Why tax technology is a game changer for CPA firms

Moving up the technology stack

Cloud storage

Cloud storage has mainly been demystified over the last decade through personal use. If you use a smartphone or email service like Gmail, you’re a cloud consumer. Because of the cloud’s ubiquitous presence in our personal lives, we’ve come to expect the following:

• Constant availability
• Anywhere access
• Elastic capacity — even if you must buy it 

For businesses, moving to the cloud has been a little more complex. Migrating complicated file systems to the cloud isn’t quite as simple as using a smartphone, but cloud-driven productivity suites make it easier. As evidence demonstrates that the cloud can be as secure as any on-premises file storage solution, that barrier to adoption has all but vanished.

Removing that barrier is especially notable for firms looking to solve challenges around document storage. How do you modernize the storage of client information in a profession that runs on extensive documentation? How do you simplify sharing these documents with teams and customers? How do you maintain strict controls over who has access?

The cloud addresses all these challenges.

The cloud is also the backend of software-as-a-service (SaaS) applications, with few exceptions. SaaS apps are specifically built around the core cloud tenets listed above, with the additional benefit of automated updates with no manual patches or upgrades required. You’re already working in the cloud if you use web-based versions of Microsoft Office or Google Workspace.

A 2022 study from AAG IT Services found:

• Over 98% of organizations use the cloud in some way, whether through SaaS applications or a fully cloud-native network
• 63% of professionals worldwide “heavily” use cloud software, up from 59% in 2021

Workflow automation tools

The cloud can simplify information storage and streamline how it’s shared; workflow automation can do the same for tasks. Since cloud computing was introduced, there has been year-over-year growth in cloud computing adoption, and experts expect cloud data centers to process 94% of workloads in 2021.

Organizations can use workflow automation to outline tasks that bring a deliverable from start to finish. When one team member finishes a task, workflow automation alerts the next task owner that it’s their turn to take over the process. Because these tools easily integrate into other tools that firms already use, notifications go to email accounts, and security and authentication can be shared via SSO.

There are many benefits to workflow automation:

• Documents and information sharing are centralized, usually with version control
• Visibility into tasks and timelines is available to stakeholders
• Users can be managed by teams or roles to simplify workflow
• Push alerts and notifications can keep everybody informed
• Access can be extended to partners and clients 

Workflow automation solutions have also been refined based on previous generations of similar tools, which creates a level of familiarity for users. So, users who balk at how things “used to work” will be pleasantly surprised by how familiar these solutions are.

Tax and accounting’s specific demands mean firms are better served by tools specifically designed for their workflows and tasks. Firms will typically find greater value in purchasing these tools rather than trying to customize generic tools for the firm’s needs. For example, specialized templates and marketing content — such as plug-and-play newsletters, social media posts, and website articles — can help firms market and promote their expertise and services. At the same time, integrated calculations in tax preparation software driven by embedded research content like tax tables, etc., can speed up computations and help to ensure accuracy.

Workforce collaboration tools

Digital collaboration can make all the difference in keeping people connected and productive no matter where they are working. In fact, a 2022 ATAWW survey found that “81% [of survey respondents] hired at least one remote team member they had not employed before,” which essentially means that firms are hiring new staff in their remote geography. It’s remarkable to note that this result was up from 38% in 2020.

The new focus is video collaboration, but the ability to edit and collaborate around documents and information is equally important. These tools often integrate with workload tools and cloud-driven storage apps and are usually accessible on PCs, laptops, and mobile devices. Workforce collaboration solutions let teams work across locations, from home, or even faster inside the same office and can be extended to enable direct client communication where appropriate.

Client service and firm management tools

Tax and accounting professionals rely heavily on client service to grow trust, so this area has natural trepidation. But from chatbots to scheduling tools, these solutions can help firms scale customer service without adding additional headcount.

• Customer relationship management (CRM) tools help centralize client information and aid in billing
• Chatbots can manage basic inquiries that come to your site, reducing the burden on phone staff
• Integrated voice recognition (IVR) tools enable clients to speak with an automated menu and be quickly routed to the right resource
• Scheduling tools can help clients book time by interfacing with your team calendars to ensure everyone has time to meet 

These investments can help quickly growing firms keep up. However, firms must balance good customer service and possible cost reductions by moving from human contact to digital customer service. After all, people still drive customer satisfaction.

Research tools

Tax and accounting firms rely heavily on tax research. Sometimes, it’s informal since CPAs consume information as required by a client’s needs or to stay current on changes during tax season.

Research tools and services formalize the effort, giving firms a continuous connection to expertly curated information they can use to ensure the work they produce for clients is accurate and up to date — sometimes even more up to date than IRS guidance.

The Thomson Reuters Institute “2023 state of the tax professionals report” noted that more than 93% of those surveyed agree that their clients are looking for some form of advisory services, and 65% of survey respondents stated the desire was “strong.” Technology-driven research can help by ensuring tax and accounting professionals guide clients based on proven knowledge and best practices. It can also provide them with access to relevant market metrics and benchmarks to ground their advice in a real-world context.

Artificial intelligence (AI) tools can consume content by looking for relevant trends, benchmarks, and patterns. This technology brings a new lens to internal business intelligence and external market research, which can effectively accelerate both the speed and depth of insight derived from data.

Technology-infused research tools come in different formats, primarily:

• A digital research tool where updates are delivered via newsletter or email but are part of a searchable archived site.
• Integrated digital content that is embedded in the other specialized work tools described in this paper. For example, a tax table might automatically update, or a financial simulation might refresh with a new metric or benchmark within tax prep software.

Research tools also make a workplace more attractive to new talent, especially those who have grown familiar with using them elsewhere.

What opportunities does AI present for tax and accounting professionals?

The emergence of artificial intelligence in the tax and accounting profession has presented a range of new opportunities for CPAs. From automating mundane tasks to providing data-driven insights, accountants can use AI to optimize their advisory services. Professionals can also use this technology to better understand client needs and offer tailored advice. AI can also help reduce errors and increase accuracy when preparing financial statements.

Using AI tools, CPAs can now gain a deeper understanding of customer behavior, which they would not have been able to obtain on their own. With access to real-time data, professionals are more capable of predicting future trends to create effective strategies that align with current market conditions. Furthermore, AI tools can help detect anomalies more quickly during audit or investigation processes, allowing firms to respond swiftly should any discrepancies arise.

Business intelligence software

Moving up the stack, next is analytics — AKA “big data.” This is where information, much of which firms are already collecting, can be turned into answers. Business intelligence (BI) can make a powerful difference to the firm’s bottom line and it’s a powerful tool to help customers better understand their challenges and opportunities.

What’s the difference between standard reporting and BI? The key differentiator is sources. While accounting has always involved readouts from one or more systems — payroll, payables, etc. — BI combines multiple sources into a single lens. BI creates a data warehouse that can pull information from various places, including practice management, payroll, and finance systems. Firms can then layer those datasets on top of one another in interesting and relevant ways.

Business intelligence software also offers visual tools and dashboards that enable firms to establish their key performance indicators (KPIs) and then organize and display data in multiple ways so the issues they must address are immediately apparent:

• Spot patterns in revenue and spending
• Better understand future performance in light of past performance
• Compare performance to industry or regional benchmarks

For instance, a firm might want to understand a specific revenue shortage. By bringing together revenue, payroll, and hiring data, BI could enable the firm to identify an underperforming branch that needs additional training.

The number of inputs only enhances the power of BI. Firms can enable clients to bring together data around revenue, tax, practice management and market metrics, and any other data that might be relevant.

Through reporting and visualizations, BI brings data to life.

Modeling and simulation software

If BI is analytics focused on “what happened,” modeling focuses on “what might happen.” This distinction is the difference between descriptive and predictive. While tax and accounting professionals have been modeling inside Excel spreadsheets for a long time, modeling and simulation software tools supercharge this ability. These solutions bring:

• Basic simulations like the traditional three-statement model
• More intricate cashflow and workforce projections
• Deeper understanding of merger, acquisition, and buyout possibilities

Modeling and simulation extend the idea of analytics — the more data, the more powerful the vision.