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The Risk & Rewards Equation: Why Accounting Firms Need to Recalibrate in the Age of AI
PLUS: A Conversation with Your Self AI
Gassen Mosbahi
September 13, 2023
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I've always believed that college education should not take that long (4 years) and be that expensive (over $100K). By 2030, AI will shorten the education period and reduce its cost by at least 50%. A tremendous gain for society!
On the same token, I’ve always believed that training programs at accounting firms are wasting too much money and time. I personally never learned much from those trainings. Most of my learning is done on the job. A tremendous gain for firms!
Generative AI: Its Impact on the CFO Department
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My Weekly Editorial: The Risk and Rewards Equation - Why Accounting Firms Need to Recalibrate in the Age of AI
McKinsey: The State of AI in 2023
Pro vs. Free AI Tools
Have a Conversation with your AI Self
AI Accounting News
My Weekly Editorial: The Risk and Rewards Equation - Why Accounting Firms Need to Recalibrate in the Age of AI
Disclaimer: The views expressed in this article are my personal views. They do not express the views of my firm, my family or friends. In addition, these views represent my modest reflections at the current moment. I reserve the right to change or modify my views in the future.
Dear Accountants, or more specifically dear consultants within accounting firms,
The winds of change are sweeping through the accounting profession, and they carry with them the transformative power of artificial intelligence (AI). In an era where data analytics, machine learning, and automation are becoming increasingly integral to the industry, the traditional risk and rewards equation for accounting firms needs a recalibration. It's time to put more weight on the rewards side of the scale to ensure survival and prosperity in the age of AI.
For decades, the accounting profession has thrived on a risk-averse culture, emphasizing precision, consistency, and regulatory compliance. These principles are vital for maintaining trust and financial integrity, but they have also created a somewhat rigid structure that can hinder innovation. As AI technologies advance and smaller firms and outside players embrace them, the risk of disruption becomes palpable.
And just to be clear here, I’m specifically addressing the consulting and advisory arms of the accounting firms. The audit and tax compliance groups do not have as much freedom considering their regulatory aspect, as they need to be extremely more careful when it comes to tilting the equation in favor of rewards.
The Growing Influence of AI
AI is no longer just a buzzword; it is a reality that's reshaping the accounting landscape. AI can process massive datasets in seconds, identify patterns, and automate repetitive tasks with unparalleled accuracy. This technology is a game-changer in areas like auditing, fraud detection, financial analysis, and compliance.
Smaller, more agile firms are leveraging AI to streamline their operations, improve efficiency, and deliver value-added services at competitive prices. Meanwhile, outside players, unburdened by the legacy systems and traditions of big firms, are developing innovative AI-driven solutions that target specific niches within the accounting field.
The Risk of Stagnation
Accounting firms, with their large client portfolios and extensive resources, are not immune to the risk of stagnation. The status quo may seem comfortable, but complacency can lead to missed opportunities. Embracing AI-driven innovation requires a shift in mindset and a willingness to take calculated risks.
The Need for a Rewards-Centric Approach
To compete in the age of AI, accounting firms must adopt a rewards-centric approach that encourages innovation, creativity, and adaptability. Here's why:
Competitive Advantage: AI can enhance the quality and speed of accounting services. By investing in AI technologies, firms can offer their clients more value, giving them a competitive edge over smaller rivals.
Cost Efficiency: AI can automate routine tasks, reducing the time and resources needed for manual processes. This, in turn, can lead to cost savings and increased profitability.
Client Expectations: Clients increasingly expect accounting firms to leverage cutting-edge technology. Meeting these expectations can enhance client satisfaction and loyalty.
Talent Attraction: Talented professionals, particularly younger generations, are drawn to firms that embrace innovation. A forward-thinking approach to AI can help big firms attract and retain top talent.
Risk Mitigation: While embracing innovation involves some risk, not doing so may pose an even greater risk in the long term. By staying ahead of the curve, firms can better anticipate and manage potential disruptions.
Strategies for Change
Invest in AI: Allocate resources to research, develop, and integrate AI solutions into your firm's operations. Collaborate with AI experts and startups to accelerate innovation.
Cultivate a Culture of Innovation: Encourage employees to propose and experiment with new ideas. Reward innovation and risk-taking to create a culture that fosters creativity.
Continuous Learning: Develop AI proficiency among your workforce through training programs and partnerships with educational institutions. Ensure that your team is equipped to harness the power of AI.
Client-Centric Solutions: Use AI to tailor services to the unique needs of your clients. Personalization and client satisfaction are key differentiators in a competitive market.
Takeaway
In conclusion, the age of AI presents both risks and rewards for accounting firms. While a risk-averse approach has served the profession well in the past, and should continue for audit and tax compliance, the changing landscape demands a shift in perspective on the consulting arm. By embracing innovation and putting more weight on the rewards side of the equation, accounting firms can not only survive but also thrive in the age of AI. The time for change is now, and the rewards for those who adapt will be substantial.
McKinsey - The State of AI in 2023: Generative AI’s Breakout Year
McKinsey released a paper recently that discusses the major trends and observations in AI. Here are the takeaways:
It’s early days still, but use of gen AI is already widespread
Leading companies are already ahead with gen AI
AI-related talent needs shift, and AI’s workforce effects are expected to be substantial
With all eyes on gen AI, AI adoption and intact remain steady.
Pro vs. Free AI Tools
For most use cases, free options are great options for accountants to leverage AI tools. You don’t need to spend money on tools that only add a small advantages. Below is a summary of the major tools.
A Conversation With Your Self AI
Today, we have the technology to clone your self into an AI. Watch this video illustrating a conversation between Peter Diamandis and his AI clone. Peter is a renowned VC. Enjoy!
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