Let’s get digital

Lisa Benson: Jim, to say that you are an expert on digital transformation in our industry would be an understatement. You speak at numerous events every year and you are deeply involved with the AICPA. Can you give me a brief overview of the digital transformation that's going on in the profession currently?

Jim Bourke: Sure. Like the rest of the world, our profession is concerned about data and how it impacts everything from audit to tax, to advisory and all of the things that we do in the firm. What's really cool is that it's not country specific, it's not region specific, it's not continent specific. It's a global language. We're all concerned about the transformation of the profession. Technology continues to drive it.

When it comes to digital transformation, what do we mean by that? We talk about the impact of AI. We talk about the automation of all the manual tasks that we're so used to doing. We will continue to see new technologies develop in our profession, and we'll to continue to find ways to utilise technology and technology related tools to handle manual tasks that we have always done.

Lisa Benson: Let's break it down by the different business areas within firms… Let’s start with tax…

Jim Bourke: Tax traditionally is a whole lot of steps. No matter what country you're in, whether it's corporate tax, individual tax, entity level tax, there’s lots of manual steps needed to generate that final work product. So, what we've seen around the world is complete automation of so many of those steps. Let’s think about individual taxation. As an example, you’ve got data ingestion. Lots of taxpayers get sourced documents. It's paper based. The process starts digitally; the data is put on a piece of paper and that piece of paper is sent via mail to somebody, and then that somebody gives that piece of paper to us and what do we do? We turn it back into digital format again by keying it in or scanning the information. We've seen lots of technologies come into play that automate that manual process that keeps it in that digital form and passes it from system to system. That oversimplifies the challenges that we have, but it's in every aspect from data ingestion to preparation to delivery. Many firms have automated the entire process and everything from ingestion to delivery to clients. Tax lends itself to tremendous automation.

Lisa Benson: The data goes full circle!

Jim Bourke: Yeah. That's exactly what happens. It goes from data to paper to data. Let's eliminate the paper process. Let's eliminate the key punching.

Lisa Benson: Exactly. So that's tax. Let's talk about audit…

Jim Bourke:

For many years, I prepared tax returns so I understand what the challenge is there- and for many years I was involved in audit so, again, I understand the challenge with audit. I will tell you, and this is not disparaging against auditors because I am an auditor, I'm a CPA but our profession is very slow to change in the audit space. We continue to do many of the manual tasks that we historically do today. A lot of the new technologies that have entered the profession around digital transformation of audit have to do with the same thing we just talked about on tax, they have to do with automating the manual task data ingestion.

Today, it would be quicker for an auditor to do their analysis on a hundred percent of the data using technology tools. However, our professional standards dictate how we go about the audit process. Through my work with the AICPA, we are working with the regulators to try and educate them about the technologies that are available in the profession.

The goal I think, for auditors around the world is to improve audit quality and at the same time, do a better job. So, we need to leverage those technologies, especially around getting the data. Similarly, as with tax, we talked about digital to paper to digital. Same thing happens in audit. We ask clients for financials, balance sheets, and cash flows and so on... And what do clients do? They print out PDFs. They send it over. There's lots of new technologies developing around the world. We see a lot in the UK in that data ingestion space. A significant number of these best breed audit tools are originating in UK.

We don't necessarily have to be regional specific with respect to our audit tools because auditors are doing the same process around the world. Let’s try to leverage these global technologies.

Lisa Benson: Let’s talk now about the benefits to the firm – obviously it saves time, but what else can that do?

Jim Bourke: The firm should see an increase in realisation, an increase in profitability and an increase in margins. As a result of utilising tools, you may not recognise benefits in immediate return on your investment, but over a period of years you will. If we're automating the manual tasks, auditors will have more free time to maybe do a deeper dive on the client, do a better-quality job on the audit, maybe service other clients, maybe bring in additional business.

From a client perspective, you tell the client what data you need, and as the data becomes available, it's delivered to you electronically. The client is experiencing less disruption to their practice by not having auditors camp out for a week, two weeks, three weeks at their office location.

So it's a win-win for the firm and for the client. And I think at the end of the day, it is a better-quality audit too.

Lisa Benson: So that's the whole compliance side, let’s talk about advisory practices…

Jim Bourke: We are seeing major strides in digital transformation relating to advisory practices. New tools are entering the marketplace to analyse data in better ways. Big companies are trying to understand the stories that are embedded in the data that we can't see, and as auditors, as tax individuals, we can uncover those.

Effectively analysing data gets you to the root of the problem. Tremendous numbers of tools are popping up in this space. There has been a lot of traction over the last year for publicly held companies. Why? Because the Big Four are doing the audits for these companies. The same firm can't be engaged to do a lot of the advisory work at board level for the same company. We're seeing a tremendous amount of fall out. Why look at a smaller firm when they can use a Big Four firm? Why not! We all have best of breed access to these data analytics tools today. It creates a very competitive environment. We can do the same things the Big Four are doing, analysing data and giving our clients those stories that are embedded in the data that they can't uncover themselves.

Lisa Benson: Tell me some specifics about how utilising digital transformation and data analyses in the firm is beneficial and what flows out of that?

Jim Bourke: Well, let's think about that. Why should a firm be embracing digital transformation and data analysis instead of just sticking to its traditional big picture analysis? It's worked for the last hundred years… But it won't work for the next hundred years. The answer is because it will free up time to do other things and drive a new revenue stream. Digital transformation drives opportunities for firms to expand the areas that they derive revenue from that will allow them to remain relevant way into the future.

The other thing we talk about is attracting and retaining key talent today. If I'm a 22-year-old, starting my career in an accounting firm, do I want to do the same things that the older generations did just because it worked? I would argue, no, I would say let's leverage technology. The 22-year-old grew up on smartphones and data so let's leverage that. If you have two firms’ side by side, one embraces digital transformation in technology and the other just wants to do things the same way, I will tell you that that firm that wants to do things the same way is going struggle to attract and retain talent.

Lisa Benson: So, you are saying that through digital transformation, you can do the compliance work and add advisory services at a higher margin for the firm?

Jim Bourke: Absolutely. You are maintaining a higher margin. Look at what's happening in our profession today. In North America, we see a lot of private equity coming into the accounting firm space. Why is private equity coming into an accounting firm? Because of all the disruptions in the market they're looking for the next horizon. It's in the advisory function that they see huge opportunity. They're funding firms to go in and expand the advisory practices to generate a significant return on their investment.

Lisa Benson: Are there any downsides that you see to the digital transformation that's going on in the profession?

Jim Bourke: There could potentially be lots of downsides.

Audit will change tremendously, but it won’t go away. We need to get better at doing it more efficiently. And that's what all these tools are about. The big opportunity for accounting firms around the globe is cross-selling advisory services into their existing client base. I often get asked, why do you merge with traditional firms that don't have advisory practices? And my answer is I've seen the partners that we bring into the fold and they're like kids in the candy store. They're like, you mean we could sell services other than audit and tax to our clients now? Do you mean we could sell advisory and cyber and digital? I'm like, yes! These are the services our clients want and admire.

Lisa Benson: Finally, what is HLB doing to support its global community with digital transformation?

Jim Bourke: HLB is probably one of the most advanced networks when it comes to technology and advisory. I speak to a lot of international accounting associations around the globe, and they want to know how to transform, where to start. HLB has not only guided our network to grow their advisory practices fuelled by technology, it has also added technology firms in different regions in South America and Europe, to its traditional firms.

HLB are thinking outside the box. We used to all hire traditional finance majors, accounting majors, because we are accounting firms doing audit and tax. Today, we're starting to hire lots of different people with lots of different backgrounds. In addition to bringing in traditional accounting and tax firms, we are now looking for best of breed advisory firms, whether they have an expertise in digital transformation, in cybersecurity, some other level of technology, that's what we're looking for.

HLB has clearly differentiated itself around the globe from other networks, and I honestly believe the HLB network is equally as powerful and has the offerings that many of the Big Four firms bring to the table today

Lisa Benson: That's exactly why we've experienced the growth that we've experienced over the last five years. We won The IAB’s Network of the Year awards for those exact reasons and because of that focus.

Jim Bourke: You think about it, when our peers recognise us as a leading network around the world, it's a home run. As firms continue to transform, the networks and associations around the world are also racing to transform their members to this new world.