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The AI Digital Transformation
April 4, 2023 •TaxPlanIQ Support team
As part of our upcoming Webinar on Artificial Intelligence and its impact on the accounting industry, we are taking a deeper look at the digital transformation in relation to tax advisory services. Artificial Intelligence continues to impact businesses across industries, no profession (including tax firms and accounting firms) is immune to the changes. The adoption of new tools such as ChatGPT and GPT4 are likely to have a significant impact on the way tax firms operate. While there is no argument that this digital transformation is exciting, are there any cautions that must be noted before we dive in head first?
It is undisputed that AI gives businesses an edge. As we move deeper into the Digital Age, the need for businesses to adopt AI into their models is crucial. Those who do not will quickly find themselves left behind. Let’s take a closer look at the advantages of using AI in business.
Improved Efficiency and Cost Reduction
One of the primary ways tax firms are using digital technologies is to streamline their own operations. Tax firms are using AI to automate repetitive and time-consuming tasks, such as data entry, document classification, client communications, and invoice processing. This automation reduces the number of errors made and allows tax professionals to focus on more complex tasks, such as providing strategic advice and identifying tax planning opportunities. AI has more value for certain repetitive tasks, as it can work around the clock and not grow tired. This reduced value translates to a cost reduction for firms of any size.
Managing and Analyzing Data
In addition to providing efficient performance, the digital transformation is affecting tax firms by changing the way they manage their data. With the increasing use of cloud computing, tax firms can store and access large amounts of data more easily than ever before. This means they can provide more detailed insights into a client’s financial performance, and they can provide these insights in real-time, rather than waiting for weeks or even months for data to be compiled and analyzed.
Another way the digital transformation is affecting tax firms is by changing the nature of the services that they offer. With more data available and more powerful analytical tools at their disposal, tax firms can provide clients with more comprehensive advice on issues such as tax planning and risk management. This means that clients can rely on their tax firms not just for compliance purposes, but also as trusted advisors who can help navigate complex financial situations.
Furthermore, AI has been trained using unbiased datasets; whereas humans are not. Occasionally, this may lead to a bias, conscious or unconscious, spilling out onto our decisions. Incorporating AI into the advice-giving process can help to quash any bias that may creep into the situation.
Enhanced Client Services
AI-powered tools are helping tax firms provide better service to their clients by providing real-time advice, and personalized recommendations. AI is available at all times; it can answer questions and provide customer service day or night. These tools also enable tax firms to offer more accurate and timely reporting. This enhances client trust and satisfaction. In addition, AI can be used as a marketing tool to connect potential clients with a firm, directing them to an advisor within a particular niche that will best serve that client and their situation.
AI is rapidly gaining momentum and transforming the tax industry in the process. Tax firms that embrace these technologies are poised to gain a competitive edge in the marketplace. However, the adoption of new technologies also presents a unique set of challenges for tax firms.
Implementing AI technology can be expensive, and smaller tax firms may not have the resources to invest in it. Depending on the needs of your firm, the cost changes. A fully implemented AI system can run anywhere from $6,000 to over $300,000. Additionally, the cost of maintaining and updating the technology can also be high. These costs may balance out as time progresses when AI is helping to efficiently process workflow, but these up-front costs can be prohibitive for many firms.
While OpenAI is currently free, it is not trained to “remember” prior sessions of chats with a user. This limits its ability to customize solutions. It also may not be available publicly for long!
Reliance on Technology
Relying too heavily on AI can lead to a loss of human expertise, which can be detrimental if the AI technology makes errors or malfunctions. Tools like ChatGPT and GPT4 only have data from 2021 and earlier, at the moment. This may present compliance issues when laws or regulations have been changed. Understanding these limitations are crucial for every firm. Never blindly rely on AI to supply you data without analyzing the given text, especially for tax advice which it has performed poorly on.
Lack of Personalization
AI may not be able to provide the same level of personalization as human tax professionals, who can tailor their advice to individual clients' specific needs and circumstances. Clients may grow weary of not having access to a trained professional who is able to listen and offer advice directly to the individual. AI is inherently uncreative. While it can produce novel ideas; it cannot produce original ones.
AI algorithms cannot be biased, but is this always a good thing? Human factors such as empathy and kindness are a vital part of client relations. While AI might make a certain decision for a client simply by analyzing the facts, a tax advisor may bring other considerations into the decision-making process. This might result in a more fair result than a simple data analysis would give. Additionally, there may be ethical concerns surrounding the use of AI in areas such as privacy and data security. As AI advances, so do the methods of those who use these tools for harm. Securing the data and privacy of clients must be an ongoing task of the highest priority.
Overall, AI can be a useful tool for tax firms. The digital transformation is likely to have a profound impact on tax firms, both in terms of the way that they operate and the services they offer their clients. While it should not replace human expertise entirely, the digital age is here to stay. Firms that embrace these changes and invest in the necessary technology and skills are likely to be well-positioned to thrive in the years ahead.
What are your thoughts on AI and the Digital Transformation? The Federal Trade Commission is considering a ban on GPT services here in the United States for 6 months. Will this help or hinder business in the long run?
Join thought leaders in accounting on April 14th and April 17th for an engaging webinar discussion on the latest developments in artificial intelligence and their impact on the accounting and tax industry! Register here: bit.ly/3znduwY
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