A majority of accounting firms doing taxes for their clients soon plan to tell them "no need to drop by."
This is one of the findings of a survey released Tuesday by accounting solutions provider
This would mean a 37% increase in "no touch" tax prep.
The statistic is part of a larger trend within the accounting world that is less bound to physical geography. The survey found that, within the past one to three years, 25% of respondents have started meeting clients virtually, 45% get more than half of client documents in digital format, and 23% have adopted secure client file exchange portals and remote signature products. Meanwhile, 17% of medium firms and 9% of large firms have implemented remote audits.
Cloud adoption spikes
The shift toward contactless or remote work is enabled through a mass migration to cloud computing, with numerous types of solutions becoming cloud-based. Between 2022 and 2023, the number of crypto tax and accounting platforms that have shifted to the cloud grew by 19%. Other notable increases include project management solutions (18%), document management solutions (15%), tax workflow solutions (15%), tax law monitoring solutions (12%), client data ingestion tools (10%) and client portals (10%).
The Wolters Kluwer survey found that cloud-based firms experienced higher growth than traditional firms, as over 71% reported revenue and profitability growth in 2023 versus over 55% of the overall market. Firms using a cloud-based tax compliance solution had the highest growth: the number of traditional firms reporting revenue growth was up only 1%, while cloud practices using these solutions reported a revenue growth increase of 10% year over year.
Firms have recognized, though, that increased cloud use can entail increased cyber risk as well, given more things are online. The survey found that 36% of firms plan to increase their investment in cybersecurity and data privacy measures. This is especially the case for large firms, 51% of which said they were planning more cybersecurity spending. Overall, 17% of firms specifically said they're interested in blockchain-based security solutions.
New tools
Overall, 28% of surveyed firms said they plan to implement new technologies over the next year. Firms intend to add mostly client-facing tools that increase staff capacity while reducing the drain of high-volume, low-value work. The specifics, however, vary based on firm size.
For small firms, the priority is on tax workflow solutions (28%), a client portal (27%) and tax return automation tools (26%). For midsize firms, the biggest implementation priority is generative AI solutions (36%), tax return automation tools (29%) and a client portal (21%). Finally, large firms' biggest priority is document management (26%) while a client portal and project management tools tied for second (21%).
As one might imagine, there is a lot of interest in generative AI tools at all levels. The survey found 40% of firms overall expressing an interest in the new technology, the average of 39% of small firms, 45% of medium firms and 47% of big firms. As for the intended use cases, 72% of the firms said they would primarily use them for research, 64% said they would be used for client communication and 40% said marketing. Any actual accounting work was not mentioned — if anyone did intend to use generative AI for client engagements, it would be a fraction of the 3% who said "other."
Firms not confident they're getting all they can from tech
While more than half (54%) of the respondents acknowledged that technology plays a pivotal role at their firm, fewer leaders feel confident in their own tech-savviness. Wolters Kluwer said that firms are feeling increasingly behind the curve with their current technologies, noting that 49% of firms feel they are utilizing 50% or less of their tech stack's capabilities; this is a 23 point dip compared to just one year ago, when only 26% reported this concern.
Perhaps relatedly, fewer firms characterize themselves as early adopters or innovators. Between 2022 and 2023, the proportion of firms self-identifying as such went from 9% to 5%. Meanwhile, the proportion of those saying they tend to wait until technology has become mainstream has grown from 46% to 52%. Similarly, those who say, "We are typically one of the last to adopt new technology" went from 9% to 12%.
"This shift is likely influenced by the uncertainties stemming from the rapid technological changes over the past year," said the survey. "Must-have technologies like generative AI, machine learning and blockchain promise large leaps in efficiency, productivity, security and accuracy. However, the need for technology as a key driver for these priorities must be tempered with realistic expectations and investment in education."
Staffing implications
The increased use of technology can carry implications for accountants. It found that 10% of firms overall intend to outsource or co-source staff. This is especially prevalent in mid-size firms, of whom 30% said they intend to pursue this path. Auditors in particular seem ripe for outsourcing, as 23% of firms overall said they intend to specifically outsource or co-source audit staff; this is especially the case for big firms, 50% of which expressed plans to do so.
Firms also plan to hire fewer entry-level audit staff. The proportion of firms overall that intend to hire skilled staff over entry-level workers was 21%. This includes 17% for small firms and a much larger 44% and 42% for medium and large firms, respectively.
The survey was conducted online. It had a sample of 1,776 tax and accounting firms of all sizes from the United States, with 1,361 (90%) of respondents self-identified as small firms, defined as one to 19 total employees; 56 (3.7%) of respondents self-identified as midsize firms, defined as 20 to 49 total employees; and 92 (6%) respondents self-identified as large firms, defined as 50-plus total employees.
