466 A Q&A about The Future of Accounting AI! (Q2 2025)

Every day you see a new headline about AI and you're like, am I like, missing the boat on something? Because I can tell you right now, in accounting, there's not really all that many, like, cool accounting applications for AI. The big exception is probably accounts payable, where there's a bunch of AI stuff happening. Otherwise, what most of us are doing is we're using generalist AI tools in accounting. Like you're using the ChatGPTs and stuff like that. It's not really accounting specific AI tech. Recently I did a Q and A with the rightworks community that I'm going to share with you today. It's interviewed by Joel Hughes, the CEO of RightWorks. And we talked about just this. Like, what do we see for near future accounting AI developments and what should that ultimately have us doing today? Like, how do we prepare for that? How do we build it into our firm? So it's something that we're perpetually learning because, like, AI is so unique in the way that it keeps changing. So it's kind of hard to build infrastructure and like training materials around. But that's also kind of the most exciting thing about it, is how fast it's getting better. So how do we, like, marry all those things into a strategy we can actually use in our firm? We talked about that as well as kind of some bigger, you know, state of accounting technology and how all that stuff comes together. This was a fun one. This happened, like I mentioned in the rightworks community. They've got some other cool interviews coming up with folks like myself, like Ryan Lazanis, Hector Garcia. I'll put a link to that RightWorks community down in the show notes, and I hope you enjoy it.

Excellent. Okay, so AI, I don't know if you've heard, but AI is transforming the accounting profession.

Sure.

Obviously we did some work with you probably even a year ago, just on safety. Right. I mean, there's a lot of education underway. There's a lot more needed. Things are changing rapidly. And I think maybe the first question, and I know you published some stuff on this, but for this audience, you know, what, what are you seeing and how should firms right now, here we are, you know, today be thinking about AI as they plan for their next year.

I mean, the, the biggest thing, which was the whole point of our collaboration a year ago, the biggest misnomer right now, is that there are not completely secure ways to use AI, even with confidential client information. Like, there are completely secure ways to, to use it. The sooner we can come to terms with that and do Whatever grappling we've got to do to, to get our heads around that, which may take some homework, may take talking with your IT group, whatever that is, whatever we've got to do to get there, we just, we got to do that work. Because this, the, the biggest blocker to AI adoption right now is just the, the over analysis, the, oh, if I just, if I just go to that one more webinar, one more, one more conference, one more whatever it is, then I'll have the tools that I need to use AI where like learning how to use these tools is fundamentally different than any other tech we've had before. Any other tech, you know, you're rolling out a practice management system or something like that, you get an implementer and they tell you what every single button does and everybody gets trained and there's a plan. Week one, week two, week three, and every time you hit a button, the button does the same thing. And with AI, like that's just not how it works. So like the best way to learn AI is, is it just being habitual, being part of your work process? So rather than like a top down approach to adoption, it looks a lot more bottom up and creating feedback loops in the firm so everyone's sharing what they're figuring out.

And I think to your point there, I think we're seeing similarly sort of two big blockers. One is just the generic safety issue and like is it safe yet still? And there are a lot of reasons that people will say it's not. But I think we agree with what you're saying, of course, which is, you know, it is possible today, it's possible the same way we've been protecting client data for whatever, a couple of decades. We can do that with AI. And then I think to your point, the other thing we hear is, but you know, it's changing so quickly that I'll, I'm like, I'm waiting like if they're getting better all the time. And it's. Yeah, but we need to get, we need to start using the tools of the day. It'll be great to have better tools, you know, next week, next month, next year. But how you use these tools is fundamentally different. And that's the learning process that you gotta do, right to learn. And it's not gonna be the vendor's gonna have a training session, right to your point. And these are the buttons and I get a very different mindset. And it's a little bit, look, I mean it's been super hard. I'm not where I wanna be personally on this. Right. My use of AI. We had our right now conference in Nashville, I think, last week. Right. And Gary Vee, you know, challenge the audience to use, you know, if you're not going to post social on social media twice a day, which nobody was willing to do, basically, he, he said, hey, you should be then at least use AI for an hour. Just start using something. Pick a tool for a purpose. You need something, just start. Because you don't understand if you don't start and you don't try. And I think we've just got to get people going on that because the people who don't do that, I do think can be sort of left behind. That'll be something that, you know, there's not a reason to wait at this point in time. So it's really like, let's kind of get moving. Do you see any specific use cases right now that you've, you know, you've done yourself or you've seen with a firm that can sort of have been eye opening and therefore can be, you know, the beginning of building momentum within a firm, let's say, for example, or somebody who sort of whatever, automated workflow or did research 10 times faster and said, hey, you know what, I had no overtime in busy season because I was using AI or whatever the anecdote might be.

Yeah. I hesitate to like lock it down so much as to, as to like, you know, project onto the team. Use it this way, that way and that way because it almost defeats the purpose of the flexibility of the tool. Right. Like my, my greatest hack is have it open on a monitor all day long. I mean, accountants, we love our battle stations. Like, I mean, that is, that is the difference between Alpha Accountant and, you know, run of the mill Accountant is number of displays, four screens. Yeah. I mean, but the reality is most of those screens are filled with things that are simply there to distract you. Your email, like Microsoft Team Slack Twitter for this thing. Like, I'm on, I'm on another monitor right now, Joel. I know I am. Like, the best thing that you can do is leave it up because then you're always thinking about it. You're like, oh, maybe I could check this and maybe this could be helpful to me. But if I can contradict everything I just said and give you one really cool use case, I think it is making use of your meeting transcripts. The more of these meetings that we capture, which is starting to become commonplace, which is great. These meeting transcripts, like, they are the greatest encapsulation of the collective expertise of your firm that exists. In many ways, it is like the saddest of a professional services firm because these meetings are just happening. Right? It doesn't even require any extra work to capture them. These advisory meetings are just happening. And there's so many things that we can do with these transcripts. And large language models are so infinitely better than, like, the control f search for a little bit of text. Like, there's so much more than that from, you know, give me five social post ideas from this meeting. I just had automatically extract from my client meetings things that they said that could be used as client testimonials. How good are we about asking for that making you a better advisor? Like, how could I have better land at this point or that point? Or find me a framework that is related to this thing that I was trying to explain so I can explain it better next time. Or the junior who is in there in the summer sitting in a chair in the afternoon, not being especially productive because they just asked their Senior a question 15 minutes ago, and that timer hasn't reset yet, and they're like, what do I do? Imagine if they had access to, like, a version of your expertise through all these meeting transcripts. That's the one that I think is just like, could have the biggest, most profound impact on professional services.

Yeah, I mean, I. I agree with that. We literally was, you know, we had a guy who was traveling for a week. He missed a couple meetings. He showed up today, and I just got all the stuff from him. I'm like, well, where. Where are the transcripts from the meetings that I missed from the team's meetings? And he's got to prepare something to present to us back next week. And it's kind of like that he's using the tools at hand and he's. I think he'll end up, you know, being a lot better off with those transcripts and using AI to sort of pull this stuff together than he would have been being there himself, taking the notes and trying to use that right? There's. There's kind of, no question, tremendous productivity enhancement. And to your point, I love the idea. You're like, I hate to. It's like chicken and egg on. On the specific use cases, you know, justify your use of AI, save time. There will be those things. But to your point, get getting people using it, there will be things that are discovered that weren't obvious and different people will use it in different ways. So do you think it's almost like, should an emerging best practice There be something around just sharing, you know, like, like periodically having the firm or, you know, the juniors or whomever. We've talked about this here, you know, just sharing, like, what's. What did you use it for? Like, what. What do you find success with? Because I feel like, you know, there's also a potential here where people find something. It's like, I'm really good at this particular use case and I just beat it to death. And then that's how I use AI and other people are doing something else and something else is something else, and you're sitting probably side by each and you don't even know. But maybe it's. How do we share, you know, successes?

I. Yes, and I. We often also have to think about what is like the durable strategy that ensures we keep learning and keep finding the new things as we get new models and new capabilities. Like, I think this has risen to the level of importance where not just accounting firms, but any organization, like, there has to be a weekly standing meeting where folks are expected to come to the table and say, here's what I did this week. And it may have worked, it may have not worked, but those two things are equally valuable. And until we create a space where we can like, manufacture that, that touch point, especially in distributed work environments where we're not shoulder to shoulder like we used to be, just don't get that contact learning like you used to. Like, I think it's risen to the level of importance where you have to force that touch point not in like a, an aggressive way by any means, but just to have more exposure to what other folks are doing.

Yeah, I think, I think that's, I think that's critical because. Right. I think that the, yeah. The, the spectrum of possibilities there is so much wider than to your point historically. The tools. Hey, how do you use the practice management system? Great. I got, you know, I didn't know that button did that. Thank you. It's sort of like, you know, question asked, question answered, move on. But it's going to be ongoing and dynamic. Right. So the more of that, the better. So let me. Obviously you talk a lot about specific applications. I'll say the tech stack. Right. The accounting and tax tech stack evolution. Who's good, who's bad? We all do some version of that. We have a set of partners. We try to curate things we know work really well on our platform for customers, and we spend a lot of time with those vendors during tax season trying to make things run. It's a lot of what we do. It's very important part of what we do. How will AI potentially disrupt, I'll call it what we, how we view the tech stack.

Yeah, I mean there's just about, there's just about no aspect of that that I don't see AI touching or impacting in some way. I'll give you, I'll give you sort of both ends of like the spectrum of the extremes of what I think it'll be capable of and what it will ultimately not be able to do. My hot take that I think will be proven out is I actually think that the next dominant ledger platform will simply be a large language model. We're actually very close right now to any old person being able to rack up to a chat interface, give it a bank statement, give it a import file, have it walk them through anything that it can't classify with a bit of context. And we all know like how many of our clients have just these Rinky Dink LLCs with a rental property and these kind of like nothing entities that we've got to manage the books for that are a pain. And any new ledger tool, it's going to start there, we'll start at the bottom. Something very simplistic and arguably you can already get a large language model to do a pretty compelling version of this. And that may be hard to envision. Wow, how could that ever go to do something more complex? And maybe it probably never does go, go to the extreme. But I would argue that language models today are closer to being a more compelling ledger than like any of these sort of next generation ledgers that I see on the market, besides your QuickBooks and your zeros, which are kind of like the backbone of accounting firms today. So that's, I would say that's like the extreme end of the spectrum of capability and interesting things I see happening on the other end of the spectrum. We've got like, you know, vibe coding and the whole notion that anybody can create software and just in a, almost a just in time sense. Like you can see a world where an AI assistant will be like, you're asking me to do this thing. Do you want me to whip up just a quick little app that will handle this better for you? And like you follow that through and you're like, well, jeez, isn't just everything just going to be kind of like just in time software development? It just manages everything. I think, I think that while that will have some really, really compelling use cases, I don't think that it's, it seems unlikely that it ultimately gets to the level of something that, you know, hundreds of people have refined to say this is the very best version of this thing that you could possibly have, say, a practice management system, right? Like you can, you can imagine an AI assistant spinning up a task manager and a scheduler, all these different kind of bits and bobs of things, but is that really ever going to fully match, like a fully fleshed out dedicated platform? That feels unlikely to me in the same way that, you know, a spreadsheet is not a very good practice management system at the end of the day. And that still offends a lot of accountants even just to say that. But I think that's, that's a good analogy where a large language model is this unbelievably cool Swiss army knife in the same way that a spreadsheet is. And it will disrupt some really interesting things that are ultimately helpful for us and so save us a pile of time. But I don't see it going as far as being, say, like an extinction event for traditional software because now, now anyone can code. Today's episode is brought to you in part by the fine folks at Cloud Accountant Staffing. As you know, my last four hires in my accounting firm were in the Philippines and this was in an 80 year old accounting firm. And I came into this with all of the ignorance that you would expect, but man, did it work. Like it completely changed how I approached hiring. Cloud Account Staffing, the team behind it, actually an accounting firm, they started doing the same thing, had a ton of success, started doing this for like some of their, like, friends firms. And now they're just, they're in the business of doing this for folks like you. So they get it and they understand all the questions you're going to have the first time you get into it. Like, how does this person get a computer? Do they do it on their own computer? Do I send them a computer? The awesome thing about working with somebody like Cloud Account Staffing, they've got recommendations for all of this stuff, all of these questions, questions that you haven't even thought of yet. If you're like me, you sat back with these questions and you were blocked on them for years until I just, I like talked to an expert and that would be my recommendation. Hop on a call with them. They'll have answers for all these questions, but you'll at least then be able to make a decision from a much more informed place. The scales will fall from your eyes. Doesn't mean it's going to be for you necessarily, but you're going to learn a bunch more, right? I can tell you it was for me if I went out and started a firm tomorrow. I'm probably 5050 offshore versus onshore hiring because I think I need both. But if you're looking for a place to get started, check out the folks at Cloud Accountant Staffing. They're going to be out on the conference circuit just like me this year as well. So you may see them in the wild, but either way, check them out down in the show. Notes this episode is sponsored in part by Finn Daily. Did you know? Here's some pretty good Jason on Firm's lore. Did you know I once founded and sold a SaaS app? I did. True story. It's the app that is the sponsor of this video, this podcast. Where am I right now? The app was Finn Daily. Let me tell you all about it because it was after it was my brain baby. So here's the thing. My firm got into doing like cash advisory work, cash reporting for clients, where we'd send them these reports every week or every day to kind of show them like that very short term sort of upcoming cash situation, like everything leading up to the next pay run and all that. So we'd send these emails that were kind of sort of templated, but it's like a manual thing of pulling together all this different information every single time. So I built Fin Daily to be almost like an a templated email platform where you just pull in variables from accounting apps, from like banking connections, all that. So imagine drafting an email template, but inside of that template having placeholders for upcoming bills from the accounting file for the credit card balance, all these different variables and it pulls those values right before it sends the email. Now the team now has built it out to do a bunch more stuff, like a bit of math to roll up several figures so that what it presents in the emails is like the total connecting multiple different accounting files so that all that stuff is piping into like one email summary. Super, super cool. Frankly I'm still in love with it. Like the whole concept of just this automated email that pulls in live data at send time and then goes out to a bunch of stakeholders that your client could go to you. But the whole premise is it's like a super connected email template. You could use the same one with all your clients, different ones with different clients. But just think like you got a client with a bunch of entities, how you can roll all that up into an unbelievably good digest to send them every single day, every single week. And the Reason I built it. Clients will pay really, really good for this. It's a super useful service. Anyways. Learn more about Finn Daily. Check out the link down in the show notes.

Yeah, I think to me part of the angle or discussion around that too is what is the. And one of the arguments sort of let's, you know, AI kill software is sort of a. There's no need for a user interface, right. It's not gui, it's not, it's not the four screens right with the mouse and the click through. It's. It's voice which I think has, makes a ton of sense from a natural language standpoint. I think that the understanding capabilities that are being built like around AI are going to have dramatic impact on the user interface. But to your point, I feel like the work behind that screen is still largely the same. That could be rebuilt potentially. But I wonder, you know, our workflows primarily visual or is there a way to really with voice. And then I'd say probably, you know, agentic automation just do the work. Yeah, I think that's gonna be really interesting and I even just the paradigms on will it be like hey let's, let's add a junior called you know, the bot and see if that work. Like what's even the structure in which we'll, we'll try to do additional work.

Super.

I don't know, I think it's gonna be just, I don't know, I don't know what your thoughts are but I think it's gonna be wild to see what happens.

I think we're so much closer to that tipping point than we realize. You know, to hear, to hear Bill Gates say like oh, the future of every software tool is just semantic and you're talking with it. It's chat interface. Like you hear that and you're like yeah, that may be for you but I have a hard time not imagine not being able to see like you know, fields of, fields of transactions. But what brings me back around to that, although I don't think conversational is like the complete solution, what brings me back to that is, you know, what is conversational that we use every day and know how to do working with other humans and the notion of an AI agent being able to go off in an in a more open ended way complete a task inside of a platform to be able to instruct it in an unstructured way. The same way that I would tell the Internet to go and do that thing like that analogy I can kind of get my head around. So like working with an AI agent. It's almost more like working with a human than it is a replacement of software in some ways. But it's one of those things where, man, as soon as it gets to the tipping point of like, where that's pretty good. I've hired enough interns in my day to know they were great in some ways, not, not the best, not the best in other ways. And they certainly didn't have the memory that, that a computer can, can have when it, when it goes to do the same task twice, you know, for the second time that I, that I taught it. And that opens a whole other can of worms of like, what is, what's the future of staffing look like around AI and stuff like that? But I, I think we are very close to that.

That does sort of roll me into. Yeah, where I was going with this, which is, so what is that? What's the impact, right, on staffing? Clearly a lot of conversation for the last many years on, you know, lack of staff and people graduating college with the right degrees and so off. Outsourcing and offshoring has been a huge driver. You could see maybe some parallels. Yeah, can AI supplement and, or replace such things? That was really more of a, you know, the same model with people somewhere else who cost less money. Right. It was like, hey, we got great people who are super capable in India and the Philippines, so let's put them to work. And that's wonderful. We didn't have enough people to hire here. But I think as we dig into how AI plays out there, I think it probably does start there, which is, well, can we add virtual remote workers who are, you know, or AI agents? But at some point it's like, well, where is the whole. Even education and training that's currently in place just not even matter if the way the work is being done is incredibly, completely different. But what do you know? What do you think, let's say the next three years, AI's impact on the current staffing shortage and how firms are today solving that with outsourcing and offshoring.

I try to be like real. I try not to be a AI apologist or too over enthusiastic about it. Like, my real take here is outside of accounts payable and AI's impact on accounts payable. I honestly don't see any AI technology inside of the accounting vertical that I'm all that excited about. What I see is really cool general AI technology that is extremely useful to us. And like, Spark is a great example of this where we can get these These AI models to do so many different things, but outside of ap, like inside of the accounting space, I mean, there's, there isn't much. And so on the one hand you're like, is this really going to impact us that much in the near term? On the other hand, I think the big impact to your point is probably these more generalist AI agents that can kind of go out and do our bidding. But if we actually think about what that looks like in practice, and if we bring this back to the analogy of working with other humans, where do we get the most annoyed with other humans when we are asking them to do our bidding? It's when we haven't given them clear expectations. We don't have SOPs. They don't have direction for how to do that thing to your expectations. So the firm today that runs on rails and has really good SOPs and has documentation, what are the first AI agents going to use to execute things to your direction? It's going to be the same documentation, right?

That's the, that's the context they need.

Yeah, yeah. So like the, this the way to get ahead in the AI age. It's the same. So then what do you do with the person who was previously doing that? I think I could say like across the board, the things that we do will change. It sure seems like on the other side of this, in all likelihood there will probably still be an abundance of things to do. There's something about the human condition where every tipping point from the Industrial revolution and, and you know, electricity and 95% of us used to be farmers. Like there's always another thing to do, it seems. But for all the fear we have about what are we going to do with the poor juniors, you know, who's smoking AI usage right now, bunch of high schoolers and college kids. Imagine if you were in college right now and somebody gave you chatgpt, you'd be a freaking wizard with that thing. Right? So like they're coming out of school with hundreds of hours of experience, going into accounting firms capable of amazing, like they're capable of amazing things with AI. But most accounting firms are still like, oh no, no, no, no, we can't use that here. Like that's. No, we don't, we don't have the, we don't have the boundaries for that. We'll probably get there soon. So here we are, like all the old fuddy duddies that are generally like not super fast to lean into that stuff. It's kind of like the first time you saw A kid using an iPad and they could just like hustle a touchscreen and you're like, goodness sakes, if that ever becomes a valuable life skill, I'm in trouble. In this case, I think AI usage is, but it's, I think we're going to have like the most productive class of accountants that have ever entered the profession. In all likelihood, we'll probably be learning a whole bunch of stuff from them. But one way or another, like, yes, like the things that we're all doing in all likelihood at least over the next five years will probably change a lot.

Yeah. I mean, related personal asides. Right. So I've got a 25 year old daughter who's a software engineer. So she's three years into her career and like she's worried. It's kind of funny. Yeah, we're like, oh, she's golden, she's got a great job. You know, she's doing what she wants to do. She's like, I don't know, like these 15 year olds that are all over the coding, you know, co pilots and now other things. She's, she's like, I gotta get upskilled. And she's, you know, she just started her career, so it's.

Joel, don't you wish, don't you Wish we were 16 years old right now though? Like, how cool would that be? I so badly wish I was.

Yeah, well, you're closer to it than I am, I'll tell you that and we'll say so.

Amazing quote that I always love to come back to you from Paul Graham. Paul Graham's like software guy, investor guy. About a year ago he said he's having a conversation with the head of a very big software company and he said this was, this was like just over a year ago and so this is only more true now. He said, interesting trend they're seeing is that 22 year old software programmers are as productive as 28 year old software developers because they're more comfortable with the AI tools. Like we've got a generation of folks where they're more savvy with that stuff. Like to which I'd say, don't you want that for your 22 year old accountants? Like I, I like we're very worried about the next generation but I think they're going to have this capability that we just don't have.

Yeah, yeah. Superpower, I think. And that begs some questions around, well, compensation and you know, historically it's right, seniority, get smarter, you know, the whole, the whole pyramid. And I think that pyramid May change into whatever it's going to be an inverted pyramid or a diamond or something else, but we'll see where that takes us. So a lot going on in AI. Let's leave that aside for a second. I got one follow up question on AI. So obviously you're doing a lot of creation of awesome content. I'm assuming you're leaning on AI any super cool story you have for us on how you've used AI, I feel like one of my questions for you is you do all your voices. Have you been able to like train AI with multiple voices now so they can create new videos for you even with your different characters?

I would, honestly, Joel, I would say the most interesting thing about me and AI is all the ways that I don't use it, because I think that's extremely important, is I still don't let it into my, into my writing at all, into like the authorship because I, I, I just have such a fear of taking the foot off the gas pedal there at all. Like what I think I've done well in my business now is, is, is my voice not like my actual voice, but is, you know, my take and my opinions on things. And I just think the fact that we are all going to be interfacing with AI so much every single day, from support experiences to a huge volume of inbound videos and stuff like that that are AI generated and you see it on social media all the time. I think the natural reaction to that is a renewed appetite for humanity. Right? Like, it's like coming out of COVID when we're all just closed in our homes like we were, I mean we're a bunch of accountants and even we wanted to be outside. So I like, I think this is just the natural reaction to being surrounded by more AI is, is actually what people really want, which is what I try to do in my content. It's just like be super real, be willing to be vulnerable and, and be very, very slow to remove the humanity from anything.

So this really is you here today? That's what you're telling me?

No, this is, no, I recorded this weeks ago.

But we're not going to know. I mean, we'll never know because you won't do it until it's so, so lifelike. How do you decide what to publish? So thinking about all the things that a firm owner, staffer, and if I put, if I bucketed, you know, technology, business model, you know, soft skills, right? Personal work, life balance, right. You've, you've talked about things in your own Personal journey. Do you have a calendar that you think through or do you just, you know, do you. The content comes out of you to your point. I mean, obviously one of your keys to success here is experience, but your authenticity and your vulnerability. So how do you decide what to publish? You know, what are you going to do tomorrow?

It's maybe 50, 50, intentional. 5050. What am I feeling energized about? Which is honestly a tremendous help. Like, the hardest way to do content and feed the beast is relying on, you know, a light from the heavens tomorrow morning and just hoping that it comes because there's going to be a whole lot of days where it just doesn't. But it's a mix of. There's seasonal trends in accounting firms. So like, we will always be talking tech change after the April and the October deadlines. Like that's just the best time to do it. So there's a couple months there where we're always talking about that stuff because that's just, that is the right time. Renewals. We're talking about it now. We're talking about at the end of the year because that's when it comes up. Otherwise it is my content is a mix of like reacting to the conversation, like, what's happening? You know, Intuit sent out an email the other day saying like, hey, accountants can now refer tax clients to our kind of done for you tax service. And there's some folks who are like, that's cool. And other folks that are like, that's wrong. And so like just kind of joining in the conversation there. But also I'm just, I mean, I'm in such a unique position, Joel, where I sold. So I sold my firm back to my partner two years ago and everybody's like, aren't you afraid you're going to lose your edge? Like, what are you not. You're not, you're not one of us now. Right? And I'm not. And I think there's a lesson in there. Like I've, I've, I've accepted ignorance to the day ins and day outs of running an accounting firm. But what I'm able to do instead is literally all I do is talk with other firm owners. If I was still running a firm, I would be heads down in my own little tunnel vision of like, here's my reality and here's all that I can ever see. I wouldn't be able to do what I'm able to do now in the world. I don't think needs another accounting firm owner. That's not True, it needs a lot more, but it doesn't need me to be an accounting firm owner when I can. What I can do instead is interact. I mean, like there's some sort. It's like 4,500 hours a day or something. Blessed people listen to my content at this point. And the more they consume, the more they, they engage in the conversation, be it, you know, telling me that I have an irritating voice or, you know, constructive things. And so I get to be in conversation with accounting firm owners all day. And I just feel super fortunate that my job now is kind of just reflecting the best of what I see actually working in other firms because there's enough thought leaders, honestly, like, who just don't have the context and aren't in those conversations. And I just feel super fortunate for like that to kind of be my job now. This episode is brought to you in part by Carbon, the practice management system. I had the opportunity recently to participate in an event that Carbon put together where they, they brought together a whole bunch of Carbon firms. And I'll be honest, I think it was cool event, but the thing that most blew me away was like the quality of the firms there. And if, like, if we can get, if we can get real on tech selection and how we build our tech stacks and accounting firms, practice management systems today, they've never been more similar than they are now. They're for sure they're still different. Each one has strengths and weaknesses and all that. We got to understand that when we're picking our practice management system. But you know what goes a really, really long ways for me? When I can look at a whole bunch of firms that I respect and I'm like, can you just tell me what they're using, man? A lot of them, a lot of them are using Carbon. And I'm increasingly seeing this among firm owners is if you have friends that run other firms and you're in constant contact with those people and that actually like kind of auto impact how you pick your tech. Because if you have those close relationships where you're like, hey, what do you do with X, Y and Z? Like how do you handle this or that? And can get immediate answers from like real people that run firms and have worked through these things, that's something that has absolutely nothing to do with the product, but makes that product tremendously more useful. So this ad read, while it has absolutely nothing to do with the Carbon product, which is like very good, and they've been in my top recommendations now for several years. But like, sometimes the ultimate Proof is what are the big brands using? And I can tell you there's a whole lot of very smart, very progressive firms that we should aspire to sort of build ourselves to be similar to a lot of those firms that are running Carbon. Learn more about Carbon. Check out the link down in the show notes. This episode is brought to you in part by guess who Wrong Client Hub. ClientHub is the practice management system that makes every season wow season, not busy season. We're delivering wows, buddy. That's, that's, that's for two reasons. One, because Client Hub provides a game changing client experience it designed with the client in mind. First, not like this afterthought bolt on portal, but second, it's drop dead simple, okay? It's not any harder than it needs to be. And one of the really cool things that they've got is magic email. So you actually use Client Hub as your email client. Some things you can do beyond just like some niceties they've had like creating work from emails, being able to pin an email. You can actually even reassign a pinned email to someone else. But in that screen where you're authoring an email, like Client sends you an email, you've got some AI options down at the bottom to generate a, like a yes reply. Like it will look at the context of the thread and draft a response. That's basically yes, a button to draft a no reply and then an AI composer where I give it a custom prompt and have it draft that response. Got some other buttons for like change in tone, expanding the length of it, shortening it, using AI to try to take, try to take the pain out of email because frankly email just sucks. So if you're looking for a delightfully simple yet powerful practice management system, take a look at clienthub link down in the show notes.

So thinking about does the world need another accounting firm owner? A topic that I think is relatively hot is consolidation of firms. M and A Private equity backed M and A. We talked about this a bunch at our right now conference and I think well, it's not going on right? So I think that tees up a conversation about, you know, whether there's consolidation to what will be a smaller number of much larger firms with the demographics in the sort of smaller side of the, of the market, whether it'll be people that get rolled up in PE but didn't want that model and spin out and start their own firms, or there's, there's a recycling of people and, and I think we're just we're seeing a lot of things happening within our customer base. We're seeing both. Right. Buyers, sellers. But I think a couple, a couple really foundational questions I'd love your take on. The first one is just like, so let's say private equity, the business model, the style, how they compensate people is fundamentally different than the classic partnership llc. And so I do think in a lot of markets there's been, let's call it roll up of, of companies. But I do think in accounting and tax in particular, given issues around, you need to have CPA ownership for audit and test. That causes some challenges with some of these larger plays. And just how do people, you know, employees at whatever level, partners on down, think about moving from an LLC structure to a different one with a, with a different owner where it's not a partner driven firm? It's a lot of change. Right. Independent of, you know, it's structurally changing the capital structure of a business and how people think about their compensation. What are you, what are you seeing and what if any, hot takes do you have in that area?

Yeah, I think it's a reflection of how killer a business running an accounting firm is the fact that you can cash flow the heck out of it. Right? Yeah.

Yes.

So like the fact that there's a load of capital in the world that has to go somewhere. Out of all the places it could go, a lot of it wants to go to accounting. Great reason to be running an accounting firm. Yeah, I for one, you know, my, my like a happy successful outcome for me. And this is very personal to you. Never felt like selling to the machine because we've all seen a lot of versions of that where the people and the clients that got burned and the devil's in the details because honestly my thought leadership and what most progressive accounting firms do, like the way they run their firm, it looks a lot like how private equities say people should run their firms. It's not the traditional partnership model or any or any of that. I have concerns over, you know, the, the destination, the finish line, like to be peak alpha accountant in the past meant being a partner and having equity and that pie getting smaller. But for all the deals that are being done, and we've seen plenty of deals go sideways and not be a great experience and who ultimately becomes the beneficiaries of that, it's the smaller firms that are getting all the, all the people and the clients that spin off of that stuff. So I honestly hope at some point somebody figures it out. It's an extremely hard thing to do. I mean everybody here knows exactly what change management with a, with a whole bunch of accountants looks like. It's not easy. But the other ironic thing I think is, is that the, the like approach and the framework and the model that those groups are coming in with, like it actually looks a lot like how more progressive firms are running their firms today.

Exactly. I completely agree. And I think that you know, at the highest level it's opportunity. Well, number one it's you know, more capital, more buyers, creates better pricing. And the pricing has been, in my opinion, it's been horrific in accounting firms for a long time and even worse than other professional services. So that's changing with, with the move toward more recurring revenue which is the way these things sort of work. The understanding of the recession proof nature of these businesses. There's a lot to love about obviously the firm model in accounting. And to your point, it doesn't have to be two different banks. Right. You can run a firm and the best run firms probably look more like a private equity run business with how they think about clients, how they grow revenue and how they drive technology driven change management to improve efficiency. Right. And client service. So I bet Derek has some good Q and A for us. So let's get to it. We got eight minutes left.

Sorry man, perfect timing effect. It's a great opportunity to jump in. As Jason was mentioning, you know, some of the smaller firms are being successful right now, perhaps scooping up in this. So the question that was posted, one of them, when do we think that we will see an accounting firm that is 100% AI? In other words, you've got potentially even an AI firm owner. You got the bookkeeper, the payroll, etc. Thoughts?

I think we're close. So like the version one of that is a little little bitty baby, little bitty baby thing. I can't remember who said this. It might have actually been Paul Graham. But like the quote is something like you've already seen the future, you just dismissed it as a toy. So think what is the itiest, itty bitty little baby version of this you can imagine that can automatically handle the accounting for a company that had 10 transactions in the year? You know, something like that. We're pretty close to that. A fully productized, just pure software accounting ledger like you see, you see digits is trying to push the whole automated classification thing as far as possible. That's, I mean probably in some form or another that already exists. It just isn't exclusively packaged that way. But from that it grows. I Mean, that's kind of been, you know, from the scale factors. I mean, how many, how many past, like productized automated accounting firms have come and gone? That's sort of the premise they're all betting on, right? That they, that they can do that. I'd say, I would say that a version of that already exists today because that's something that large language models can do pretty well on a very small scale.

Second question also related to AI, if what, as you mentioned earlier, and as we all know, constantly evolving, right, AI is changing. What we don't know what's coming tomorrow. How can we write an effective AI policy today if we have no idea what tomorrow's going to bring?

That's a good question. I sort of, I think you have to think of it through the lens of the platforms that you're using for AI. Be that, you know, be that Spark, be that ChatGPT, whatever it is, those platforms, at least right now, like, there's fundamentally an agreement of what information is retained in the models and what information is not. And that is like very concrete and very well understood. Like, there is no mysteriousness around that. There's mysteriousness around the ways that we can use some things we can get it to do, but how it retains our Data is what, 100% completely understood. There's not a, like, I mean, I can, this is a right works opinion. And that's the beauty. If I could just say whatever I, whatever I want to say, like, I don't see a world where they come out tomorrow and they ship something, you know, on a business plan where the whole premise of the business plan is security that now, you know, trains on your data or something like that. Like, that's a fundamentally problematic thing for everybody who's in the AI business. Like being able to offer a secure AI. There is no greater business opportunity than that. And it's what's created great, like, safe spaces for us to go and work with AI. So for sure it needs to be a part of the ongoing conversation, but more around the life cycle of adding a new app or adding some new module or something like that. Because when you sign like the privacy policy of the tool that you're using, the T's and C's, like, yes, let's pay attention to when those change. For example, Zoom, it changed last year and there was some wording in there where people thought it meant that they could train their AI models on our meetings and everybody's like, what the heck, man? That's messed up. So, like, we do have to pay attention to those T's and C's. But to me, it's not a reason to not start, if that makes sense.

Joel, did you have any thoughts to add into that?

I, I think that's, I agree with that. I think that to our earlier point, I think it's the policy, you know, around safety is important and therefore. And it's exactly what are you using, right? And how is the data being safeguarded? And then the thing you can't really predict, the thing is changing dramatically is how people are using it, what's working, what's not. And that's. That is left to the reader, right? That's a little more for, I'd say the specific firm to say, maybe they decide they don't want to use it. For certain, you can use it for communication research, but you can't use it yet for, you know, a balance sheet. I don't know. But that's something based on, I think, personal or whatever, in this case, firm preference.

And all this stuff is sussed out. The more you have these conversations. If we hide from these conversations, you got team members doing the end around like it's, it's happening whether we allow it to happen or not. So like just, I mean, it's like, it's like my kids, like, I want you to come to me with this stuff like, let's have the conversations because I think that's the best way to do it.

I love that. That's a great closing point, Jason, because my wife and I say the same thing to our children. Joel, I'm sure you've said the same come to, come to us, come to us with these conversations. Just want to thank everybody for tuning in today. Obviously we will have this. You can go back and listen to it and potentially parse it with AI. I'm not entirely sure what we're going to do with that yet, but most importantly, Joel, Jason, thank you guys so much for joining us this afternoon.

How was that anything you think I miss? Any cool ways that you're using AI that we may not be talking about enough? If there's any ways your firm's putting it to work, pop that stuff down in the comments, keep the conversation going because it's frankly, it's like, it's an exciting time. As much as I wish there was more like accountant specific AI out there, I'm constantly blown away at just how much value we can still get out of like generalist AI tools inside of our firms. And like these stories are rolling in of like, hey, we finally rolled this out in our firm. We weren't quite sure what to do at the beginning, but like, man, things picked up quickly. You already know I'm a big time AI geek, but I'm very excited to see where all this stuff goes. Like I mentioned that interview, it was in the right works community. They got some other cool conversations like that planned as well. If you want to check it out. We'll have a link to that down in the show notes and thanks for coming hanging. We'll see you the next one.