In the UK, the professional services industry is critical to the success of the economy, representing 14% of employment according to PWC. However this 14% - whether accountants or other professional services – are increasingly finding themselves facing a common threat: replacement by automation.
A recent study from Oxford University suggested that 35% of existing UK jobs are at risk of automation in the next 20 years. Most at risk are those that are in supporting roles. For accountancy firms this could be auditing and even tax advice.
Why do accountancy firms need to change?
The rise of Artificial Intelligence (AI) means that algorithms are now able to automate some existing business processes, helping to both solve problems and uncover value through measurable, direct ROI. Take tax compliance work for instance: it currently requires the ‘crunching and collating of numbers’ by a human to inform a business decision. This means that the accountant needs to first understand complex sets of data, and then produce an accurate and timely report. AI readily possess the ability to process this same data and almost immediately deduce an unbiased, strategic business decision – relieving the company of this human-driven and otherwise labor-intensive, costly and subjective decision function.
To understand the potential impact of automation within the accountancy workplace, look no further than the world of European tax audit firms. In 2014, the European Union mandated that all European companies switch to a different firm every ten years. Instead of doubling down to compete on the quality of their products and services, audit firms have responded by lowering their fees. This has created an environment where competition is based on price, not quality of work. The results have been unarguably ugly, creating a path for automation. And it’s only a matter of time until AI technologies are able to deliver a replacement that will win on price and quality.
This looming competition from technology isn’t something that will stay limited to auditors within the accountancy sector. All employees in low-skilled, decision support roles are facing an increasing threat from automation, as technology evolves and fees drop. However, accountancy firms are able to overcome this threat by finding new ways to differentiate their services.
Here are the three ways that the industry is beginning to tackle the threat of automation:
- Mobilise knowledge from across your business
Knowledge is a key factor in facing the threat of automation. Industry insight, experience and understanding of clients are all things that can’t be easily replicated by the competition – even machines.
That said, knowledge can easily become siloed if the right communication and collaboration resources are limited. And with an increasingly global economy, even small companies need to operate across multiple locations further isolating valuable knowledge. Being able to access and share knowledge across an entire organisation (regardless of location or team) is a huge asset; one that is extremely valuable when under a growing threat from AI.
One way that an accountancy firm might ensure knowledge is widely available to everyone might be through altering its corporate structure. This was the approach that Grant Thornton UK took when it elected to become a “shared enterprise firm”. This allowed the company to ensure its employees were given a voice, and in turn knowledge, ideas and experience were shared throughout the business. According to the CEO, Sacha Romanovitch, “Businesses with shared ownership structures significantly outperform other businesses… recording 55% improvements in productivity and 70% improvements in quality.”
2. Dissolve the wall between your clients and the firm
Given the service-based nature of accountancy firms, they must also learn to dissolve the walls between themselves and their clients. A successful client experience ultimately boils down to two things – communication and trust. And it is only through these actions that a valued relationship can be formed, setting a company apart from its human or artificial competition.
According to Robert Eccles, author of "The Value Reporting Revolution," the more information firms disclose, the more likely they are to win confidence and investment (within reason, of course). There is a good reason for this: companies are being held to increasingly high transparency standards, and they expect their accountancy consultants to adhere to the same level of disclosure. Client companies have a lot at stake, and they're entrusting part of their business to the care of an outside entity. The less accountancy firms are seen as "outsiders”, the easier it becomes to win a client’s long-term confidence and retain the business.
To overcome this, some accountancy firms are adopting software that allows information to be shared, and collaborated on, securely with both external clients and internal teams. For example, Baker Tilly International offers its clients a tailored portal that allows 24/7 access for all stakeholders, including those who are performing the work. It has government-grade security and can provide a ‘paper trail’ of interactions and updates. The results: the company claims that this has been influencing factor on several global deals – differentiating it from its competitors.
3. Leverage creativity
Lastly, accountancy firms must embrace strategic creativity within its consultancy services, as this is something algorithms struggle to replace. Creative contributions can’t be outsourced, automated or devalued. Being able to highlight the areas where an accountancy firm displays that creativity can be a beneficial point of differentiation for existing and potential clients. For example, this might mean acquiring a whole new company, like PricewaterhouseCoopers did last year. Creativity is one of the few assets that is almost impossible to replace with machines, and therefore is priceless.
With AI technology standing prominently on the horizon, the accountancy sector is faced with two options - prove value; or die trying. Those that will survive will learn to evolve, incorporating technology where needed but all the while making the most of core assets – knowledge, relationship and creativity. An accountancy firms holds indispensable value to its clients and the clearer it demonstrates this, the more likely it is to thrive: even in the face of replacement by automation.
Guest post by Morten Brøgger, CEO, Huddle