CFOs See Technology Gaps Revealed by the Pandemic; Can CPA Firms Fill It?

CFOs See Technology Gaps Revealed by the Pandemic; Can CPA Firms Fill It?

For years, thought leaders in the accounting profession have been saying now is the time to invest in game-changing technologies, such as artificial intelligence or robotic process automation. But the dollars aren’t there when the budget is finalized.

CPA firm leaders seem convinced that advanced technologies will eventually save them time and money while freeing them up for higher-level advisory work, but they appear to be struggling with when it’s time to start spending and at what level. CFOs/controllers of client businesses are also hesitant to invest in streamlining the work.

Meanwhile, the ongoing pandemic reveals – or magnifies – the inefficiencies and weaknesses of technology infrastructures that aren’t set up to handle virtual business in a sustained way, as in-person reviews and supervision are still the norm.

The reticence to spend on advanced technologies, such as robotic process automation (RPA) came through in the latest data collected by IPA. With the exception of the Big 4, 77 IPA 100 firms provided information on the percentage of net revenue spent on “transformative” investments, such as building prototypes using AI, developing blockchain services or incorporating data analytics into compliance processes. Two-thirds said 0%. The other third averaged 2.0%, or roughly $80 million in investments. By contrast, the Big 4 are investing billions of dollars.

A separate 2020 IPA survey, specifically focused on IT, asked about firm intentions related to AI/augmented intelligence. Of the 140 responses, 53% are proactively learning and researching, but only 18% are actively investing and testing prototypes (up from 11% in 2019). The firms range in net revenue from $500,000 to $768 million – roughly evenly divided among firms below $15 million, those between $15 million and $30 million and larger firms.

Opportunities for CPA Firms

Teresa Mackintosh, a CPA and the CEO of a Dallas-based fintech Trintech, believes that the urgent financial scenario planning during the pandemic is pulling attention away from longer-term investments that can lead to CPA firm advisory opportunities, such as automation of routine tasks for clients or HR and CFO outsourcing practices.

Here’s how CFO-for-hire CPA services could help. Mackintosh notes that firm clients are making life-or-death decisions about their businesses based on the data provided by the finance departments. The constant need for financial models and forecasting (and re-forecasting) requires immediately available, visible, accurate and relevant information. “Most CFO offices aren’t really prepared for this level of demand on the information to run the business.”

Rob Goldenberg, CFO of customer engagement for software company 6sense, told CFO Dive that finance team members, especially parents, have less time for routine inefficiencies while working from home. “Every place where we have a process flow involving downloading something and putting it into a spreadsheet as a CSV file, and uploading it to another system, is ripe for change,” he says. “Ideally, in the next six months, we’ll replace that with some form of automation. This wasn’t necessarily a priority before, but it’s become a real pain point now.”

Automation company Auditoria, in a survey of several hundred finance executives, reports that only 5% of companies have fully invested in digital automation of finance and accounting functions, according to CFO Dive.

Jim Bourke, a partner at WithumSmith+Brown and longtime evangelist for cloud-based technology, notes that it took a pandemic to push forward the use of technology, even for something as ubiquitous as Microsoft Teams. Usage at his firm was flat for the first couple of weeks of the COVID shutdown, “but about three weeks in, utilization was off the charts and it’s stayed at that level.”

Speaking at a recent AICPA virtual conference, he says he would only use vendors utilizing the cloud if he were to start a firm today. “There’s no looking back. You absolutely need to implement these types of technologies.”

Trintech, a financial software company, leverages RPA to automate financial close processes. CEO Mackintosh says automation is often misunderstood. Investments can be small, implementation can take three days, the technology can pay for itself in as little as four months, and results can be seen more quickly than many think.

Second Phase of CFO Complications

Getting the best information to run businesses now is a top priority for CFO organizations, but another wave of concern follows it – creating accurate financial statements, Mackintosh says.

She points to a study by the Hackett Group, which polled about 100 companies, of which 80% reported closing their books on time for the first quarter, using “superhuman efforts,” in some cases. Companies embracing financial automation were able to close four days faster.

Goldenberg says the monthly close for 6sense is extended now by over a week. “We want to close the books faster. Every month of data we can get in this new normal will help us forecast.”

The pandemic is forcing massive change in how businesses are run, complicating financial statements. Consider the restaurant client that is now relying on curbside takeout instead of indoor dining, Mackintosh says. “Now you have a situation where cash transactions are being handled very, very differently.” Finance systems may not be providing accounting staff with the most appropriate information for reconciliation, for example. Reconciliation is time-consuming, and finance staff also tend to get bogged down pulling data for audits. And for auditors, this could mean a serious gap in financial controls and a bigger potential for fraud and financial misstatements, she notes.

The AICPA, partnering with CPA.com, the largest CPA firms and CaseWare International, is working on what they call a Dynamic Audit Solution that uses data analytics and AI to make financial statement audits more efficient and thorough. For example, rather than analyzing a sample of data, all transactions would be included. The AICPA expects the first commercial release next year.

Mackintosh says firms, and their clients, can consider the cost – in risk and in dollars – of doing nothing to automate financial systems. “Status quo has its own momentum. It’s easy in the moment to put it off until we’re ‘back to normal,’ but what we’re seeing with companies is it’s not a great option because it’s creating so much risk within the financial framework – and not just for internal controls, but there’s a huge gap in information needed to manage the business.”