AI is leading accounting firms to spend less on people and more on technology, representing a major shift in traditional budgeting logic. The proliferation of AI solutions has allowed firms to expand capacity without growing headcount, but this has come with high upfront costs and ongoing expenses like integrations, cybersecurity, and licensing. So far, then, it seems as if AI has not so much reduced costs as much as shifted them around.
Jack Castonguay, vice president of strategic content development for accounting, finance and AI with accounting education group Surgent, noted this is a significant reversal from how firms have budgeted for years. Labor used to be the biggest and most expensive cost center, as well as the most important asset, at virtually any firm. But with the rise of AI, capital investments, particularly where technology is concerned, are starting to eclipse it.
“AI has greatly increased the capex spending at firms already and reduced people costs,” said Castonguay. “Firms’ most important and most expensive asset was its people. That is changing. Firms are essentially taking any free cash flow they have and investing it right back in AI. I think that is also a big reason we are seeing firms seeking more private equity investments than ever before. And because the firms believe AI will be able to replace up to a third of their existing new hires, they are reducing hiring and not raising wages like they would absent AI. I think both of those trends will only accelerate in 2026. Firms will race to be the AI leader and will need fewer staff in 2026 than they needed in 2026.”
Ellen Choi, founder and CEO of accounting and AI-focused advisory firm Edgefield Group, has observed this shift as well and, similarly, has seen it reflected in firms’ budgeting priorities.
“While AI has added to operating costs (even incremental costs like Copilot licenses add up), firms are realizing meaningful time savings with AI investment, which are translating directly into cost efficiencies. The clearest signal is in workforce planning: firms are modeling growth while holding headcount steady or maintaining revenue while allowing for natural attrition. Leading firms and operations teams are explicitly baking these efficiency gains into their operating models, reflecting a shift from experimental adoption to deliberate firm planning,” she said.
Firms doing this are, effectively, making a bet that while technology spending might initially spike due to AI, over time they will both see lower costs and better productivity which will allow them to translate the aforementioned labor savings into real profit. Dr. Sean Stein Smith, chair of the Wall Street Blockchain Alliance and a Lehman College professor, believes we’ll see this start to happen in the new year.
“Thus far AI has reduced labor hours but increased spending on AI platforms, compliance, training and oversight. Even as efficiencies and operational benefits are being realized in virtually every firm that has adopted the costs associated with implementation, training, and upkeep of the AI models and tools themselves continue to make bottom-line effects muted for the time being. In 2026, firms will see declining marginal costs as adoption stabilizes. The biggest savings will appear in audit, tax preparation and client‑communication drafting workflows,” he said.
This will, though, depend on how a firm implements AI. There was strong agreement among experts that we’re already seeing a divergence between firms that have made heavy investments in AI and integrated it into their workflows versus those who have not. The former will see significant gains from AI as it expands both the types of services a firm can offer as well as the speed at which it is delivered. The latter, meanwhile, will likely keep struggling.
“Firms are beginning to recognize that AI advantage is not determined by access to tools alone,” said Kelly Fisher, chief practice officer with Top 25 firm Wipfli. “The differentiator is the degree to which AI is integrated into an organization’s operating models. Organizations that pursue AI purely as a cost-efficiency lever will struggle to sustain an advantage. Those who invest in workflow redesign, capability building, and value creation will gain a competitive edge. The next phase of competition will reward firms that treat AI as a force multiplier for expertise, not a substitute for it.”
It will also depend on what AI firms use and how. While people are most familiar with generative public models like ChatGPT, Randy Johnston, executive vice president at tech-focused accounting consultancy K2, pointed out there is a world of difference between that and the specialized agentic systems trained on high quality accounting data.
“AI work products are already evident for client deliverables. Both creativity and quality have declined as more ‘AI-slop’ is produced, reducing the firm’s branding differential. Firms that have built their own agentic AI are seeing benefits: more refined, firm-centric results with less effort, and these results seem higher quality. Firms using AI seem to be working fewer hours to deliver the results to clients. Firms that do not use AI are continuing to rely on similar efforts as in the past. AI is becoming structural and strategic, rather than reactionary and tactical,” he said.
But even if a firm does not adopt AI at all, they will likely still be affected by it. Mike Whitmire, CEO and co-founder of accounting solutions provider FloQast, said AI has already eroded the billable hour and encouraged firms to adopt value-based pricing instead. He felt this shift will likely continue in the next year.
“AI is fundamentally breaking the traditional billable hour model because it completely decouples output from time spent. … The smart firms in 2026 will pivot to value-based pricing, charging for the strategic outcome, the audit assurance and the peace of mind they deliver, rather than the minutes they spent typing in Excel. This shift will initially hurt the laggards who can’t let go of the timesheet mentality, but it will ultimately make the industry more profitable and less reliant on burning out young staff just to protect their margins,” he said.
There is much more below in this, our third entry examining our results from the 2026 AI Thought Leader survey.
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