If the world of modern accounting feels strange to you, you’re not alone — and you’re not wrong, says Joe Woodard.
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The rise of artificial intelligence is a major part of that: “It’s the single element that’s making the room feel the most strange,” he told attendees at his Scaling New Heights Conference last week in Orlando, Florida. “But it’s not the only element.”
In fact, he highlighted a number of other important changes in the accounting landscape that are helping make the current moment different than any the profession has experienced before, starting with the massive shifts in firm ownership taking place.
Private equity, for instance, now owns the majority of the Top 100 Firms. “It’s not owned by accountants anymore,” he said. “Isn’t that strange?”
The entry of outside capital now has firms contemplating all sorts of new forms, from alternative practice structures and ESOPs all the way up to initial public offerings.
“Did we ever imagine a world where a CPA firm could be public? Where the public could own a CPA firm? And yet there is, in CBIZ and Anderson,” he said. “Isn’t that strange?”
And while some might imagine that those options are only for larger firms, he made the point that PE is more and more reaching out to smaller and smaller firms — and that the accounting firms that are funded by PE are going even smaller, looking at acquiring practices as small as $500,000 to $1 million in revenue.
“The point isn’t to do it or not do it,” he said. “The point is — isn’t that strange?
Client demand, demographics, the fluctuations in the pipeline of new accountants joining the profession, and new paths to becoming a CPA are all helping make things feel strange, to say nothing of the major changes in what accountants actually do all day long.
“Seismic shifts in policy at all levels are constantly making things strange,” Woodard said. “What’s compliance today may not even be relevant tomorrow.”
Finally, he returned to the big digital element in the equation: AI, which looks set to automate large chunks of what accountants do, including some things that are closely tied to their daily identity.
“We’re not going to do tax returns or reconcile bank accounts,” Woodard said. “That’s not necessarily good or bad, but it’s definitely strange.”
Despite the discomfort that all that strangeness may bring, he took pains to make it clear that not all of it is bad: “Sometimes it’s lowering the fruit on the tree so that smaller firms can compete on the same level as larger ones,” he explained. “That’s a powerful opportunity — but it’s still strange.”
The 800-pound gorilla of AI
Woodard then dove even further into artificial intelligence and how it is both making things stranger and creating new areas of concern and opportunity for accountants.
Woodard started by pointing out how it is significantly increasing the pace of change (and the pace of strange) in software.
“The technology industry is shipping features faster than ever before, because programmers are now bots — so you’re using solutions or features that have been programmed by bots,” he explained. “The same number of features are rolling out in a month that used to come out in a year.”
AI is also democratizing the creation of software, giving non-developers tools to build their own applications without having to know how to write code.
As an example, Woodard recalled asking Anthropic’s Claude chatbot to build him some asset tracking software while he was getting ready for a presentation.
“It asked me a few questions, and then built me a beautiful piece of software, and then provided me with sample data,” he recalled. “I demoed it at a conference, and people were asking me where they could buy it. Claude built it with about 20 prompts from me while I was brushing my teeth.”
While the rate of AI “hallucinations” has dropped significantly, human interaction with AI is going to be critical, he warned.
“‘Human in the loop’ is the most important term in the lexicon of AI, because you are the human in the loop,” he said. “When software companies refer to you as the human in the loop, they mean, ‘You’re going to train my AI’ or ‘You’re going to review my AI’s work, and when it doesn’t do what it needs to do, you’re going to do the final work.'”
Accountants need to avoid simply accepting and implementing AI as is.
“AI must be governed, and it can’t be governed by the simplest of logic,” Woodard said. “You need managerial governance. If you put these in your firm with no security or privacy or user governance, it would be as irresponsible as when we adopted the cloud without user privileges and privacy.”
As important as it is to take precautions with AI, however, Woodard was also quick to point out the tremendous potential upside of the technology, and the accounting profession’s capability for capitalizing on it.
“The disruption of desktop computing in the 1980s and 1990s was just an opportunity,” he recalled. “The disruption of the cloud in the last two decades was just an opportunity. And you embraced all of those. AI is just another opportunity. Is it going to replace us? Just remember: You’ve been here twice. And if you built an opportunity around those, you can build the opportunity around these.”
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