Why the Time Is Ripe for Digital Transformation in the Professional Services Industry
The professional services industry is shaped by its traditional approach to business: Place a high premium on individual expertise, build strong personal client relationships and stay focused on billable hours. Now technology and new competition are forcing the industry to change how it operates.
Organizations are shifting toward a more outcome-based billing model rather than an effort-centric one. Technology has the potential to move the industry from an approach based solely on people to one that values people plus technology. And as digital natives enter the market, their new perspectives threaten traditional organizations and compel them to rethink their business strategies.
Auvenir, an in-house startup at Deloitte, reimagines the audit life cycle for smaller firms with technology at their core. Much of the audit methodology and technology available today is too complex for smaller clients. They need a simpler set of automated and intelligent tools to make their audit compliance more efficient. Auvenir accomplishes this through:
- Automating and standardizing the importing of data from client enterprise resource planning systems.
- Creating customizable tests to run on the data using machine learning.
- Populating work papers as output.
This simplification of the audit process, which is built on digital technology, helps large firms successfully serve smaller clients.1
Each of the practice areas — audit, accounting, tax and advisory — is affected by technology. The journey typically goes through a standard path, from employing robotic process automation to automate mundane repetitive tasks, to utilizing analytics and finally to integrating artificial intelligence and machine learning. Having said that, each of these practices transforms itself in a unique manner.
Audit and accounting
As machines take over more manual tasks and decision-making, the role of humans in the audit and accounting fields is bound to undergo fundamental changes.
Emerging technology can fundamentally alter how audit and accounting services are provided. Among all professional services offerings, this practice has great potential for transformation.
Given that the audit function is extremely data-heavy, it is impossible to manually sift through all the data. Firms sometimes take a sampling approach to detect compliance problems. However, doing so risks allowing some issues to slip through the cracks. In a typical audit, the engagement team samples a small percentage of transactions looking for discrepancies. When auditing employee claims, the sample set is determined based on certain parameters, such as the value and type of the claim and employee job level. This may provide a broad level of confidence, but there is a likelihood that some discrepancies are missed. One example is when the same employee has multiple claims for the same item.
Identification of anomalies can be automated through an RPA plus machine learning approach. Machine learning can also study past data and recognize patterns, enabling it to identify discrepancies or anomalies even without human interaction.
PwC is partnering with H2o.ai to build a bot that analyzes billions of data points in milliseconds, seeing what humans can’t. Using that AI technology, PwC is able to check 100% of the transactions and look for additional patterns that would not be detected with manual sampling. This helps weed out any chance of undetected discrepancies and build better trust in the audit outcome.2
Blockchain is another valuable technology that will help auditors. We have seen audit firms tricked when companies produced doctored bank statements and other evidence. The result is the reporting of incorrect financials and loss of trust in the audit process. However, creating a private blockchain between the auditor, company and bank eliminates the risk of doctored evidence, saves time and creates an automated and efficient audit. The same blockchain technology can be used for validating a number of areas, including:
- Accounts receivable.
- Stock and asset transactions.
- Intercompany settlements.
Now primarily a people-based business, auditing needs to move toward a people-plus-technology model. The human experts will remain at the forefront, maintaining the client relationships and explaining the nuances of the reports. However, much of the intensive, repetitive work can be automated. This will not only result in more thorough reporting but also help reduce costs, making the offering much more competitive.
Accounting technology startups like Pilot, Bench and Botkeeper offer online, cloud-based bookkeeping services that are simple, automated and easy to use. While most accounting firms are focused on the end deliverables (financial statements or tax returns), these startups try to solve customer pain points, particularly for small businesses. A typical accounting firm would ask CPAs to exchange data and documents with the clients, but this is often unstructured, need-based and ad hoc. That sometimes leads to the client asking for the same information on multiple occasions, which adds to the overhead and client stress.
These process-oriented accounting startups, on the other hand, automate data collection and make it seamless for the client. They provide a smoother user experience, better-quality service and faster results thanks to their use of technology.3
Today, tax planning is primarily a manual activity with established tools in certain areas like tax filing. Those tools include process automation (RPA and intelligent process automation) and data automation (visualization tools and extract, transform, load, or ETL).
Global tax preparation mostly consists of compliance and reporting. The latest corporate trend is the use of shared service centers and real-time collaboration tools to automate workflows, such as calendar activities, internal controls and documentation. Some companies may also opt to work with a third party.
Ernst & Young’s Global Tax Platform automatically exports and standardizes data — collected from the client ERP system — that is needed for tax calculations. The data includes sales invoices, value-added taxes paid on source materials, and intercompany transactions. Then the system reduces manual work by automating tax computations and tax form preparation. As data is standardized and digitized, it is now possible to use analytics to gain additional insights that help tax firms advise clients on better tax planning and management.4
It will no longer be enough for tax experts to excel in their domain alone; they need to be proficient in data analysis and new digital technologies. They must also understand how to manage change and improve their processes. Tax technology, automation and transformation strategies, and data and project management skills will be the influencing factors in the tax value chain.
Advisory is focused on productivity tools, information tools and personal development. Many of the same tax and audit tools — including blockchain — apply here.
Given that time is at a premium for consultants, technology can also help maximize personal productivity. Voice- or chat-based automated personal assistants can reduce nonbillable hours spent in meeting room bookings, travel planning, etc. Timesheet generation can be automated using calendar, travel and email information.
Client engagement teams typically spend an hour each week to ensure that their timesheet entries are accurate, since this is used for billing. Incorrect information can lead to delayed or rejected payments from clients. Tools like Intapp’s time module scan calendars, emails and travel records, and then combine that information with a firm’s project management tools containing assignment information. Machine learning and AI are then used to auto-populate a timesheet featuring the right cost center, project codes, purchase order and other client billing information. This significantly reduces the time spent on paperwork and increases time available for value-added tasks.5
New technology tools can also aid in personal development. Comprehensive learning tools can be delivered on mobile devices. Performance feedback systems with advanced user experience can help gather real-time feedback. Digital badges and skills programs can motivate learning.
Advanced content management systems, delivering the latest and greatest on technology and client information on mobile devices, can help drive better information management. Google-like universal search on all external content and internal content (customer relationship management, proposal hubs, employee and skills databases) will make data retrieval easier.
Traditional scripting-based methodology for processing and managing content is often inadequate because of inconsistent formats or variations in content layout. It is not easy to read data from documents that are nonsearchable or use a variety of formatting that hinders accurate extraction.
Infosys works on content extraction with a completely different approach, moving away from empirically derived rules. NIA Vision is a machine learning-based content platform with image-based extraction and parallel neural pathways that can accurately convert and extract complex documents. It is built to support self-learning based on feedback, thereby optimizing maintenance costs.
Clients expect their advisors to provide them with deeper insights and faster execution. As a consequence, advisors also want to create globally consistent systems and processes within their organizations to be able to extend better support.
Staying ahead of the technology curve could prove to be a big growth driver for professional services firms. It would not only allow them to explore new opportunities and new business models, but it would also drive greater value for their clients.