By Alex Smith.
No one said running a successful accounting practice was easy. Even in the smoothest and most uneventful of times, there are a variety of factors that need to be taken into consideration and successfully managed to ensure profitable operations.
Throw a disruptive new technology like generative AI into the mix, and this balancing act becomes even more difficult to pull off. The emergence of the latest crop of AI tools – including not just gen AI, but next gen search and knowledge graphs – has enabled transformative new ways of working within accountancies.
The result? Tasks that once took multiple days and/or accounting professionals to complete can be readily accomplished in a matter of hours – whether that’s creating detailed tax reports and summaries or gathering reams of financial data to help prepare tax returns.
What does this new way of working mean for overall profitability of accounting practices? Does gen AI create a pricing conundrum for organizations that have long tethered themselves to the billable hour if tasks and workflows can now be greatly accelerated?
There’s room for multiple pricing models
Discussion about the billable hour and whether its death is on the horizon periodically pops up every few years, and yet: The billable hour endures.
It’s safe to say that the billable hour will continue to be a fixture of various aspects of accounting work for at least the next decade, even as technologies like generative AI are reshaping the ways in which work gets done.
Increasingly, however, the billable hour will sit shoulder to shoulder with other pricing models, including fixed fee arrangements and other types of value pricing.
The trick, then, is for accounting firms to distinguish when fixed fee arrangements make the most sense, and when a billable hour model makes sense. Part of gaining clarity on which pricing model to use is gaining clarity on where the firm can effectively utilize AI.
AI is best suited for repetitive workflows
AI as a technology is best suited for repetitive, high-volume pieces of work. Our earlier example comes to mind: combing through heaps of financial statements to find the right pieces of information.
AI can find the necessary pieces of data much faster and for much less “cost of delivering the service” than having hordes of accounting professionals reading over a year’s worth of financial records.
Value pricing is a good fit here. Wherever repetitive accounting workflows and ability to effectively utilize AI overlap with one another, value pricing should be considered.
High-end work is a different ballgame
The more that accounting professionals use AI for these repetitive aspects of work, the more they are freed up to focus on higher-value activities.
For accountants who are neck deep in an audit, that might translate into fewer hours spent pulling data from supporting documentation or previous audit reports and more hours spent coming up with action plans and recommendations around how to address any deficiencies they’ve identified.
For the tax specialist who is on the cusp of tax season, that might translate into fewer hours spent gathering data for the tax return and more hours coming up with valuable advice on how to minimize tax liabilities and take advantage of tax incentives.
Likewise, the advisory professional can spend fewer hours summarizing market and industry research or a client’s internal process documentation, and more hours developing actionable insights about how best to strategically evolve or move forward.
In contrast to repetitive, high-volume workflows, this strategic high-end work will fundamentally be based on time – as a result, the billable hour makes most sense here.
Resolving the conundrum while creating an opening for new services
The fact that there is room to apply AI to certain accounting workflows but not others means that there is room for multiple pricing models in accounting – effectively resolving any pricing conundrums that accounting firms might fear.
Instead, firms can focus on what gen AI can do for them and how they can refactor their workflows to take advantage of these new ways of working.
It’s time for accounting firms to start thinking about the kind of new and innovative services they can offer to clients. What workflows can they tackle in a world where they have AI-enabled tools that can work with data so efficiently? Are there new service offerings that they have not even thought about offering yet because it wasn’t feasible in a world before these tools existed – because it required too many people or involved too much cost?
Pulling off this kind of evolution of “business as usual” will require a combination of people, process, and technology successfully working in concert with one another. But in the meantime, accounting practices can apply gen AI to their operations in a thoughtful manner without impacting overall profitability – helping firms navigate the complexities of modern accounting while staying in the black.
Alex Smith is Global Search & AI Lead at iManage.
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Tags: Firm Management
