Bytes & bucks: How technology — and need to invest in it — is having growing effect on accounting firms

Joseph Damiano tracks the increasing demand on accounting firms to keep up with technology in the way an accountant would: He thumbs through the profit & loss statements.

The CEO and managing partner at Sax LLP said that, on his firm’s annual expense report, technology has become the line item just below labor.

Joseph Damiano. (File photos)

“And that was just never the case before; it was maybe in the Top 10, but nowhere close to No. 2,” he said. “The budget is increasing all the time as we’re making the necessary investments to keep up with technology. That’s something that’s impacting every firm.”

The technology spend in accounting is increasing to such an extent that Damiano said it’s a bit of an unknown for firms just how high it could go in the future, as artificial intelligence and language processing tools such as ChatGPT make even more of a mark on the sector.

That’s driven a firm such as Sax to hire outside consultants who provide a “digital roadmap” in concert with the firm’s information technology staff to understand what tech is currently out there, what’s on the horizon … and, of course, what it’s all going to cost.

The upshot for clients of accounting firms is that their financial experts are being increasingly more proactive about using the latest tools. That’s something accounting firms have talked about doing for years, but, as Alan Sobel, managing principal of the New Jersey offices for CliftonLarsonAllen, implies: They’re putting their money where their mouth is.

Alan Sobel.

Sobel’s own firm has made hundreds of millions of dollars in investments into bolstering the firm’s technology with AI. It even went out and acquired a U.K.-based company that was developing its own AI platform to not only use that platform internally, but offer it up for clients as well, Sobel said.

One of the most eye-catching recent industry headlines was Big Four accounting firm PwC announcing last month that it would be rolling out OpenAI’s business-focused ChatGPT Enterprise for employees and, at a cost, clients, too.

“Between that announcement and everything else we’ve seen in the sector, I do think you’re seeing firms making moves and not just talking about it anymore,” Sobel said.

Sobel expects more of those moves. In fact, he expects the AI embrace in his sector to be similar to industry’s transformation when — as happened early in his career — the first personal computers entered offices.

The American Institute of Certified Public Accountants, or AICPA, and local trade associations have been releasing guidance on the use of AI in the profession. The AICPA also is hosting a startup accelerator this year with AI as its focus.

Patrick Walsh.

Patrick Walsh, CEO and managing partner of Withum, said there’s an undeniable buzz in the profession surrounding the potential of AI and language processing tools. Financial professionals’ early hesitancy about the data security of ChatGPT and other platforms is also being accounted for, he added.

“So, we’re definitely leaning into it as our employees, and clients, are educating themselves on this,” he said.

At the same time, Walsh said, his accounting firm wants to balance out that excitement with some prudence, which means not rushing into overinvesting in these tools before the ROI is less cloudy.

And, to be clear: There are tech features that already automate some of the profession’s more mundane, data entry tasks. Investments are going strong there, Walsh indicated.

“That form of AI has benefits in terms of taking hours out of the work we do that are being seen already,” he said. “And are sometimes lost under the shiny new object and the focus on how these language models can impact us years from now.”