059 What If AI Does Automate Bookkeeping?

It's happening. An extinction level event for accounting practices. Let's say that AI drops tomorrow. That fully automates bookkeeping. It pulls all the documents and just boom, snap your finger, Thanos. Poof. All bookkeeping work goes away. Whole lot of reasons why that's unlikely. But hey, let's just say it happens. What does your accounting practice look like on the other side of that event? Do you still have a business? Are you out of work? Let's explore it. Come on in. Dinosaurs. It's Jason Daly. Okay. We did this a couple weeks ago for tax practices. We create this hypothetical AI that is amazing and can do anything. What if it did away with all your tax work overnight? What would your business look like after the fact? I think it's a useful exercise because we can see into that worst case scenario and ensure that we're not setting up our business in a way that is, like, built around all of those things that are ripe for disruption. And I think it just kind of deep depressurizes the whole AI conversation and takes some of the fear out of what if we did go there? Because we've already kind of thought that through. Every single time I do an AI talk, I'm on an AI panel, a webinar, whatever. Every single time the question is asked, where are we gonna be in X number of years or X number of months? And they always say, and everybody always goes around the horn and they're like, well, let me tell you this neat thing that I've figured out that is the right answer. And you know what? Like, the reality is nobody knows. There's a whole lot of smart people out there that are like, it definitely seems like it's gonna be disruptive. There'll be some good things, there'll be some bad things. But I'm usually like the A hole on the panel who will be like the smart alec that's like, I don't know. Because I don't know. And the reality is nobody knows. And the more useful conversation is, what do I do today, what do I do tomorrow, what do I do the next day to, like, sure, ensure I'm in the most prepared position for where we're headed. Like, in my mind, that is all that matters. We can all guess all day long, but, like, at the end of the day, nobody knows. And the funny thing is, like, on the inverse, on the other side of that, many of the people who are most sure of where we're headed are the people that actually, like, know the least about all this stuff. But even, like, at Engage. Last week I'm on an AI panel with two other legit, like AI experts as opposed to myself, who just plays one, plays one on the Internet. And that was how they ended the talk was they went around to everybody and they set me up perfect. I could, because I was the last one. They went around to everybody and they're like, five years from now, what's. What are we gonna be looking at? What looks different? And they, the other two people gave these very thoughtful, smart, like well informed takes on where we'd be at. And I was the knucklehead that was like, I don't know. Because I think like the more interesting answer to that question is acknowledging nobody knows. Everybody's guessing. There's an abundance of opinions right now. But more interesting than that is how can it make me more productive today and how do I learn a little bit more each day so that I not only protect my own business, but I become a better advisor to my clients because they're all like scared of the same things and getting disrupted also. So if I know a little bit about this stuff to protect myself, my value actually goes through the roof because I can support my clients also. I'm sorry. It's okay. No need to apologize. Okay. So what would this product look like? This meteor that just like wipes out meteorite, One of those that wipes out traditional bookkeeping, like, which is, you know, I think like the core of a accounting practice. Right. So let's set the ground rules for what this thing can do. It is nice. All you gotta do, you just gotta plug your bank into it. You chuck all your documents into it. Buy boom. Does all the accounting. You've got all transactions classified, all the documents are associated with the transactions. It just magically does all of this stuff according to some kind of standard. That's kind of what we're going to talk about. But for like, think about a micro business, all they got to do is just plug the account in. So this is like probably a mega simplified version of something like a QuickBooks where you connect the bank and in the end you got a set of financial statements and it just, poof, poof. Takes care of all of that stuff. Due to advancements in AI technology. Let's just. There's a lot of issues with that, but let's just assume that's a thing. Somebody announces it tomorrow. Ta da. And now we have to figure out how to build a business around everything but that. So let's do it. What would be left if this product did come out Tomorrow. What are some complications that we would probably still get sucked into? And where do we still add value around accounting? So complications with that. I'm just gonna get out ahead of a couple of things because Steve's gonna post it in the comments if he hasn't already. Or it'd be great if the bank feeds would actually work. Yes, complications in the US we still can't get bank feeds. For a huge percentage of the banks that are out there, we are still downloading transactions from the bank. Whatever. Let's kind of cruise past that though. Like, okay, worst case, they gotta go out and download a 12 month CSV and import it. Except for the banks where you can only do that like 90 days at a time or you can't go back beyond six months. Or we're just gonna cruise past all that, assume you can get a bank fee and get all that stuff in there. Another issue that this doesn't really solve, like no amount of AI solves for is the wrong info going through the wrong bank accounts, the wrong transactions, like happening in the wrong place. I'm sure none of your clients do this, but what I've heard is sometimes the business owner will go out, they'll get a haircut, they'll go buy that new suit, they'll go buy that thing that maybe it was a complete accident, they put the OnlyFans sub on the wrong card. Maybe it was intentional and they thought, no, I can totally buy these business pants on my business card because I'm gonna wear them for business. And then the wet blanket accountant comes around, swoops through, chucks them in distributions and you never even tell them. Right. So that's, that is one thing where like no amount of AI is going to solve for this. And the advising that we have to do on how clients set up their sort of finance stack and how they manage spend and where they pay for those things. So there's some fiddly stuff like that. But the biggie is none of this like the automation of bookkeeping and all of that will get your client any closer to understanding what the hey, those financials actually mean and how they inform their business and how that should inform proactive decisions that are made. So you know, if you just send off those financial statements to a client via email each month and that's it, and you go, hey Steve, here's your financials, have a great day. You know that they're probably not looking at them, but most definitely not making any sense of them. And for like itty bitty micro businesses where these are compliance books and they just chuck them into a tax return. Like, maybe it doesn't matter. Like, maybe they don't really need to understand those things. But beyond a certain level of a business's maturity, like, you have to develop the financial literacy to understand what you're looking at to, like, better inform the decisions that you make going forward. And until they get to that level, or until they have an advisor that can come alongside them and be like, hey, look at xyz, these may be things worth paying attention to. Like, they aren't actually using those financial statements for anything meaningful. And so if you're, if your bookkeeping cycle looks like, we just prepare the books and then we ship off the financial statements that work, maybe that work is at risk. Like, that is kind of the, the bottom, I don't know, the bottom of the value chain right now, where that's probably the most likely thing to get gobbled up by AI. But if you ship off the financials each month and say, hey, here's a video. I'm going to explain everything that's happening here. Or here's. Here's a video and let's hop on a call, or you just do a monthly call with them, like, there's still gonna be a big place for that. I think people still need that. Because even if you, like, we know better than anybody, if the output of your work is just a set of financial statements that's not actionable for people, for most people, like, that's not enough. So there's this entire, like, prospective, like, future level of action. AI here didn't fundamentally change the way that we think about the future. It may be suited to tackle the stuff that has happened in the past, but how is it going to advise clients into the future? And, like, there's absolutely AI applications that could also help with that. But ultimately that is a much, much tougher nut to crack than like, fully automated bookkeeping. Because that future advice is layered with so many things, so many nuanced aspects of the business itself, from how it works to the motivations of all the people involved to, like, where the business owner is at. Like, being an advisor to a small business is, here's what's going on in your business. But it's also, okay, I hear you're really tired and you need to work less or your mom just got sick and all of a sudden you have to figure out how to go half time. So, like, we're looking at a new hire. Like, that's the reality of advising business owners. Is it's a whole bunch of business things, it's a whole bunch of personal things. And in my mind of all the things we're looking at here, that is hard for an AI to do. Like yes, there's a path to AI being able to do virtually all of these things, but that's a tricky one, like pulling all that information together and putting together a plan that takes into account all of those things and is able to draw out of the business owner all of the important things to make that decision. Like a huge part of the value we provide to our clients is the fact that nobody else in their lives has this level of transparency into the things that they do. Oftentimes like not even their spouses. Like they're not talking about financial results and have somebody like that far into all of their work. And so in many ways you end up being like the business counselor. And it's kind of the best and the worst part of running accounting firms is you build these really deep relationships and it's what makes it really hard to then make like decisions for yourself, the firm runner, like firing that client or telling them no. And, and part of being that advisor is like, like drawing out those hard questions that they may not be able to get to themselves. Where it's like, is the issue just that you are really tired and you're working too much? I hear that you want to double the size of the business but you're super exhausted right now. Is that really realistic? Generally they're not going to have people on their team that have the same transparency and access to information that you do. So they're probably not going to have the people in their team that are telling them no, that are pushing back and a self guided experience. Even if they have like this kind of AI forecasting advisor or something like that, that's definitely not going to be the same experience as actually like working with someone that supports a bunch of other clients that has this incredibly unique set of experiences where we've done this exact thing for hundreds of people's like lived experiences. And then the clients who are coming to you, like they've done it once, they've done it twice. Like that body of experience that you have is incredibly valuable. Hey. This episode is sponsored in part by firm360. You know,360 because it handles all aspects of your firm in a single single platform. You don't want to hop around all these, all these different places to do different things. That's why it's 360. You think they've got. Hang on. Sidebar. You think they've got like VR headset support? You see the new Apple Apple VR thing? Wonder what that would look like, right? Okay, let me tell you about Amanda Spivey. Amanda approached Firm360 in the second half of 2020 because they needed a platform to streamline their processes. Enable and Enable remote work. Remember that old chestnut, remote work? Oh, a lot of people having to rip that band aid off coming into Covid. Before firm360, their team had to haul boxes of work documents between home and the office if they wanted to work remotely. That is disgusting. That is absolutely disgusting. But you know what? Gonna level with you. That was happening. That was happening at my practice more recently ago than I would care to admit. But let me tell you, thanks to firm 360, they had the opportunity to add more clients. First three months they were seeing improvements in team productivity, better transparency into what everybody was working on. And it was because they could pull all that stuff together into one place, all in one place. 360, put those goggles on. That's not a thing yet. Maybe soon. If you're still hustling information in a whole bunch of different places, check out firm 360 link in the video. Description this episode is sponsored in part by dark horse CPAs. Hey, if you're a regular listener of the show, you've heard me say that Dark Horse CPAS is a platform CPA firm about five times now, and I know that each time I've said that, you're like, what the he? Double hockey sticks? Does that even mean? It's a community of accountants operating under the same brand, building their practices collaboratively together. Turnkey resources. You're not reinventing the wheel. All the stuff that solves for you and will get you through. You know the hard things about launching a firm, about not making the same mistakes everybody else is making. Dark Horse brand will help you attract the talent you need and the clients you want. Buddy their tech team. There's a tech team? Hang on. Tech Team Alert will ensure you have what you need to automate the mundane and augment the your advisory muscles. Advisory muscles. Do you have those? Dark Horse is the only CPA firm built exclusively for CPAs. Unlike a franchise, they will work with you one on one in group settings. Get you everything you need. You're no longer a lone ranger. There's a better way. There's a better way. You got a whole squad behind you now. To learn more about how Dark horse is helping CPAs build practices from scratch and scale existing practices within a community that helps each other continuously up level their game. Head over to Abetterway cpa. So even if you did have this like incredible AI advisor, it's not going to be like at the level of the type of stuff that we do. Another complication with like the Thanos automating bookkeeping sort of worst case scenario is like books and like what are correct books are kind of in the eye of the beholder. So like you have books for tax, you have books for management, you have gap books and oftentimes there's like even more kind of little delineations than that. So even if we got to a quote unquote fully automated bookkeeping standard, which to be clear, I am in favor of, like I think there is value in greater standardization in how we do this stuff so that product builders can like automate better around that. We make some, we make some parts of this really hard for us in the profession today because like every set of books is like this unique kind of snowflake one of one sort of thing. I think there are better ways to balance the value of that uniqueness with like all rolling up into a common group of parent accounts maybe or something like that. I feel like there's more like greater commonality that we could lean into. But ultimately when it comes to like what is the version of those books that is most helpful for management that's very business specific and that even changes over time. Like there isn't really a standard that gets everyone there and this is like a 200 IQ problem where the reality is most small businesses are like, don't even have a reconciled bank account. And so like there are long ways from that. But ultimately there is no single standard format that will be like the best version of those books for everyone, where it gives them all the information that they need with which to make decisions specifically for their construction business versus their dental office versus their content creator business. Right. So what do management books look like in that situation? What do tax books look like? Like the requirements for how we track information for tax purposes, like even look a little different at like the jurisdictional level. So how do you create something that gives you all of the information that you need to just simply to stay compliant and then you get into stuff like, you know, gap books, like third parties you have to report information to in a specific format. The fact that like the correct classification is in the eye of the beholder, like that makes this conversation a little more complex and probably requires then an advisor to come in and figure out how do we augment maybe this core type of accounting or core like type of books to be helpful for management to be compliant for tax purposes and anything else? Like I think that's a situation where we're probably still getting pulled in regulation. And the fact that that is all changing how localized that is, I don't see like a broad brushstroke AI approach that takes into account all of those things. It could definitely get better over time. It could definitely begin to handle kind of the more general problems that go into bookkeeping. Like in the US the various ways that stuff related to vehicles are expensed and what's the best way to account for that in different situations. How do you handle stuff where you may make a vehicle related purchase today, but the decision on how on like the tax deductibility is not made until later when the tax return is filed. Should that impact how it's tracked in the bookkeeping? Like, should it not impact that? Should you have books for book and books for tax? Like should you start separating those things out? These are not really things that like business owners are gonna be able to navigate on their own. This episode is sponsored in part by Client Hub. This week on Tales from the Hub. That's right, it's back. Remember last week we were talking about super smart accounting firm and they were celebrating how everyone could stay on top of things from clients from Client Hub's jobs dashboard. That's right. I said celebrating. They were saying celebrating it. Now they're getting ready to head to conferences. It's conference season. I've been talking about conferences a lot lately, right? Man, they can't wait to take their partnership with Client Hub to the next level by doing some IRL glad handing, back slapping and a lot of other analogies like that. I tell you what, it's one thing to chuck support requests into a system to email with that support team, you know, share your new ideas for features. It is a whole other thing to stand in a booth with the delightful people that you've been talking with and actually build, build some human relationships. Client Hub co founded by a former firm owner. It's why they just seem to get it. It's why when you flip the switch on Client Hub you're like, wow, these people understand me. They understand my pains and they understand why all I want is for my client to respond to my request. Well now super smart accounting firm, they can't wait to see Client Hub at scaling new heights in a couple of weeks. You going to be there? I'M going to be there. Client Hub is going to be there. Let's all hang out. Even if you're a Canadian, they're going to be at cpb. CPB Ignite in September this year. I got no idea what that is, but if you're Canadian, you probably do. That's it for this week's episode of Tales from the Hub. Check out Client Hub. If you're going to be at these conferences, let's hang, swing by their booth. You can meet the actual people behind it. Ultimately, if something big like that happened overnight, which is kind of like the worst case scenario, you know, like it happened super fast, we don't have any way to plan for it and people can just switch to this other system and it just does it. If that happened, would that be good for our profession or not? Honestly, I don't think it would be that bad for our profession. I think most of us are not setting up camp in a place where that is our core business, just the plugging in of the debits and credits. This part of what we do has been on a road to commoditization for so long from like you getting way more productized services like bench and QuickBooks Live bookkeeping and all of these services that will just do this stuff for you at a lower and lower cost. This is why we see the push to like call it CAS instead of bookkeeping, like call it anything but bookkeeping, call it accounting, so that we're not lumped in with the value people assign to just bookkeeping. I think most of us, if we're running an accounting practice, like we have not set up camp in that place where we are just plugging numbers into an accounting system. And if you're still there, maybe you're like still getting that firm off the ground. It doesn't take long at all to realize, boy, there's a lot more useful things that I could be doing with my time that are more valuable to the client that, than simply dropping in debits and credits and all those things. Like in my mind, those things largely aren't impacted by a complete AI bookkeeping solution. And yes, like there's an argument to be made, but like, about what about those other things? And could AI impact those other things also? And like, the answer is probably yes. But even the, the prospect and like professionals understand the nuance that goes into the technical fiddly things around bookkeeping and tax and all that. Professionals understand that better than anyone. So even, even the more you explain this hypothetical perfect product that does all of these things, the more you talk through it, the more kind of absurd and maybe out of reach some aspects of it feel. But I think what happens is we see specific functions and tasks that we do, and especially in the news cycle, and maybe how we generalize what we do in our heads, we blow that up to not be representative of the task or the function, but of the person of the profession. You know, people talk about accountants being replaced, and accountants do such an astronomically vast type of like different tasks where even if something did happen that automated some aspect of accounting overnight that's not. That ripple effect isn't going to impact every single account because we all do such different things. So to me, the more interesting version of this discussion and the better framing of will it replace us? Will it displace what I do, the more interesting framing of this, and I think I've shared this on the POD before, is not will it replace accountants or will it replace me? It is will it replace this task that I do? Because on a more granular level than Steve drives into work every day and is an accountant, on a more granular level than being an accountant is. Here are the hundred tasks that Steve does every day. The reality is every one of those hundred tasks are on a path to extinction. They will ultimately be automated, be replaced, whatever. That's just how it's always been. Think back a hundred years to what accountants were doing back then. Most of those tasks have probably been automated in the meantime. And that spectrum of it being a heavy lift, totally human thing to ultimately nobody even thinking about it because it's automated. Like, there's a lot of steps along the way there. So let's talk about like entering bank transactions into an accounting system, for example. Like if you have working bank feeds in a perfect world, that's not a thing that we have to think about anymore. But in the past, somebody entered all that stuff in and it took them a whole bunch of time. And the day they flipped the switch on bank feeds and it connected and it pulled a bunch of stuff in and it seemed like magic. You know what people did? They pulled out the paper bank statement and then they pulled up those transactions that came through on the screen and they went, okay, that's 149. Yep, that one's there. Okay, 250. Yep. Nope, that one's there. They went right down the paper bank statement and made sure that everything was there. Now, like, that would be ridiculous, right? You're gonna check that. Like the eventual balance is correct. Whatever. Like you wouldn't do that now. But for these tasks that are on a path to extinction, there's a stop. There's like the initial kind of very manual, fully human version of it. There's the version of it that is like technology assisted where you still have to oversee the output, but then eventually there's a destination where it just happens and you don't even have to think about it. And that is the case for every single fiddly little thing that we do. And so the people that are ultimately most at risk are the people that do a very, very specific thing. And like maybe they just do that one task all day long. And that's where you hear about like at the enterprise level, you've got entire floors of people that are doing this one AR function or something like that. And like boom. RPA just, you know, automated these hundred jobs away. Like those are the roles that we see being most at risk. But for public accountants, man, we are in a constant like fist fight to stop doing like more new things. And the accountant wants you to do this now and that now. And oftentimes they have nothing to do with accounting. So like that is not really the way that we work. We are constantly having to pick up new things that oftentimes we don't want to do. But we're not like setting up camp in a place where just we're doing the heck out of the this one task, right? Like that's not really how public accountants work. But all of that being said, like, I do think it is a helpful exercise to think about the worst case scenario and the stuff that would go away. Ensure that you are not setting up a business around those things that are most likely to go away for all of the same reasons that it's just not a good idea to be living there anyway because we already have productized solutions coming in and like trying to steal your lunch there, right? So like if Bench will come do this bookkeeping, this certain type of cash bookkeeping, cash basis bookkeeping for $300 a month. If Intuit Live Bookkeeping will come in with a plan starting at like 250amonth. You need to understand, like what are the types of projects that they will do? At what price level are they doing it and how is what you do different? And I did this on a video. Boy, it was, I don't know, maybe six or nine months ago. Now a helpful framing for me and this is for like early stage accounting practices where maybe you're still having these conversations with businesses. A helpful framing for me is like you see those software tools out there that do like comparisons of what they do versus that competing app. So like you do a Google search for Airtable and the top result is this paid placement from ClickUp that's like, here's why ClickUp is better than Airtable. And you go in there and you've got this side by side table of all the ways that these things are different for you and where your accounting practices is setting up camp and how you think about your messaging and how you explain what you do. Like I think for entry level accounting practices like that's a helpful exercise to go through is to like build this table of here's what this productized service does and here's how we are different. Because I think we cruise right past all of the ways that we are different from you'll sit down and talk with a client to anytime the client calls, they can talk with the same person, they can actually build a relationship with a person as opposed to like going to a pool or something like that. If you are feeling like you are at risk of the things that AI will displace, like look at where the productized solutions are. Like try to climb up that value ladder of getting out of those very trivial sort of things that are most ripe for commoditization because those will also be the very first things to be automated. And so we'll see more productized services that will do, you know, AI based bookkeeping at like these shockingly cheap levels. So today in your messaging with clients, if they think that all you do is that, and if that is how you communicate your value to clients, then when somebody rolls out a $20 a month bookkeeping solution that'll handle, you know, 5,000 transactions a month, they're gonna be like, shoot, I'm paying you 1500 bucks for quote unquote bookkeeping when I can get this other service for 20 bucks a month. Obviously we don't wanna set up camp there, but even today, like it may impact, you may wanna think about what that messaging looks like to ensure that they understand that what you do is fundamentally different than like this commoditized bookkeeping solution. Worst case scenario. To me it's not that scary. But I do think like thinking down that path of what's what that could be and what business is left after that. Like I think that sort of takes some of the fear out of that parting thought. I see more and more conversation around kind of like oh man, this stuff's a lot to learn. We've got new AI stuff And all that, is there an increasing value and a role for like an automation or AI expert within a firm? Like are we all just going to start hiring AI pros to work for us? And I think where this kind of stems from is the initial friction we feel in terms of like not identifying as an AI expert or like an automation expert. Like there was a time, and this probably still happens, where job listings would list, you know, Microsoft Office proficiency as a job requirement or 40 words per minute typing skills, sort of like stuff like that, right? And when all that was new, like that was important and people needed to have that, but like the floor for what the expectation is for us to know changes over time that keeps going up. And none of us, when cloud came around, said, oh buddy, I can't wait for this. This is really exciting because I want to be a cloud expert and I can't wait to help all of my clients move their businesses onto the Internet. Nobody got excited about that. There's probably a few weirdos that did. And none of us identified as cloud experts. But you know now more than almost any of your clients about how to like connect different web based apps and get them to integrate and talk to each other and automate like the flow of information between those things. But like a couple decades ago that had nothing to do with accounting. So like I think we, we hold ourselves back because we don't identify as the type of people who will learn this stuff when ultimately our job is to just be helpful. Like how can we deliver value to clients and help them to solve their problems? You know, what is like right on the other side of the windshield for all of our clients right now, AI, all the same news headlines that we are scrolling through, like they're confused, they're scared, they don't know how it's going to impact them. And as much as we like push back against, I really don't want to learn one more thing. Can't I just hire somebody that's an expert in this thing to like just like we can just pile all the AI stuff on that person. I think this is akin to like saying we're going to pile all the Microsoft Office top like tasks on this person, right? Like AI is not a like new paradigm or type of tech. Like tech is just AI. Like that is just where we're going now. Like it's going to be the underpinning of everything that we do. But today and we talk about this stuff, there are killer huge time saving applications of things that firms should be doing right now. And I've, I used to be really into like the automation hire. Like oh yeah, get a no code expert and, and like pull them into the fold and they're going to make everybody else more productive. But I'll be totally honest, I like, I can't really put my finger on any examples of that working phenomenally. And at worst saying I need to make an automation hire gives everybody else a certain level of permission to not pay attention to learning those things. And right now the best thing we can do with AI is find responsible ways to put these tools into the hands of our teams to enable their productivity. Laziness is like the mother of invention. If your staff people can figure out a way to do their job in half the time with AI tools, that's great news. I want the high schoolers who are generating their essays with ChatGPT. Maybe a bad analogy, that's a very loaded analogy, but you know what I mean, like we want to get this stuff in people's hands so that they can find ways to be more productive and we need to find ways to reward those people. And that's why we talked about, talk about like output based compensation. But if we instead say, oh no, we just hired somebody that uses ChatGPT, that's going to be Karen's job. If you have any CHAT GPT related tasks, please send them to Karen. Like you're stunting everybody else's growth because nobody else is learning it. Right. So I've kind of come full circle on the automation hire and now I think an automation hire could at worst like be framed as permission for everybody else to not have to learn anything. And as much as people are like tired of change and, and we don't always want to learn new things, I think with the right framing, like this is fun, like I'm, I'm enjoying this. Like I actually super appreciate having this assistant that will do things for me, specifically the things that I least enjoy doing. And, and so hopefully y', all, because I mean if you're tuning into this, like you are at the edge, like the leading edge of what accountants are doing with AI, like hopefully we can be the ones to like kick off the party, like show the path to that being a fun thing to learn, get people inspired to lean into it either out of like their own curiosity, out of pure laziness because maybe they don't want to spend so much time working. Bottom line, these are all wins as far as I'm concerned. If we can get more productive in what we're doing, help more people waste less time on trivial things. Right, that's it for this week. Thanks for coming and hanging. Have a lovely weekend and I'll see you Monday.