.There are certain incessant questions raised by generative AI. Where will advancements in AI plug existing holes in workflows? And where will it create disruptions in the labor market?
A new article from two partners at the VC firm Andreeessen-Horowitz (or a16z if you must), argues that Generative AI is poised to unleash a wave of disruption on cloud accounting.
“Bookkeeping, accounting, tax preparation, and auditing are fields full of largely formulaic and repetitive exercises that would immensely benefit from generative AI’s gift of efficiency and time savings,” a16z partners Marc Andrusko and Seema Amble write in the article “Death, Taxes, and AI: How Generative AI Will Change Accounting.”
As far as the authors are concerned, disruption is coming at the nick of time. The two write that current conditions in the accounting industry are practically begging for a fresh wave of automation.
“There are real, quantitative tailwinds that make this a particularly critical moment for accounting firms to lean into AI and machine learning. For starters, 75% of CPAs could retire in the next 10 years. Simultaneously, the profession is attracting fewer job entrants, with the number of U.S. students who complete accounting degrees falling. This means in the coming years, far fewer professionals will be available to handle existing client demand. And firms are already struggling to keep up.”
So what’s going to happen?
While “accounting workflows are ripe for disruption”, the partners acknowledge that large language models are better at working with words than numbers. Complex calculations and quantitative analyses, at this stage at least, are not the strong suits of LLMs.
A16Z Dumps $350M into Adam Neumann’s Mystery Proptech Startup Flow
Plugging the Skilled Labor Gap
Still, the z16z partners highlight several areas where AI can help accounting firms do their work. Even amid the growing skilled labor shortage that the partners identified.
The partners say that small businesses spend about 15 hours per week on accounting-related tasks. Not to mention the huge amount of money larger businesses spend on outsourcing these tasks.
SMBs once saw SaaS and cloud accounting as time saviors. Perhaps GenAI will be the technology that helps SMBs get back to cutting hair.
Automation is of course one way to cut down on this. For example, using LLMs to do reconciliation. This is the labor-intensive process of compiling data from multiple sources to consolidate performance metrics and resolve any contradictory entries.
“Teams can use LLM-powered data extraction software to pull data from unstructured file formats like contracts, receipts, and invoices,” the partners write. “This has far-reaching implications in both enterprise and SMB settings.”
The partners go on to list several other accounting tasks that GenAI can either supplement or replace.
However, there remain two crucial capabilities that GenAI cannot yet replace, according to the z16z partners.
“GenAI is not yet ready to replace two absolutely crucial capabilities in professional services: judgment and sales (although both can be AI-assisted),” the partners write.
“At the end of the day, it will still be up to the seasoned professional to win new business, sign their name next to a recommendation (even if said recommendation is 90% automated via AI), and stand by it.”
