AI is bringing transformational change to tax

It's impossible to have a conversation about the tax, audit and accounting profession these days without encountering the word "transformation." 

Whether it's the generational shift that's seeing waves of CPAs retire and fewer new candidates line up to fill their shoes, the rise of private equity investors taking over independent firms, or new technologies fundamentally altering the way firms work, a major wave of change is sweeping through all facets of the industry.

For some, that's a good thing. New tech, new business models and new talent are a promising path to driving change in an industry that needs to modernize to help overcome its biggest challenges, and many firms are embracing these opportunities. 

Other firms, however, are taking a more cautious approach. Whether they're prioritizing stability and proven methods, managing resource constraints, or carefully evaluating the costs and benefits before making significant investments, many firms are still assessing what digital transformation could mean for their specific business contexts and client needs.

Change is in the air

We see this phenomenon emerging clearly in the results of Thomson Reuters' recent Future of Professionals Report. The report takes the pulse of professionals working across tax, audit, accounting, legal, compliance and global trade functions in firms and in-house at major corporations to gauge their thoughts on everything from technology to talent strategy. 

When we dig into the specific responses from tax, audit, and accounting professionals, we find that AI is expected to have a greater impact on the industry over the next five years than any other force — including labor shortages, regulatory changes, increased data volumes or the retirement of baby boomers and Gen Xers. All told, 79% of tax, audit and accounting firm professionals believe AI will have a high or transformational impact on their businesses within the next five years.

While that may sound at first blush like firms are incredibly bullish on AI, a closer look at the data reveals some potential challenges ahead on the road to tax, audit and accounting firm transformation. Although a healthy majority of firms see the potential in an AI-powered future, far fewer firms are actually putting plans in place to get there. Just 14% of those surveyed say their firms currently have a defined AI strategy in place and just 36% of firms say they expect to see major changes in their firms this year.

Moving from idea to execution

Essentially, what's happening across a large slice of the marketplace right now is that firms are on board with the idea of transformation, but they are not yet developing the specific action plans and strategies necessary to execute on that idea. That's where the industry really needs a more detailed playbook for what real transformation looks like. Firms need to start drawing a clear distinction between one-off technology enhancements and proactive integration of technology across all aspects of their existing operations.

Increasingly, firms that understand that difference are going to start pulling away from the pack, quickly finding ways to cover more ground faster, expand their offerings and anticipate and respond to changes in ways that were not possible just a few years ago. In fact, among the 14% of firms that already have a clear and visible AI strategy in place, 86% say they are already experiencing a return on investment. They are also nearly two times as likely to see revenue growth from AI compared to firms that are still experimenting with their AI strategy.

"Transformation" means different things to different people, but one thing is clear: it's happening in many tax, audit and accounting firms right now. Those who treat it like a strategic imperative are already seeing the benefits. Those that are still treating transformation like a future state idea they will address at some point down the road run the risk of falling behind the competition.