Brian Tankersley, CPA, and Randy Johnston discuss the technologies and processes they see having the greatest impact on the accounting profession in the coming year.
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Transcript (Note: There may be typos due to automated transcription errors.)
Brian F. Tankersley, CPA.CITP, CGMA 00:00
Welcome to the accounting Technology Lab, sponsored by CPA practice advisor, with your hosts, Randy Johnston and Brian Tankersley,
Randy Johnston 00:11
welcome to the accounting Technology Lab. I’m Randy Johnston with my co host, Brian Tankersley, oh, this is a fun time of year. We get to talk about the future, and we don’t have to even be responsible for what we’re saying, but we will be, because we care about our recommendations to you and that we’re giving you proper guidance that you can count on. The trick here, though, is these are very unstable times. We could talk about private equity playing in the profession. We could talk about AI moving and, you know, now think about it, we probably will. So Brian, I know you are thoughtful about the future, and what you recommend we could talk about big publishers. We could talk about small startups. What do you think are some of the most interesting things to watch for in the coming year?
Brian F. Tankersley, CPA.CITP, CGMA 01:00
I think, well, first off, there are more startups now than I have seen at any point in the 30 years I’ve been in the profession. There are more people trying to create, more point solutions to solve more pain points for the accounting profession than again, has existed since the late 90s, since the early 90s when I joined the accounting profession. Okay, and so it’s a it’s a very innovative time. We’re going to see a lot of merger and acquisition activity, both for firms and for for for things there. But what I think is also interesting is that the our friends at the big publishers seem to have gotten religion with respect to innovate or die. And so they’ve, they’ve decided, I think both, both of the major big publishers, as well as the others, have decided that they’re going to build as much as they can internally, and they’re going to partner with everybody else to make the rest of the stuff happen. And I think everybody sees that the private equity influx into the into the practitioner space, where the firms are getting bought up and rolled up and everything, you know, that’s not going to be everybody, and they’re going to be a lot of people that opt out of that and start their own firms. And so I think it’s, you know, but, but it’s going to that’s going to enforce the technological adoption and the real time reporting and the evolution of practice management in a very exciting way, I think in 2025
Randy Johnston 02:30
Yeah. And, you know, speaking of startup technology businesses, couple of numbers, and I will try to provide the source as well. But you know, during the pandemic, there were 7.2 million new businesses formed in the United States, and here in 2024 roughly 3.2 million, I believe I saw is either 3.2 or 3.6 this year alone. So if you think about the opportunity for public accounting firms to support new startup businesses, there’s never been a much more ripe time for that either. You know, when we look at new business creation, obviously there were many that did fail during the pandemic, but the bottom line is, 10 million new businesses is a bunch. That’s a group, as my friend from Florida would say. And you know, they’re going to need advisory services, they’re going to need client accounting services. They’re going to need tax services. And you know, as some of the providers out there are suggesting that, you know, a lot of times you’re getting 1040s right now that are really business owners that are kind of in startup mode and pushing away 1040 work right now may not be the wisest choice, particularly if you can automate. So one of the continuing issues, I think that is lessening, is staff shortages. You know, as we think back over the last three to five years, maybe longer, staff shortages have been a problem, maybe even all the way back to the year 2000 and it’s just going to get worse. But what is getting better, is automation is supporting a lot of our efforts, and we are solving some of without sourcing accounting today, I think reports, 26% of all firms are using offshore outsourcing today, and you and I have written and taught courses on outsourcing in the past year, but we see AI automation coming of age. You know, we we’ve talked about in other technology labs the black or tax autopilot product that fully prepares a 1040 you know, ready for partner review. Discovered another platform that I think will cover in another technology lab soon, that’s doing sing, type of thing. We’re seeing k1 automation with AI in products like additive.ai who can process the k1 so and you know the numbers I’ve been talking about, and you and I have some work to do together on this is I’m seeing currently 10 plus tax AI products probably going to be 20 plus if I was reading. About it, 10 plus audit AI platforms. And again, that’s probably 20 plus, and certainly 40 plus client accounting services, AI platforms. Well, wait a minute, you said that’s the most you’ve ever seen. Well, all of a sudden, all the ones that I just named are all startups, and I just did 40 plus, maybe 2020, that’s 80 tools. 80 company provide any 80 companies providing tools to the profession that are all kind of new startups. That’s a lot,
Brian F. Tankersley, CPA.CITP, CGMA 05:34
it is. But remember that the price on software has gone up, so even though the total addressable market hasn’t grown in a huge fashion. The you know, there may be enough margin for everybody to hang on and survive for a while, but there will eventually, with with 40, with 80 platforms, there will eventually be some consolidation, you know. But in, you know, they will, they will incorporate the best technology, and this, this competition, will make everybody better. Yeah,
Randy Johnston 06:05
and you know right now, because you’ve heard me quote the numbers, we’re tracking 57 practice management products, too many. We’re tracking 88 portal products, too many. All right, so there’s got to be consolidation in the products that we’re already aware of. Oh, and another classic number, 94 QuickBooks, reporting tools. And of course, we saw that, you know, least crunch bought phenograph. You know, just phenograph survive. I don’t know, but you know, that’s probably another example of the consolidation that’s coming. That transaction was pretty small, only $7 million but I would have thought finagraph would have exited for a lot more money than that. And
Brian F. Tankersley, CPA.CITP, CGMA 06:50
I think, I think it also, it also highlights that we’re dealing with startups, that many of them are venture funded, and when, when the investors sour on it, and the and they lose confidence, or they decide that, they decide that they’re not going to make their you know, that rainbow at the end, at the end of the rainbow, there isn’t that pot of gold that they were hoping was going to be there a lot of times there will be quick consolidations, okay? You know, we one can look back at this year, at the at the at the exit of Abby Avi, the practice management solution that that was great practice management product that, again, was designed by some former KPMG folks, but it, you know, they, they just didn’t have enough to didn’t have enough market Share to make it work with the with the plan they had and and they ended the product. It just stopped functioning at the end of October in a lot of big firms. And that’s the thing I think our listeners need to be very careful about, is you need to watch the financial stability of your providers and have a plan B, and have offline backups for these cloud things. Because, you know, Avi gave their people six months notice or nine months notice, something like that, when they decided they were going to shut down and still didn’t find a buyer during that period. What I’ll say is that I think you need to have backups of the data from some of these startups. I don’t think that it’s likely that many of them are going to get shut off, but I think it’s likely that one out of the 80 platforms may shut off with very little notice, and I don’t want you to lose data. Okay, so, so, so that’s the and I, I think you need to generally be careful about your data backup in this cloud world. Because, you know, again, you when, when the clouds down, you are out of business. And so we’ve got to, we’ve got to, again, do that business continuity thing. That’s not sexy, but, but is, is essential for everybody. Yeah.
Randy Johnston 08:56
And, you know, in another technology lab, we talked about backup, and at the end of that session, we said, Boy, that was a great session. And you know, we’re not self congratulating very often, but when something’s just clicking and backup is still critical. I was in a firm this week where the Microsoft 365 platform was not getting backed up by their IT provider, and they were being charged a premium. And it’s like, really, folks, no. And I actually did a hand raise in Tennessee to say, how many of you are backing up Microsoft 365, is almost zero. And it’s like, come on, folks. Do you not value any of your word spreadsheet or PowerPoint presentation documents? Hello, but,
Brian F. Tankersley, CPA.CITP, CGMA 09:37
and I think we’re going to see you know it feels like, feels like, to me, that we’re going to see some more failures. Now, it may not be on the provider side. It may be on the firm side, but I think you know, if you remember 2019 when we had, when we had the major failures of the hosting companies and the providers, that all happened in May of that year, I. Think that it just feels like we’re due, you know, kind of like that earthquake that happened off the coast of California, okay, you know, I heard that there was a tsunami warning yesterday, and we’re recording this again on December the sixth. I heard that there was a tsunami warning in California. I said, Well, they’re due, okay? And, it’s, you know, and thankfully, nothing bad happened there. But I think that in general, you know, security and backup both have a horrible feedback loop. Okay, yeah, and a lot of CPA have deluded themselves into thinking that it will never happen to them, okay, until, by God, it does, and then they’re staring at the abyss, and they don’t know how they’re going to go forward. And so I think it’s, I think, you know, if I was, if I was a practitioner today, I would, I would have, I would, I would have a top to bottom look at how I’m backing up data, what my plan B is for everything, because we don’t know what the future holds. And, you know, again, it’s not that it’s going to happen definitely this year. But, you know, you and Dr Bob were talking about the, talking about a pandemic as far back as 2006 and I thought you were smoking dope. I thought you all had clearly gotten into the good buds from BC, and you were just, you were just having a good time at the dispensary. Okay? And then 2020 have happened. And I said, Holy cow, they’re geniuses. And then I went back and looked at my family history, and I realized that my great grandmother died in the Spanish Flu of 1918 and so, you know, I I didn’t realize, because I hadn’t studied the history, I didn’t realize the risks that were out there. But the the thing, the thing here, I think we’ve got to do here is, I think we’ve got to get refocused on security and backup and some of the basic blocking and tackling, because a lot of your firms have gone in and you’ve signed up a managed service provider, and like you mentioned, Randy, the managed service providers may or may not be providing the right kind of backup for your business. Okay, yeah, and so it’s, I think it’s, I think it’s important that we go back and do more validation of, are we really as safe as we think we are? Because I can assure you that with backup and security both, you are not going to get good feedback until it is a disaster,
Randy Johnston 12:23
yeah, so maybe a few pieces of feedback. Because, you know, one of the things that got Dr Bob and I started on that was bird flu, which is obviously getting into milk supplies and so forth. And it’s just a matter of, can it jump to human transmission? And we got another one on our hands, but going way back in our conversation, you know, on the AV, you know, shutdown, you may recall that somebody we’ve talked with recently, Davis Bell, who’s the CEO over at canopy, we watched canopy burn through lots of money, and they had to get refunded. We had to get additional funding multiple times. And there’s a whole lot of marketing going on by companies like canopy or carbon or right works right now, where they’re really trying to drive new sales through marketing efforts, and that’s an expensive effort along the way too. But, you know, I’m thinking about these, these types of companies, and they’re very innovative. I like what they’re doing, but there’s only room for so many. But now I want to go over to a concentrated risk statement that you said, because you and I were fortunate enough to be traveling on the CrowdStrike outage on July 19. And when I think about these data center risks, where we get more and more data in fewer and fewer data centers. You know, what’s going to be the risk there? And so concentrated risk becomes a factor. Because I was lucky that day, I was flying united, and got home and you were flying Delta, and, you know, our associates were flying Delta, and they got home on Monday, right from a Friday trip. Now you were staying for some extra stuff,
Brian F. Tankersley, CPA.CITP, CGMA 14:00
but now I haven’t told you the whole story about CrowdStrike. Okay with me, because I am a CrowdStrike Falcon user, and I came home and my, my P, I have a, I have a home I have a, I guess, a PC, a home theater PC, and I have had to win a server, and both of them were shut down, but nobody used them because I was out of town. And so that thing that really did affect me and it and so I’ve, I’ve actually, I’ve actually changed some stuff around, and now I’m running more Debbie and Linux in the background. But I think Linux may make a comeback in 2025 as well. We’ll see.
Randy Johnston 14:42
We’ll see. But it is certainly realistic that it can for lots of reasons. And you know, so now if we kind of think backwards here for a minute, because for our listeners, we do worry about, you know, fundamental applications. For you those. Of you in tax, those of you in client accounting services, those of you who are in audit, those of you who are dealing with practice management or document management or portals. And I’ve been on a mantra for four to five years that less is more because Brian, as you said earlier, developers are doing point solutions, and we’re getting lots more applications to choose from. But more is not necessarily better. In my mind, you’ve got more licensing, you got more training, you got more interfaces to make more is not necessarily better. You know, I’ve heard you say too doggone many times. You know, life is too short for cheap ice cream, and you’d rather have a little bit of the good stuff than a lot of the bad stuff. I think that’s maybe speaking for you, but that’s kind of the thinking behind this. So out of all those practice areas, have you seen something that you say this is really interesting. It’s a breakthrough in Portal or document management or practice management or tax or audit or CAS, that’s a big question, but I want to give you a chance to kind of think about, okay, what products would I call out? Because you and I know we could do, you know, product award of the years if we wanted to do that type of thing, but I’m just thinking about innovative or new coming at us.
Brian F. Tankersley, CPA.CITP, CGMA 16:20
So I will say that the way Validus is solving the rest of their the rest of their imports from the service, the things they don’t currently service is is pretty amazing, and how they’re providing a much more comprehensive solution. I think the the generative AI that we’re seeing to compose emails and letters. And, you know, the engagement letter tools like Nula that are that, they’re, you know, five or six of them out there now, but, but the use of AI in everyday things for routine correspondence and routine, routine things, I think, is something that is a that is a big deal. I think the, you know, if I, if I look at the automatic classification that fix folks are trying to do, where they’re trying to automatically classify things, the review ready that Thompson’s doing, the the teammate, document, linker, again, I just keep coming back to that. That’s just, that’s such a big step forward that, you know, I think, I think we live in it at a great time for the profession, you know, because all of these things that that took gray beards like me when I was in the early 90s, and made me question, you know, do I really want to do this for the next 3040, 50 years? You know, all these tools that I prayed that we would have have now finally come to pass. And so now, you know the the profession for the future. You know you’re going to be able to get, you’re going to be able to, you’re going to be able to do some pretty interesting stuff pretty quickly in the accounting profession today. And so even though we’ve got what we refer to as a talent crisis today between outsourcing and automation. I think it’s going to work out, but, and I think you’re going to see a lot of that in 2025
Randy Johnston 18:10
Yeah, and it’s interesting, you’d call out Nula. You know, there’s been a lot of breakthroughs in engagement letter automation, and a lot of breakthroughs, I think in payment automation too. But if you look at new list competitors, like anchor, that’s kind of interesting on the front end. Or, you know what Licio has done with their engagement letters and PBC documentation on the front end. But if you flow it through to the back end, the likes of the quick P fees and the CPA charges, as well as the, you know, more broad products, the axioms and the islands and the campfires
Brian F. Tankersley, CPA.CITP, CGMA 18:51
and Licio and and their payment things and their business texting and, you know, it’s, you know, I think another major trend that I’m seeing is we’re finally getting accounting firms to get religion with respect to CRM and they’re starting to finally understand it, only 30 years after corporate America did okay. But it’s a it’s, it is a culture change. And I think the, I think the PE folks in the big firms that are successful have already done it, and that kind of relationship focus is essential for advisory and so I think, you know, if I if I had to call out things that I think are going to be key success, things for 2025 for accounting firms that want to grow, I think if you’re not using CRM, I Think you’re, trying to run a marathon with one leg tied behind your back.
Randy Johnston 19:45
Yeah, that’s interesting that you call out CRM for business development, because a lot of firms are trying to use HubSpot or MailChimp or Constant Contact, one of the legacy products, but you can use a product like levitate or result CRM or I usually recommend about. 10 different products, fiber, CRM symphony, there’s a bunch of names that I throw out for CRMs, for for CPA firms that are not Salesforce. And
Brian F. Tankersley, CPA.CITP, CGMA 20:12
the problem is that for the accounting firms, they want to control what they say to everybody else. And that’s where MailChimp and the again, all the, all the email tools come in, and they’ve, they’ve got good outbound marketing, okay, but when the data comes back and the clients say, This is what I want, this is what I want, this is what I want, they don’t have a system for keeping up with that, tracking that and making that happen. And so these opportunities, you know, three out of five are there. They they hang out in the air in front of somebody at lunch. It never gets written down and it disappears into the ether, okay? And that’s the thing that we see the big firms that have multiple lines of business doing very well, is they flip that lead over to somebody real quick, and they they strike all that irons hot and and that is responsive customer service, but it’s also, in many ways, self serving, because you’re chasing that business and you’re you’re not letting that thing drop. And I think that, I think generally, that the folks that are running CRM and it’s, don’t get me wrong, it’s pain in the butt. Okay, it is, it is work, but it is the thing that differentiates a sales system from a ad hoc nightmare, which is what a lot of accounting firms have, and by applying a little bit of structure to it, I think that the firms can be so much more successful. And those notes and those things that the client told you don’t get forgotten, and you know, if the if the partner has, you know, a heart attack or or some kind of catastrophic health situation, the firm can largely continue along because the notes are in CRM, whereas if it doesn’t, you know, it’s just a mess.
Randy Johnston 22:03
Yeah, and every one of the last firms that I’ve been for doing tech assessments and Consulting has stated this problem and didn’t associate CRM with the solution. It was fascinating. And I would say that has been everyone, certainly, since late July, and probably even before that, if I get more realistic about it. But you know, so Brian, I guess I’m just gonna maybe put you on the spot, on on one final question. Because again, in
Brian F. Tankersley, CPA.CITP, CGMA 22:32
the technology, I want to hear your innovation. I want to hear your innovations. Here, I’m
Randy Johnston 22:37
going to come at you with those and just appreciate you holding me account. Okay, that’s a good thing, because, you know, when it comes down to it, I’d like for you to think about the one thing you might change in the coming year. While I’m giving my response. I didn’t want to put you on the spot on that, but think about the one thing. But now, if it’s my innovations, your CRM, one really has got me thinking about it. But you know, our friend and associate, Dr Bob Spencer, always talked about thinking about things holistically, and I really want firms to think holistically. In the end, what’s it take to do business development, to turn those into engagements, to gather the documents the PBC or client request list, to support the transactions that you’re going to do, tax, auditor, Cas, or any other valuation, whatever it is that you have a deliverable that can be delivered electronically, that’s paid for electronically, that the client can access, kind of that whole end to end process. So to me, that’s part of the trick here. Now you can get those end to end processes in lots of different ways. And there is no silver bullet, or we’d tell you about it, that you could use to solve it. Unfortunately, today, it is a lot of piece parts, as they would say. And you know, I can see this Rube Goldberg device, yeah, Rube Goldberg, I wish I’d have thought of that while I was speaking, but you’re absolutely right, and what we’re looking for is somebody to put it together elegantly, almost Mercedes Benz, BMW, German engineering style. We want it to be solid. And there’s just nothing solid out there that I can can suggest lots of new innovations. Somebody will get there. But at the low end, when you think about the canopies or the tax domes, or how many more should I name that are entry level practice managements, they’re all trying, but every practice management system that I look at has something missing, okay, and that’s not being critical of them. It’s just practice management, as you know, is hard to build. So what I really want in the coming year is a practice management that finally gets complete enough that I can say this is the real deal. Now I’m going to stop, you know, talking about all these others. Because there’s, it’s head and shoulders above everybody else, and right now, I don’t really see that, and it’s the same way in portals. You know, there’s several I like, and I recommend lots of different ones. And we’ve already talked about Licio in this session, for example. But trust, or Stanford, tax, or how many more do you want me to name? Because each one of them does something good.
Brian F. Tankersley, CPA.CITP, CGMA 25:23
And I think it’s important that that we all acknowledge that we don’t. I don’t think we really want to get to this German model where there is one right way to do things you know, you and I have done consulting with SAP in the past. And one of the knocks I have of SAP, one of the benefits of for big companies of SAP, one of the knocks I have of SAP, is that they have one they have the one way that they think is the best way to do things, and they study it to death. And the problem is that doesn’t match everybody’s strategy. And so I think there will still be 10 portals, and 10, you know, and and 10, but I don’t know that there’s going to be 100 Okay, yeah. And
Randy Johnston 26:01
if we go back in our conversation to the start with so many startup businesses that have so many needs, if you’re attentive to client needs, the way you solve the problem will be different for lots of different clients. You should determine your way and the best way to serve your client base, and there’s a lot of variability in that, as I see it. And you know, these the portals, since we were in that zone, many of them are difficult to use because of security logins. You can’t remember your password, all that type of stuff. And we are seeing the first arrivals of passwordless portals, and, you know, pretty good innovation with safe send in their new portal that’s only been out about a month. You know, I keep watching technicians trying to solve this, and I’d actually like to get accountants to drive technicians to solve this. So at this point, I guess I’m back to the, you know, if you only could change one thing in the coming year, what would it be?
Brian F. Tankersley, CPA.CITP, CGMA 26:59
Well, I’ve thought about this, and it is, it is clear that it is the government side of technology in tax, okay, I want the IRS to get modern systems, and I want to have an initiative like making tax digital that they have in the UK, in the IRS, where there is an API where this stuff just works. Okay? You know, you’ve said many times that you you worked on the the ancient mainframes that power currently the transcript system that the IRS has today. And, you know, I so I’m going to put a shout out here to the Vivek and and and Elon, for the love of God, fix the IRS, okay? Because, because it’s the and the technology side of that, okay? Now that’s going to have all kinds of implications, and it’s going to be a multi year transition. But I think you know, when I look at accountancy in the UK and Canada and Commonwealth countries and abroad, we are so far in the in the weeds, because of the Byzantine nature of regulation in the US, because we have so many different regulators, states, federal, local, we have so many rules. They have to be followed. They all don’t talk to each other. There’s no integration. There’s no centralized way to communicate. So if, if I could fix the government side of technology and make it more friendly to the accounting profession, I think we would spend so much more time making money advising clients, you know, solving problems, as opposed to sitting on hold, praying to God that you don’t get the courtesy disconnect.
Randy Johnston 28:40
Yeah, that’s a pretty big order, so big ask, so maybe uncle Elon will help you on that. So in I am going to go a slightly different way, because I had reflected on my own question, and I thought about fundamental things like backups that work reliably 100% of the time and back up everything you need in the cloud, desktop every place, but you can get those pretty easily day, and we’ve talked about those in other sessions, and those are pretty straightforward, but I would like the APIs to become easier to use and connect more of the systems together. So I think that’s actually pretty doable in the coming year. Now, I gotta tell you, the other one that I threw away was Quantum. You know, I want AI and quantum so bad. It’s like, it’s like you with any audit tool, I can see you, you do a poltergeist 360 when that happens.
Brian F. Tankersley, CPA.CITP, CGMA 29:35
But it’s physics Randy. I mean, you got to get, you got to get more than one degree above absolute zero. I mean, that’s the problem. Is the materials with quantum, you know, is that, you know, liquid helium doesn’t grow on trees, so, so, you know, the I want quantum to get there too, but, you know, I don’t know, maybe, maybe all this stuff with maybe all this stuff. With UFOs that’s getting batted around Congress and everything will come up with the fact that there is something that can solve quantum computing. And, you know, it landed in Roswell in 1947 Okay, but, you know, and I, and I hope they do okay, but, but I’m, I’m just, I don’t know, man, it’s that’s, they got some tough challenges coming, you know, and you remember, and the likelihood of the IRS solving all their digital problems in 2025 it’s more likely the earth will crash into the sun, okay,
Randy Johnston 30:32
but, oh, you remember, you talked about the pandemic. I’m just gonna tell you that you know, Dario Gill, and have any other people that are right in the thick of this are thinking 2028, to 2032, so we’re not too far away, but,
Brian F. Tankersley, CPA.CITP, CGMA 30:52
but I think they I think the military, the military and the black budget is much further into quantum than We know?
Randy Johnston 31:00
Oh, by far as matter of fact, I, I, I’ve got some inside scoop on that. So I do, in fact, no, but you know that said we always wish you to have, you know the exact technology that you’d like to have. You know my personal mission for 40 years has been to help as many people use technology in the way that benefits them the most, and so that’s what these technology labs are about. We want you to know about technology that’ll benefit you the most. We wish you continued success. And Brian and I are very happy to have you along today. We appreciate you listening, and we’ll talk to you again soon in another technology accounting lab, good day.
Brian F. Tankersley, CPA.CITP, CGMA 31:42 Thanks for coming here and happy new year to all of you. Thank you for sharing your time with us. We’ll be back next Saturday with a new episode of the technology lab from CPA practice advisor. Have a great week.
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Tags: 2025, Accounting, Firm Management, podcast, predictions, tech lab, Technology