Why Are Accounting Firms Having a Hard Time Adapting to New-Age Technology?

A 2022 survey by the Virginia Society of CPAs found that 5 emerging technologies will garner significant attention from the profession. They are:

1. Advanced cybersecurity measures
2. Artificial intelligence (AI)
3. Workflow software
4. Robotic process automation (RPA)
5. Enterprise resource planning (ERP)

The demand for advanced technology, new-age software, and AI in accounting has continued to boom into 2024. Although many accountants and accounting firms believe these tools positively impact their work and business, some are still apprehensive about them.

A December 2023 report found that 89% of the respondents had at least one concern about implementing AI in their work. The top concerns include:

Work quality: 42% of respondents expressed concern
Data accuracy: a worry for 41% of the respondents
Fiscal costs: 31% of respondents thought this would be negatively affected
Undetected bias: 26% of respondents raised their concerns about this
Ethical issues: 21% of respondents thought AI would build such concerns

The apprehensions that accountants hold regarding the adoption of modern tools and artificial intelligence are understandable, considering the specialized tasks performed in accounting firms.

Challenges that make AI adoption hard for accounting firms

Embracing advanced technologies like artificial intelligence (AI) in the traditional field of accounting requires overcoming several hurdles, particularly for smaller firms. Let's explore how firms can navigate these challenges to successfully adapt and thrive in the evolving landscape of the accounting industry.

Skill gap and technological resistance:

Artificial intelligence is a relatively new phenomenon. Accounting is a well-established profession, and those who have been in the industry for a long time may resist the adoption of new technologies due to the fear of new. While the use of AI might not necessitate a particular skill set, it does require accountants to learn and continually stay informed. Contemporary tools and software mark a significant departure from traditional methods. Gaining expertise in these advanced technologies requires time and resources that small accounting firms frequently lack.

The Cost factor:

There is no denying that accounting tools, task management software, or communication tools require some investment. Moreover, the software required by firms often needs to include complex functions, leading to significant costs. Accounting firms, in particular, may struggle to justify the initial investment. This challenge is exacerbated for small and mid-sized firms with limited capital. Costs extend beyond purchasing licenses; they encompass staff training, integration into current workflows, and more. Furthermore, continuous maintenance and support expenses increase the firm's financial burden. Such costs may deter small or mid-sized firms from embracing new technologies.

Data security concerns:

The nature of data and information that accounting firms deal with is sensitive and critical. While AI brings along a lot of benefits, they also need to be dealt with carefully — data security is of paramount concern. New software and AI introduce potential vulnerabilities that small accounting firms might not be equipped to deal with. Adding unvetted, third-party software to an already vulnerable system can expose a firm to further cybersecurity risks. The threat of data theft or manipulation can undermine the client’s trust and damage the firm’s reputation beyond recovery. Cybersecurity measures and data protection are crucial, yet they are complex and require extensive resources.

Customization and integration issues:

While the services that accounting firms provide might be similar, each firm has its own unique processes, workflows, and ways of dealing with clients. New software or AI solutions often do not align perfectly with the firm’s or client’s specific requirements and may be in need of customization. A significant issue arises when a firm's existing systems lack the capability to integrate new software smoothly. This not only incurs additional expenses but also extends the workflow process. As teams grapple with adaptation, it often results in a decline in work quality.

Client acceptance and communication:

In accounting firms, resistance to innovation isn't limited to employees accustomed to traditional methods; clients can also be hesitant to embrace new practices. Clients might be wary of the changes and be concerned about the potential disruption of business processes. Such clients worry heavily about the compromise of the confidentiality of their financial data. Thus, it becomes essential for the firms to invest time, money, and resources in educating the clients on the potential benefits. Building trust and managing client expectations is crucial to ensure success in the process.

Best practices for accounting firms adopting AI

The field of accounting has evolved significantly, transitioning from manual record-keeping and data entry to the automation of many tasks. Accounting was always equated with time-consuming tasks, mountains of paperwork, and constant worry of human error. AI has not only helped make mundane, repetitive tasks easier and faster to complete but has also helped relieve the overall stress. Accountants are now able to concentrate more effectively on critical tasks, develop strategies, and add dynamism to their profession. Technological advancements are also fostering a new breed of accountants who are as proficient with technology as they are with balancing the books.

Although automation and AI present challenges to accounting firms, it's the commitment to ongoing learning and innovation that will be crucial. The persistent worry about AI replacing accountants is unfounded; instead, accountants should leverage AI to enhance their work. The following are strategies that leaders of accounting firms should consider when integrating AI:

➡️ Find your reason for adopting AI

Utilizing AI can be beneficial and particularly attractive for new firm owners looking to stay on the cutting edge. However, it's important to resist the temptation to purchase software solely for the sake of ownership. Firm leaders must start by asking, “Why do we need a certain tool?” or “What is the business challenge we need to solve?” There is no question that AI can add value. Leaders can safeguard their investments by pinpointing areas for enhancement, such as efficiency, accuracy, or decision-making. Artificial Intelligence should be employed solely to achieve strategic goals and provide concrete advantages to both the firm and its clients.

➡️ Start small

If you are a believer in the phrase “go big or go home,” it might be a huge challenge for you when you are trying to adopt AI. The realm of AI is vast and can be daunting. For newcomers to accounting firm ownership, adopting a phased approach is the most effective way to familiarize themselves with new software and train their team. This strategy also reduces the risk of abrupt disruptions to current operations. Moreover, it enables firm leaders to evaluate successes and failures promptly, adjust strategies accordingly, and incrementally increase AI integration as their business expands.

➡️ Build an open-minded team

One of the major hurdles in embracing AI is the inflexibility of teams. This issue can arise with employees who have extensive industry experience, but it ultimately boils down to conquering the fear of the unknown. Successful integration occurs when team members are open to exploring innovative concepts, experimenting with advanced technologies, and questioning traditional thinking. As a leader, fostering a culture of ongoing learning and curiosity is paramount. Recognizing and maximizing the distinct potential of each employee is essential.

➡️ Seek help

Accounting is an industry of constant change and growth. Remember that you are not alone in your journey as you navigate through the complexities and benefits of new tools and software that use artificial intelligence. Building a strong network of partners can help you gain the confidence to break boundaries and reach your firm goals. Outsourcing is another terrific way to gain access to experts and provide quality services. The best part is that your outsourcing partner, most often, would have already adopted AI and can help you scale.

Adapting new-age software and AI - Conclusion

While the advent of modern technology opens a world of possibilities, it also has its difficulties. Accounting is a niche and critical field, so firm owners need to be curious about everything they encounter in AI. The field of accounting services is competitive, and accountants must adopt technology, prioritize data security, and uphold ethical standards to stay on top of their game. After all, it is all about making informed decisions, sometimes with a little extra support.

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