Right. But the idea being is, is that those business owners. Still need someone to guide them along. They still need context to the content, right? They still need context to the understanding of the numbers that they're experiencing and what it means for their particular business, what it means for their goals. AI doesn't necessarily understand the holistic picture. I can give you a lot of good information back, but it is missing that Human piece. And that's where we have to remember that the more technology we use, the more human we have to be. And again, um, some of us would say, Oh, but I really like doing Excel. Um, okay, then we're going to have to rethink what kind of Excel you're going to work on or what kind of things you're going to do, because the reality is, is most of the data is going to be done for you. The 20 percent is still needs. You know, a look over, but it's, it's our opportunity to get more human and figure out what those skills are to, to really become that advisor that I think small business owners actually want and would pay 10 times more for, because they feel like they're not getting it today.

Matt Tait: 14:19

I think, I think you hit on a good point. A couple of things aren't going to change. Number one, I always joke that the three worst parts about running any business are HR, IT, and accounting. That's not going to change. We do accounting. Business owners don't like this aspect of their business, want to spend time on this aspect of their business or want to spend the time to truly understand it. They want somebody to help them. They are desperate for somebody to help and advise them, and that's not going to change. You could put as many tools and A. I. s and outsourcing as you can. They still want somebody to help them. And that, I think, is a really cool opportunity. You hit it. Earlier right now because you have to you have to create a cost structure that people will pay for you are spending you're seeing accountants today spending so much time getting work done and they don't have the time within that cost structure to advise and so now with AI and outsourcing changing that. You don't have to do as much of the work, which means you can spend more time advising. And I think that's a really cool thing because I think most accountants truly enjoy being advisors and that's where the skill set is. And so that's where I think both the integration of outsourcing and AI come in, is moving accountants out of doing the work and into final review. And advice, and that's a really cool place,

Jody Padar: 15:52

and I think it means we're going to also have to rethink what advice means and how we're going to change train the next gen to become advisors a lot faster. But the cool thing is, is AI is going to be here to help us, and it's going to allow us to kind of upskill the next generation a lot faster,

Matt Tait: 16:10

so that actually gets to a really good point and question that I have for you. How do you think this, this integration of AI? And an outsourcing into kind of more daily and more expected value for accounting is going to change client expectations and service delivery and accounting.

Jody Padar: 16:28

So I think the client expectations have, have already shifted. Um, you know, I talk about that a lot, that. You know, there's a disconnect in product market fit so that the clients expect more from their accountants today are ready and accountants haven't really kept up with where they should be. And that's why when you look at, um, tools like Intuit and when it, it pops into you and it says, Hey, you know, do you need help in your quick books? And you know, the little chat bot pops up and you can respond. That's why there's actually a need there for that because accountants haven't necessarily been responding, but I think it's only going to 10 X that. As an expectation, because AI is not just coming to accounting. It's coming to the rest of the world as well. So everyone is going to have to level up in how they interact from a customer experience perspective, because again, it's not going to just be people are going to expect it from their accountant. They're going to expect it, um, from every other service provider. They have as all these other tools kind of increase. Their value as they integrate AI as well. I mean, doctors are using AI already. So like, you know, it just kind of, it's leveling everyone up and accountants just need to keep up.

Matt Tait: 17:44

I think they do. And, and I think we're being put in a position as an industry to do that easier and better. And, and I think that's also happening as well is it's, it's not going to be as hard as you think to implement this because it's just going to start being there more often. And there are also more and more really great tools that are coming out. And I think picking the tools that also have kind of the right mentality behind them. Like when you talk to tech companies, they kind of fit into two general AI buckets. One AI is going to work alongside an accountant and help make an accountant better. Two, it's going to replace accountants. I prefer to work with Number one, because I think that's the end point of where AI gets to. And I think that's a really important thing as you start to look at AI is, is really looking at the philosophy behind the builders and, and implement what you think fits your firm and you. And the expectation that your clients have for you.

Jody Padar: 18:45

And if you think about it from a client relationship standpoint, think about how you're going to solidify those relationships moving forward and how you're going to up your game and be more human because that's, there's going to be an opportunity there and there's going to be a risk there. So I think that's, you know, one of the things that we need to look at as to how we up our game to be more human. So we can kind of. Capture our clients that we want to keep today before some of the tools or other things kind of encroach on our space and you know, kind of snatch them away.

Matt Tait: 19:24

I think that's a great point. And you know, this season Jody has been really fun to kind of talk about, you know, AI and outsourcing and kind of where the industry is going. I think it's going to be really cool as we've kind of wrapped up today's episode. We keep going back to advisory and advising. And I think as we look at next season, I think helping people understand advising and where AI can help and how we can start to level up towards that will be another great continuation of these fun conversations.

Jody Padar: 19:58

Awesome. Thanks.