Tech spending outpaces people spending as firms adopt AI

January 2, 2026 9:00 AM

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.

You can read Part 1 here.

You can read Part 2 here.

Jim Bourke

Managing partner, Withum Advisory Services

* How has AI already affected the competitive landscape between accounting firms (for better and/pr for worse), and how do you expect it will further affect it in 2026?

Firms that leverage AI are absolutely differentiating themselves in every aspect of their practice. Whether its gaining an advantage in the new client proposal process by not only gaining greater knowledge about the prospect but also invaluable knowledge about the competition and what the firm should be doing to better leverage its strengths, to leveraging AI in the firm-client collaboration process, giving their clients the "Amazon" experience that we have all come to expect! Firms that are doing it will continue to do it better, and firms that don't will be at a greater disadvantage.

How has AI already affected costs at accounting firms (for better and/or worse), and how do you expect it will further affect costs in 2026?

Right now I believe most firms have seen an increase in internal technology costs associated with AI. Whether it's as simple as an increase in Microsoft licensing for Copilot or the addition of audit and tax tools that leverage AI to automate a portion of the process, I don't believe many firms have realistically reached the ROI goals they set out to achieve.

Jack Castonguay

Vice president of strategic content development for accounting, finance, and AI, Surgent

How has AI already affected the competitive landscape between accounting firms (for better and/pr for worse), and how do you expect it will further affect it in 2026?

The first firm that can harness the technology to cut costs, cut engagement time, and improve audit quality will be at a massive competitive advantage. They could use that cost and time savings to poach clients from their rivals, expand their market share, and refocus their efforts on the most profitable consulting engagements away from audit and tax. The firms know this, so they are all racing to seek out more capital to expand their AI capacity internally while they also are partnering with the leading AI companies. It's been interesting to see which firms are choosing to partner with which AI companies since many of them seem to be picking different winners and losers. I expect more of the same in 2026. Ultimately, I think they will all arrive at their evolved AI-focused state at about the same time, leaving them essentially where they are today competitively. The more interesting development to follow will be to see if the firms spending millions of dollars on AI will go after the clients of the next tier of firms who don't have the capacity to expand at the same rate.

How has AI already affected costs at accounting firms (for better and/or worse), and how do you expect it will further affect costs in 2026?

AI has greatly increased the capex spending at firms already and reduced people costs. 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 AI race to be the AI leader and will need fewer staff in 2026 than they needed in 2026.

Jin Chang

CEO, Fieldguide

How has AI already affected the competitive landscape between accounting firms, and how do you expect it will further affect it in 2026?

AI is accelerating a divergence in firm performance. Firms that have embraced automation are handling more engagements with leaner teams and delivering faster, more modern client experiences. Meanwhile, firms slow to adopt are struggling to keep up with rising complexity and shrinking talent pools. By 2026, we'll see a clearer split between firms that scale strategically with technology and those that are limited.

How has AI already affected costs at accounting firms, and how do you expect it will further affect costs in 2026?

We've already seen AI reduce hours spent on repetitive tasks like documentation, evidence gathering, and formatting. That translates to lower cost per engagement, even as workloads increase. But AI also brings indirect cost benefits like less burnout, higher retention, and stronger quality control. As the technology matures, I expect firms to reallocate cost savings toward training, advisory development, and modernizing client services, rather than simply reducing overhead.

Danielle Supkis Cheek

Senior vice president of AI, analytics and assurance, Caseware

How has AI already affected costs at accounting firms (for better and/or worse), and how do you expect it will further affect costs in 2026?

There is a common assumption that AI is, by default, a cost-reduction lever. In practice, the picture is a little more nuanced. While AI can streamline certain labor-intensive activities, the systems themselves can be expensive to license, operate and govern. Poorly designed implementations can actually drive up per-use costs, particularly when compute, integration and compliance are not carefully managed.

What many firms are already experiencing is not a simple reduction in costs, but a rebalancing of them - from labor to technology, data and infrastructure. That shift in unit economics is consequential. The firms that will benefit most will be those that treat AI as a strategic capability rather than a tactical tool - investing deliberately, designing for scale and aligning AI deployment with pricing models and margin expectations. In that environment, AI becomes a lever for sustainable profitability, not just short-term efficiency.

Ellen Choi

CEO, Edgefield Group

How has AI already affected the competitive landscape between accounting firms (for better and/pr for worse), and how do you expect it will further affect it in 2026?

My observation is that the business impact gap between firms leveraging AI and those that are not is still modest today, partially because we are still early in the true, firmwide AI adoption in firms. Most of the tangible gains so far have shown up in internal operations vs. than external client-facing differentiation, largely because client behavior in accounting is sticky. One area where AI is creating competitive separation is talent, with firms that are committed to modernizing their technology stack and visibly embrace AI proving more attractive to recruits and better positioned to compete for the next generation of accountants.

We are seeing some firms investing aggressively in 2025, and more firms joining in 2026. These firms will likely begin to meaningfully break away in 2027 with firms that have deprioritized AI feeling the impact. At this point, it will take them some time to close the gap because of the sustained effort it takes.

How has AI already affected costs at accounting firms (for better and/or worse), and how do you expect it will further affect costs in 2026?

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.

Woosung Chun

CFO, DualEntry

How has AI already changed competition between firms? What happens in 2026?

There's a clear division emerging. Some firms treat AI as just another tool in the toolkit. Others have reorganized their entire operating model around it. The difference is obvious in turnaround times and the quality of insights they provide. Clients are starting to expect the speed and proactive advice that AI-enabled firms deliver. In 2026 this gap gets worse - basic compliance work becomes commoditized while firms that offer real insights command premium pricing.

How has AI already affected costs? What happens in 2026?

Yes, we're saving on the obvious stuff - fewer hours on routine work, less rework. Error rates are down too. But the technology spend is significant. Plus integrations aren't cheap, and don't get me started on security requirements. Training used to be something you did once when someone joined, now it's constant. And we need governance structures that didn't exist before. By 2026, successful firms will have fewer junior staff doing repetitive work and more experienced people managing exceptions and client relationships. The cost structure shifts rather than decreases.

Sergio de la Fe

Digital enterprise leader, RSM

Sergio de la Fe

How has AI already affected the competitive landscape between accounting firms (for better and/or for worse), and how do you expect it will further affect it in 2026?

AI has already widened the gap between firms that invest in technology and those that don't. Early adopters deliver faster, more accurate insights, while others risk falling behind. At RSM, our $1 billion global investment in AI and technology reflects a commitment to lead this transformation: not just for automation, but for enabling deeper advisory services. In 2026, this divide will grow sharper. Firms leveraging AI will set the standard for client experience. Those that hesitate may struggle to compete on speed, quality and value. The future isn't optional, it's accelerating.

How has AI already affected costs at accounting firms (for better and/or worse), and how do you expect it will further affect costs in 2026?

AI has already shifted cost structures in meaningful ways. Upfront investment in technology and talent can be significant, but it's offset by long-term efficiency gains. At RSM, our $1 billion global investment reflects a commitment to drive those efficiencies such as automating tasks like to free teams for higher-value work. In 2026, we expect costs to evolve further and not just through savings, but through reinvestment. Firms leveraging AI will redirect resources toward innovation, client experience and advisory services. AI isn't a cost lever—it's a strategic imperative.

Mary Delaney

CEO, Karbon

How has AI already affected the competitive landscape between accounting firms (for better and/or for worse), and how do you expect it will further affect it in 2026?

What I'm seeing is a growing difference between firms that treat AI as a side project and those that use it to rethink how the business actually runs.

We've learned that 85% of accounting professionals are excited or intrigued by AI, but only 19% think their peers feel the same. That tells me a lot of progress is happening quietly, inside firms that are already moving ahead.

By 2026, the firms pulling ahead won't just be "more tech-enabled." They'll be run differently. They'll operate with clearer visibility, healthier workloads, and more intentional growth. That's where the mindset shift happens—from "I have an accounting firm" to "I have an accounting business."

How has AI already affected costs at accounting firms (for better and/or worse), and how do you expect it will further affect costs in 2026?

Right now, AI isn't about cutting costs overnight. Firms are investing in tools, in training, and in figuring out new ways of working. That's real effort.

But the early payoff is time. Firms that invest in AI education save a daily average of 66 minutes per employee, according to Karbon research. That's time people can spend on clients, learning, or simply avoiding burnout.

Looking ahead, the biggest change isn't cheaper firms—it's steadier firms. Less overtime. Fewer last-minute scrambles. More predictable work. Over time, that stability matters just as much as cost savings.

Avani Desai

CEO, Schellman

How has AI already affected the competitive landscape between accounting firms, and how do you expect it will further affect it in 2026?

I say it is affecting the profession the same way every major technology shift has. Firms that stay ahead and integrate it thoughtfully will be better positioned, while those that treat it as optional will feel pressure. AI cannot be a standalone feature or tool. It has to be part of the workflow. Today, it has narrowed gaps in basic capabilities, but it has also made differences in judgment, quality, and governance more visible. By 2026, the firms that win will be those that embed AI into how work actually gets done, not just how it is marketed.

How has AI already affected costs at accounting firms, and how do you expect it will further affect costs in 2026?

For us, the biggest impact so far has been on our people, not on the client experience. AI has helped reduce burnout by taking pressure off the most repetitive and time-consuming parts of the work. Our teams were working incredibly hard, and I want them focused on the things that matter most, applying judgment, solving problems, and working with clients. Over time, AI should help firms better allocate resources and manage costs, but the real value is enabling people to do their best work sustainably.

Kelly M. Fisher

Chief practice officer, Wipfli Advisory LLC

How has AI already affected the competitive landscape between accounting firms, and how do you expect that to evolve in 2026?

Firms are beginning to recognize that AI advantage is not determined by access to tools alone. 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.

How has AI already affected costs, and how do you expect it will affect costs in 2026?

In the near term, AI adoption has more often increased costs than reduced them. Licensing is only part of the equation; training, workflow changes, governance, and ongoing support frequently outweigh tool costs, and productivity gains rarely appear without meaningful process redesign.

Today, we see organizations opting to slow replacement hiring rather than making immediate reductions, leaving roles intentionally unfilled. That may relieve short-term cost pressure, but it doesn't address capability gaps or the need for work to change. Firms that look beyond efficiency are using AI to redesign workflows, develop new skills, and create new offerings—unlocking growth as well as more durable cost improvement.

Prashant Ganti

Vice president of global product strategy, finance and operations BU, Zoho

How has AI already affected the competitive landscape between accounting firms (for better and/pr for worse), and how do you expect it will further affect it in 2026?

AI has leveled the playing field between smaller firms and larger ones by giving them the power to automate time consuming operational tasks, and gain quick insights through better business analytics. This has drastically helped them improve efficiency and turnaround times when dealing with their clients.

I think in 2026, firms that invested in AI will grow faster, invest more time in advisory roles, and set new client expectations with value added services. So the gap between the firms that adopted AI and those that didn't will widen.

How has AI already affected costs at accounting firms (for better and/or worse), and how do you expect it will further affect costs in 2026?

I think AI has helped accounting firms to get more done with the same number of people and existing resources. However, this does come at a cost of investing in AI tools that are suitable for their firms, training their staff, ensuring security and data governance. But in the long run this will pay off in terms of operational efficiency and securing more clients since routine work gets completed faster. So by 2026, firms will be able to see gains in terms of leaner teams with increased productivity per employee and providing more value-added services which ultimately generate increased revenue.

Aaron Harris

Chief technology officer, Sage

How has AI already affected the competitive landscape between accounting firms (for better and/pr for worse), and how do you expect it will further affect it in 2026?

AI is already widening the gap between firms that treat it as core infrastructure and those that see it as a bolt-on capability.

The firms pulling ahead are using AI to deliver work faster, more consistently, and in new ways - shifting toward continuous accounting, proactive insights, and advisory services. In 2026, agent-led workflows will accelerate this divide, enabling firms to run entire processes with human oversight rather than human execution, and prompting more progressive firms to test new ways of pricing and packaging their services.

How has AI already affected costs at accounting firms (for better and/or worse), and how do you expect it will further affect costs in 2026

In the short term, AI is starting to shift costs rather than eliminate them as firms look to invest in governance, oversight, and capability-building.

Over time, those investments will begin to change the economics of core work. As AI takes on more of the execution layer, firms can deliver routine services more efficiently and consistently, particularly around reconciliation, close, and payables. In 2026, the impact becomes more visible: firms can do more for clients, at higher quality, without simply scaling effort in line with volume.

Wesley Hartman

Founder, Automata Practice Development

SONIA ALVARADO

How is AI affecting the competitive landscape between firms and how will it continue to do so in 2026?

AI is not having a significant impact on competition between firms. Most firms I talk to have plenty of work and are looking to hire. Their AI implementations are not going to be a competitive advantage but to help shore up the workload. I think this will continue into 2026. I think there will be other levers that will drive client mobility between firms like clients leaving after their old firm was acquired by a larger firm.

Jon Hilton

AI practice leader and shareholder, LBMC

How has AI already affected the competitive landscape between accounting firms (for better and/pr for worse), and how do you expect it will further affect it in 2026?

It's clear the Big 4 will be putting immense resources into AI over the next 5 – 10 years and that accounting software and start-ups are trying to bring automation to much of the accounting processes in accounting firms. Early indications from research are that AI has a compounding effect, those that build upon AI use cases compound their AI ROI vs just doing one or two. I expect those firms that put budget to AI, have an AI strategy, and start moving forward earnestly with AI will be better equipped to deal with disruption.

How has AI already affected costs at accounting firms (for better and/or worse), and how do you expect it will further affect costs in 2026?

Adoption of AI that supports automation should by default reduce time and produce better pricing. There may be significant price pressure on routine consulting and professional services if tasks can be automated through AI tools. What AI will not replace is the human judgment required to interpret complexity, apply context, and make strategic decisions where experience and accountability matter. Additionally, this could result in larger organizations pushing further downstream to capture more market share or improve revenue if there is a pricing reduction further upstream in the market.

Lisa Huang

Senior vice president of product, AI and insights, Xero.

How has AI already affected the competitive landscape between accounting firms (for better and/or for worse), and how do you expect it will further affect it in 2026?

We're already seeing a widening gap between the early adopters and those hesitating. The firms embracing AI aren't just getting faster; they're scaling their capacity to serve more clients effectively. In 2026, the competitive edge will shift from speed to depth. Firms leveraging AI-driven analytics will be able to offer the kind of proactive, high-value advisory services that were previously only possible for the Big Four, bringing "big firm" insights with the personal touch of a small firm. Our data shows that small businesses consistently using AI are twice as likely to see revenue increases, and we expect that same dynamic to separate the leaders from the pack in the accounting industry, too.

How has AI already affected costs at accounting firms (for better and/or worse), and how do you expect it will further affect costs in 2026?

Costs are shifting, but it's really a story about revenue and capacity. The industry continues to face a massive talent shortage against rising demand. AI lowers the "cost to serve" per client by handling the low-value manual work, which unlocks the capacity for firms to say "yes" to clients they previously had to turn away. In 2026, successful firms will leverage this efficiency to rebalance their focus, moving away from hourly billing toward high-value advisory that drives growth for the firm. It's about leveraging technology to do more, not just to spend less.

Kacee Johnson

Principal, be Radical

How has AI affected competition between firms, and how will it in 2026?

AI has widened the gap between firms that experiment and firms that execute. The leaders aren't just faster, they operate differently. In 2026, advantage won't come from "having AI." It will come from how deeply AI is embedded into workflows, roles, and culture. I think clients are getting better at spotting the difference between AI-enabled firms and AI-marketed ones.

How has AI affected costs, and what happens next?

Short term, AI has increased costs: tools, pilots, training, and governance. That's normal. What we're now seeing is the payoff: firms increasing output without linear headcount growth. In 2026, the real cost savings won't come from layoffs, but from fewer errors, faster cycles, and better use of capacity. The firms that struggle will be the ones that bought tools without redesigning how work actually gets done – and implemented AI just to say they have it (FOMO is real!)

Randy Johnston

Executive vice president, K2 Enterprises

How has AI already affected the competitive landscape between accounting firms (for better and/pr for worse), and how do you expect it will further affect it in 2026?

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.

How has AI already affected costs at accounting firms (for better and/or worse), and how do you expect it will further affect costs in 2026?

AI licensing costs seem to be recovered by firms spending fewer hours on projects. This is occurring at all levels where AI expertise exists. Careful review is taking longer, and small errors are slipping through as reliance on AI increases. Costs will increase in 2026 as Agentic AI projects are developed, AI licensing in products increases, and Large Language Model (LLM) Generative AI (GenAI) products such as OpenAI ChatGPT or Copilot 365 are licensed for more team members. Larger firms will have to invest more in AI Governance.

Roman Kepczyk

Director of firm technology strategy, Rightworks

How has AI already affected the competitive landscape between accounting firms (for better and/pr for worse), and how do you expect it will further affect it in 2026?

I see both larger firms and private equity consolidators investing significantly in accounting firm process optimization, utilizing AI components built into accounting-specific applications to streamline labor-intensive components within accounting firms. I believe we will see these efficiencies roll out in 2026 (for those processes piloted in 2025) and the summer of 2026 to be a renaissance period for the major accounting vendors to tout the AI components and features that improved productivity during the Spring'26 busy season.

How has AI already affected costs at accounting firms (for better and/or worse), and how do you expect it will further affect costs in 2026?

Right now, I don't believe firms are quantifying the costs and benefits beyond the monthly expense/investment for ChatGPT/Copilot licenses and any fees associated with attending conferences or piloting tools. This is fairly normal in the first year that any technology is rolled out, with noticeable efficiency gains in the second year and following years. I anticipate that regular use of generative AI tools (ChatGPT, Copilot, and Gemini) will occur across all firms to some extent in 2026, with the economic benefits quantified after validated case studies and professional surveys are published next fall.

Brent McDaniel

Chief digital officer, Aprio

M.I.A Braids

How has AI affected the competitive landscape between accounting firms, and what's next in 2026?

AI has widened the gap between firms that are building real platforms and firms that are simply adopting tools. The firms investing in data foundations, integrated workflows, and proprietary capabilities will be able to deliver faster, absorb more volume, and move talent into advisory sooner. I expect 2026 to be the year clients start to notice which firms can answer questions quickly and anticipate issues without delays. Responsiveness becomes a competitive differentiator, not price. The firms using AI to modernize how work gets done will separate themselves from those treating AI as a checkbox.

How has AI affected costs, and how will it affect them in 2026?

AI increases costs upfront because you're investing in infrastructure, integrations, talent, and change management, and we're making those investments right now as we expand our data ecosystem. But the long-term economics shift meaningfully as automation takes hold. Prep time drops, rework declines, and teams can handle more volume without adding equivalent headcount. By late 2026, as automation expands across key difficulty levels, firms will start seeing the operational leverage everyone has been predicting. The payoff is real… not in year one, but absolutely in year three.

Ariege Misherghi

General manager and senior vice president of AP and AR, BILL

How has AI already affected the competitive landscape between accounting firms (for better and/pr for worse), and how do you expect it will further affect it in 2026?

AI has already influenced the competitive landscape by elevating firms that use technology with intention. The firms pulling ahead aren't simply adding tools – they're integrating AI in ways that eliminate unnecessary workflows, improve accuracy, and create more capacity for advisory work. That translates directly into better client experiences and stronger positioning as modern, tech-forward practices.

In 2026, the advantage will belong to firms that apply discipline to their AI strategy. Just as firms audit financials, the most successful ones will audit their technology stack, evaluating which tools are delivering real value and which are adding noise.

Rather than racing to adopt the most AI, leading firms will focus on measuring outcomes: time saved, errors reduced, advisory capacity gained. This shift rewards firms that prioritize efficiency and impact over volume. In 2026, competitive advantage will come from refining AI usage with purpose, not simply expanding it.

How has AI already affected costs at accounting firms (for better and/or worse), and how do you expect it will further affect costs in 2026?

AI has already begun improving cost structures at many accounting firms by streamlining routine tasks, reducing manual effort, and helping teams work more efficiently. Firms that have thoughtfully embedded AI into core workflows are completing more work in less time, with greater accuracy and fewer bottlenecks. Those gains are translating into healthier margins and increased capacity for higher-value services.

Looking ahead to 2026, firms will take a more intentional approach to managing costs through technology. Rather than expanding their toolsets, many will focus on auditing their AI investments, identifying which systems truly drive efficiency and where consolidation can unlock additional value. The result is a more streamlined, cost-effective tech stack where AI contributes directly to productivity, client service, and long-term operational health.

Eva Mrazikova

Senior director, IRIS Accountancy

How has AI already affected the competitive landscape between accounting firms (for better and/or for worse), and how do you expect it will further affect it in 2026?

We are already seeing it start to change the playing field, with some firms using AI to boost productivity without adding headcount – allowing them to take on more clients, faster. That creates a real gap between early adopters and those still catching up. It's not just about tech anymore, it's about who's positioned to scale. I think in 2026 we'll see this divide grow, and the firms that treat AI as essential infrastructure will pull ahead, while others may struggle to keep up.

The most immediate shift will likely be in audit work. The continued move toward digital-based financial transactions, even at the smallest business level, is giving rise to 'continuous auditability', where real-time data monitoring can replace traditional annual reviews. This fundamentally changes the audit model from periodic snapshots to ongoing assurance, and firms that build this capability early will have a significant competitive advantage.

Looking further ahead, AI has the potential to reshape the market by enabling micro-firms to thrive on deep expertise rather than breadth of services. As billing shifts away from hours worked and toward value delivered, these focused practices may compete more effectively than larger generalist firms and inverting the traditional growth model.

How has AI already affected costs at accounting firms (for better and/or worse), and how do you expect it will further affect costs in 2026?

There's a short-term cost to implementation from training, to integration, to rethinking processes. However, once the transition is made, AI tends to shift costs rather than simply reduce them – lowering spend on repetitive tasks while increasing investment in strategic roles and smarter systems.

By 2026, I expect many firms will find themselves doing more impactful work, and budgets that reflect a very different internal structure than they did even five years ago.

Abigail Parker

Accounting educator, UT San Antonio

How has AI already affected the competitive landscape between accounting firms (for better and/pr for worse), and how do you expect it will further affect it in 2026?

I think AI may favor the larger accounting firms more than smaller players. This is because enterprise-wide AI applications are expensive and require relevant talent to properly use and maintain. Larger firms have the resources to purchase (or develop), deploy and maintain these solutions.

How has AI already affected costs at accounting firms (for better and/or worse), and how do you expect it will further affect costs in 2026?

I don't think AI has meaningfully affected the costs at accounting firms. This is mainly because accounting profession still operates on billable hour model. I've talked to practitioners who use AI in their job. The time saved by using AI is easily filled with other tasks. Besides, enterprise-wide AI solutions are expensive, accounting firms also need to factor that into their pricing. Conversely, accounting firms could increase their price because of AI usage citing higher quality of work. Moving into 2026, I also don't think the price will be significantly impacted.

Hitendra Patil

CEO, Accountaneur

How has AI already affected the competitive landscape between accounting firms, and how will it affect it in 2026?

AI is rapidly leveling the playing field for basic skills. Now, small firms can do solid technical work that used to need large teams. The competitive edge will no longer be about how many people a firm has, but about clarity in thinking about client situations. By 2026, firms will split into those that sell "outputs" and those that offer certainty, guidance, and advice that considers real consequences, i.e., "outcomes". Firm size will matter less. What will matter most is purpose and expertise. What will matter is not what the firms "do" but what "happens" because of what they do.

How has AI already affected costs at accounting firms, and how will it affect costs in 2026?

Routine labor costs are decreasing due to greater efficiency, and hence, lower cost per unit of work produced, but expenses for software, integration, and coordination are rising. Firms with strong AI-powered processes will experience less rework and fewer mistakes later. But if a firm automates a bad process, it will only accelerate the problems. By 2026, the competitive edge will favor firms that rethink how they make decisions, review work, and manage accountability. Simply adding new AI tools without fixing processes will only appear as progress, but it will complicate matters for firms.

Wenzel Reyes

Head of methodology and audit solutions, MindBridge AI

Wenzel Ryan Reyes

How has AI already affected the competitive landscape between accounting firms, and how will that continue in 2026?

AI has widened the gap between firms that embrace it and firms that hesitate. Early adopters have expanded into advisory and consulting because AI frees people from repetitive tasks, allowing them to spend more time with clients. Their top talent focuses on judgment, interpretation and relationship building. Partners now spend less time on admin or reviewing routine work. That shift raises the ceiling on what firms can deliver. As we move into 2026, the firms that continue investing in AI will pull even further ahead. Their professionals operate at higher levels because the technology handles the mechanical work. This profession is built on trust, and trust still comes from a human who can guide you. AI amplifies that human, but it does not replace the relationship. The firms that blend both effectively will lead the next decade.

How has AI already affected costs at accounting firms, and how will that continue in 2026?

AI helps firms absorb rising complexity without adding more staff or more hours. Every year, new accounting rules, reporting requirements and disclosure expectations increase the workload. Traditionally, that meant hiring more people or charging more hours. AI changes that. It takes on repetitive, mechanical tasks so teams can focus on the issues that truly matter. Costs shift away from manual work toward higher value services driven by professional expertise. This gives firms the ability to maintain quality while controlling costs, even as audits become more complex. It also reduces burnout, because teams spend more time on analysis and less time on administration. In 2026, that trend will continue. AI will serve as the buffer between regulatory complexity and human capacity.

Cathy Rowe, Adam Orentlicher

Senior vice president and segment leader
Chief technology officer
Wolters Kluwer North America

How has AI already affected the competitive landscape between accounting firms (for better and/or for worse), and how do you expect it will further affect it in 2026?

In 2026, AI will continue to reshape the competitive landscape within tax and accounting.

The 2025 Future Ready Accountant Report shows that tech-forward firms are already growing faster, reporting higher profitability, and attracting talent that demands modern tools. High-growth firms are 38% more likely to be fully cloud-based and 53% more likely to have highly integrated systems, and they are more likely to prioritize investments in AI-enabled tools, workflow automation, and data analytics – giving them agility and scale that late adopters will have trouble matching.

Meanwhile, firms that are stuck in manual mode will continue to face slower turnaround times, higher costs, and mounting talent risk. Staff expectations for better technology tools surged to 29% (up from 19% the year prior), signaling a talent flight risk for firms that lag. In a market where advisory services are now a growth engine (93% of firms offer them, and nearly half plan to expand them), AI-powered platforms aren't optional. They're the infrastructure for delivering insight at speed.

So in 2026, expect the AI gap to widen into a chasm. Leading firms will leverage AI-powered platforms to move beyond efficiency into intelligence, powering predictive analytics, personalized advisory, and real-time decision support. Firms that integrate AI deeply will dominate client relationships and talent pipelines. Those that hesitate will begin to lose ground.

How has AI already affected costs at accounting firms (for better and/or worse), and how do you expect it will further affect costs in 2026?

AI is already helping accounting firms reduce costs by enabling them to handle significantly more work with the same resources. By automating routine tasks and supporting complex processes, firms can multiply their capacity without proportionally increasing headcount or overhead. Looking ahead to 2026, this trend will accelerate as AI tools become more advanced, allowing firms to scale efficiently and deliver more value at lower marginal cost.

Jeff Seibert

CEO, Digits

How has AI already affected the competitive landscape between firms—and how will it shift further in 2026?

AI is already creating a widening gap between AI-native firms and AI-assisted firms. Early adopters are delivering closes in hours or days instead of weeks, offering real-time reporting, and shifting their teams from preparation to advisory. In 2026, this gap becomes structural: firms using AI as a foundational layer—not as a collection of tools—will operate at fundamentally different cost structures and service levels. They will win on margins, retention, turnaround time, and client experience. Meanwhile, firms that rely on manual processes or stitched-together automations will struggle to compete, especially as clients begin expecting continuous financial visibility rather than monthly snapshots.

How has AI affected firm costs so far—and how will it affect them in 2026?

AI has already begun reducing variable labor costs associated with rote monthly workflows, shifting accountants from "doing" to "reviewing." In 2026, as the close becomes ~95% automated, firms will see a meaningful drop in the time required per client, allowing teams to support more accounts without expanding headcount. This doesn't eliminate staff—it reallocates them toward higher-value advisory roles. On the cost side, firms will likely see a transition from spending on numerous point solutions to investing in a single AI-native foundation, which ultimately lowers complexity and reduces the operational overhead required to manage fragmented workflows.

Sean Stein Smith

Chair, Wall Street Blockchain Alliance

How has AI already affected the competitive landscape between accounting firms, and how will it affect it in 2026?

AI has widened the productivity gap: early‑adopting firms now deliver faster turnarounds, lower costs, and more analytics‑rich deliverables. Smaller firms using AI can compete with mid‑tier firms for advisory work. In 2026, AI will increasingly differentiate firms based on workflow integration maturity and not firm size. AI is a powerful tool that is already leveling up firms and people that are effectively making use of it, and is allowing those firms to create opportunities and conduct work in fields that were previously unavailable to all but the largest organizations.

How has AI affected costs at accounting firms, and how will it affect costs in 2026?

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.

Donny Shimamoto

Managing director, IntrapriseTechKnowlogies

How has AI already affected the competitive landscape between accounting firms (for better and/pr for worse), and how do you expect it will further affect it in 2026?

I haven't seen firm's actively touting AI capabilities extensively publicly or in private conversations that I'm involved in, so I would say that currently it has not affected competitiveness because it's still only early adopters that have integrated it into operations. However, I do believe that will shift in 2026 with the shift into the leading adopters phase.

How has AI already affected costs at accounting firms (for better and/or worse), and how do you expect it will further affect costs in 2026?

I believe firms who are leveraging AI are seeing reduced effort to provide services, but these should not be perceived as hard cost savings since we aren't seeing layoffs occur. The cost of tools that incorporate AI seem to be starting to ask for a premium. So I believe we will see overall increases in cost to run a firm in 2026. However, efficiencies from use of AI should enable more engagements to be done and thereby increase top line revenue—so should help increase profitability of firms if staff time is leveraged properly.

Mike Whitmire

CEO and co-founder, FloQast

Picasa

How has AI already affected the competitive landscape between accounting firms (for better and/pr for worse), and how do you expect it will further affect it in 2026?

The competitive differentiator in 2026 won't be who has the smartest AI, but who has the healthiest culture because of AI. We are seeing a sharp divide. Some firms are using AI to grind their staff harder and squeeze out more billable hours, which is a fast track to mass attrition in a talent-short market. The winners are the firms using AI to eliminate the grind entirely, offering true work-life balance to attract talent. We know from recent research that 65% of candidates now evaluate a firm's tech stack before accepting an offer. If you are still relying on manual methods, you are effectively hanging a 'Do Not Apply' sign on your door for the next generation of talent. The firms that win will be the ones that sell career sustainability, not just career growth.

How has AI already affected costs at accounting firms (for better and/or worse), and how do you expect it will further affect costs in 2026?

AI is fundamentally breaking the traditional billable hour model because it completely decouples output from time spent. If a reconciliation task that used to take a junior associate 10 hours can now be done in 10 minutes by an auditable agent, the firms clinging to hourly billing are going to see their revenues collapse. 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.

Simon Williams

Vice president of emerging solutions, Intuit

How has AI already affected the competitive landscape between accounting firms (for better and/or for worse), and how do you expect it will further affect it in 2026?

AI has already become a key differentiator in the accounting profession with 79% of accountants anticipating increased competition for high-value advisory clients. Firms that have successfully adopted AI are gaining an edge through increased efficiency and significant cost savings, with 25% of accounting firms considering themselves tech-advanced and 27% tech-proficient. Our focus on delivering an AI-native platform solution levels the playing field for firms of all sizes, ensuring all accountants benefit from advanced AI capabilities. With access to AI-driven insights and automated workflows, every firm can focus more on high-value client advisory services and create opportunities for specialization in niche markets that were previously difficult to scale. Firms that

How has AI already affected costs at accounting firms (for better and/or worse), and how do you expect it will further affect costs in 2026?

Firms adopting AI strategically are poised to realize long-term cost savings through greater efficiency and fewer errors, benefits that outweigh upfront investments. This shift is already underway. According to Intuit data, firms invested an average of $19,000 in technology in 2025 and plan to spend $20,000 in 2026. Firms are also investing in AI. In 2026, 64% of firms will invest in AI, up from 57% in 2024, signaling a shift in industry cost structures. Firms that thrive in 2026 will be those that balance technology investment with high-value, human-centered advisory services, gaining a clear competitive edge.

Adopting an AI-native platform is also helping firms consolidate their tech stack, ultimately reducing costs. On average, businesses use 7-25 different apps to manage operations, with costs averaging $10,000 per month, $3,000 of which is on apps they rarely or never use. Our strategy to consolidate tools into one seamless, end-to-end platform is transforming how businesses operate. By providing a single, end-to-end AI platform, Intuit is streamlining workflows, reducing complexity, breaking down data silos, and enhancing efficiencies for firms. This unified approach saves time and minimizes errors caused by disconnected systems, allowing firms to deliver greater value to clients.

Joe Woodard

CEO, Woodard

How has AI already affected the competitive landscape between accounting firms (for better and/pr for worse), and how do you expect it will further affect it in 2026?

Those firms with the resources to strategically deploy AI and build AI-native workflows (e.g., build their own agents) have a strong competitive advantage. However, most firms are not currently feeling the impact of this competitive advantage as it is mostly concentrated in enterprise-sized firms. In 2026 and beyond, small and emerging firms who are slow to deploy AI will increasingly feel the impact. Though these small and emerging firms may never match the enterprise-sized firms on R&D, they can, and should, deploy AI-enabled and AI-native solutions to level the playing field.

How has AI already affected costs at accounting firms (for better and/or worse), and how do you expect it will further affect costs in 2026?

We are beginning to see AI reduce human resource costs, mostly in the category of offshore labor (in-house or outsourced). During 2026, I think many outsourced providers will adopt outcome-based pricing so they can leverage AI on behalf of the practices they serve, which will, in theory, reduce the "waste" with the current hourly model and consequently reduce the cost of outsourced services. In 2026 and beyond, I think firms will slow hiring, especially at the entry level with tax preparation services and transactional accounting services (i.e., bookkeeping). Also, we will likely see a reduction in administrative resources in the coming months and years due to increased AI adoption.