Savvy CPAs see AI as a tool, not a threat

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As a lifelong technology buff, I’ve always tried to stay on the cutting edge. But I don’t think I really appreciated the power of artificial intelligence until I attended the Milken Institute Global Conference two years ago. That’s when Magnus Carlsen, the world’s No. 1 chess player, described how easily he was trounced by the IBM Watson supercomputer. He said the “match” wasn’t even fun and that there was no way any human could ever beat Watson at chess. The world’s top Jeopardy contestants didn’t fare much better against Watson.
It’s very clear that AI is having a significant impact on the business world as well, in industries ranging from health care and travel, to manufacturing and finance.

As some of you may know, H&R Block teamed up with IBM in 2017 to put the Watson supercomputer on the desks of 70,000 of its tax preparers. H&R’s tax preparers are now using the technology to improve the client experience and help them identify credits and deductions. The technology is also being used to help H&R clients better understand how different filing options can impact their tax outcomes. Cloud-based Watson services can understand context, interpret intent and draw connections between clients’ statements and relevant areas of their return.

That’s pretty powerful since H&R’s tax preparers can now identify additional areas of possible tax implications in order to maximize client refunds or reduce their tax liabilities. Further, H&R clients can follow along with their tax professional on a dedicated client companion screen that brings to life key focus areas for deductions.

Threat or opportunity?

It’s impressive technology to say the least, but I don’t think that’s going to put every other accountant and CPA out of business by next year, However, I do think it’s a nod to a new world that we need to be prepared for.

I was talking to two accounting partners the other day who are on the cutting edge of technology. One told me it’s gotten to the point that a nine-year-old could input a K-1 into a personal tax return. Thanks to the speed and efficiency of the software, in just a few clicks, it can populate in the tax return, and do so with remarkable accuracy.

AI is not just impacting tax preparers, but the companies that make tax prep software too. Many are going to be left behind because the next generation of providers will be more robust and more efficient thanks to AI being incorporated into all their products and services.

In theory, these new AI tools and technologies should free up bandwidth for CPAs—not take their jobs away. But you do need to start thinking about what supercomputers cannot provide to clients and that starts with leveraging the human connection. People don’t necessarily want a nice tidy tax return from their CPA; that’s just a document. What they really want is to feel they’re being guided correctly by someone who cares. They want someone to have their back at all times and to make sure they’re not making big mistakes with their finances and not missing any opportunities. If that’s the primary role that you start to play, then you will be invaluable to your clients for a very long time.

Leveraging the human connection

Watson is fantastic for producing output, but at the end of the day, you need good inputs to have a successful result. Where does the input come from? It comes from your client. Watson is not going to know about your client’s kids. Watson is not going to know about a client’s charitable intent. Watson is not going to know which values and goals a client cares about most. Only you can know that.

Even for accountants, taxes can be confusing. CPAs have a tendency to give overly technical explanations to clients. Most clients don’t care about the minutia of the tax code. They just want a plain language description of what they should do with their finances.

When utilized correctly, automation can be a huge asset to your practice. By eliminating the amount of time spent on routine data entry, it frees you up to be more consultative, to provide higher-value advice and services to your clients. That’s the proactive approach that the most successful CPAs I know are following. They’re not spending time trying to defend their turf against the onset of new technology.

From CPA to personal CFO

Most CPAs I know prefer having a more consultative relationship with their clients. Unfortunately work, deadlines and compliance issues get in the way and have to take top priority. Also, many CPAs haven’t figured out how to get paid for their consultative services. It’s very easy to get paid for doing a tax return. It’s a simple time-based deliverable with a finite deadline. It must be completed by a certain time and you get paid upon completion. Plain and simple.

But the consultative side is harder to measure and it doesn’t always fall into a nice tidy ledger. As a result, some CPAs find themselves not getting paid for valuable consultative advice they’re providing to clients. That simply comes down to spelling out your capabilities, deliverables and fees more clearly from the outset. We’ll talk more about the mechanics in future articles. Just know this: CPAs who have figured out how to get paid for their consultative expertise have more lucrative practices and a much happier, more loyal client base.

Getting started down the consultative road

Reach out to your top 20 clients, preferably the business owners, since they tend to have more complex needs. Invite them to your office when it’s not crunch time and ask them what they really want from a personal and financial perspective. Do you want to take some steps to reduce their taxes or get their household spending under control? Do they think they could be doing more with their retirement plan?

As technicians and professionals, we assume clients know what they want. More often than not, clients don’t really know what they want. Informal sit-downs are a great opportunity to find out what that is. Some clients want minimal complexity: “Get the return done, pay it and move on.” Other clients want to pursue every possible strategy that can be laid out and understand the pros and cons of each. Still others want to know about steps they should be taking if they want to sell their business to outsiders. Others want to know which steps they should be taking if they’re planning to transfer the business to their children.

Have these meetings face-to-face if possible. Don’t have them over the phone and certainly not by email. If a face-to-face meeting just isn’t possible, there are some excellent videoconferencing platforms such as Zoom, GoToMeeting and Microsoft Teams you can use. Don’t use a low-cost tool or app on your mobile phone. The face-to-face experience is just too important for the future of your client relationships. Again, that’s something that even the world’s most powerful computers can’t provide.

Over 90 percent of your competitors are not asking their top clients questions like the ones posed above. They certainly don’t know the answers. I know what you may be thinking: “I’ve never had a consultative meeting with a client before, or I’ve never called them in when it’s not tax season.” It may be a little uncomfortable at first, but you’re going to come out of the process saying to yourself, “Wow, I really helped a lot of people and learned a lot about them.” Before you know it, clients will be coming in to ask, “What else can you do to help me?” That will quickly revolutionize your practice and the quality of referrals clients make on your behalf.

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Artificial intelligence Tax preparation Tax practice H&R Block IBM