AI Puts the Smacc Down on Accountants and Auditors
Artificial intelligence (AI) is finally maturing, and we’re now on the cusp of a “Fourth Industrial Revolution” that could impact up to 80% of service jobs. We’ve written before about how artificial intelligence and automation threaten to displace jobs ranging from the mundane (fast food) all the way to the highly technical (medical imaging). Now we hear from a top executive at Ernst and Young that graduate recruitment for auditors and accountants could fall by as much as 50% in the next 4 years due to advancements in AI. If you’re an accounting major right now, you have to be questioning your choice of careers. What you might do instead, is to look for a job at one of the many startups that are going to eventually destroy your future job prospects. We’ll give you the names of 3 firms that you can send your CV to.
Founded in 2015, German startup Smacc just recently closed $3.88 million in funding to develop a solution that provides “next-generation financial management for your small and medium-sized business“. All you do is send Smacc your invoices and receipts and they’ll send them up to the cloud in digital format which allows you to view your financial accounts in real-time without having to wait for the traditional “once a quarter” financial statements. Over time, the system uses artificial intelligence to get better and better at doing what it does. Real-time financials sound pretty compelling, not to mention the appeal of never having to fill out an expense report ever again.
Canadian startup Kira Systems has taken in an undisclosed amount of funding to develop intuitive, easy-to-use software for uncovering relevant information from contracts and related documents. Deloitte announced an alliance with Kira this year, though they’ve been using the platform for over a year now with 3,000 users to analyze hundreds of thousands of documents in weeks allowing them to meet tight deadlines. In addition to Deloitte, Kira’s solutions were used by some of the world’s largest corporations on over $100 billion of M&A transactions in 2015. The system saves 20-90% of the time typically spent on contract review. The company claims that “AI creates higher-quality jobs in the legal industry” which is a polite way of saying that all those low-quality jobs like contract review are going the way of the dodo.
Founded in 2006, New Zealand company Xero (ASX:XRO) provides cloud-based accounting software for accountants and small businesses that is now used by over 700,000 subscribers. In 2013, Xero partnered up with an artificial intelligence company called Celaton in order to automatically extract information from places such as email and accurately send it up to the cloud. The system is estimated to reduce transaction costs by 74%. While Xero isn’t profitable yet, they realized $142 million in revenue in 2015. Xero trades on the Australian Securities Exchange (ASX) under the ticker XRO. U.S. based investors who want a piece of XRO can read our past article on “How to Invest in Foreign Stocks“.
If you’re one of the Big-4 accounting firms, you don’t have a choice but to start embracing machine learning and artificial intelligence so that you can compete. And it’s not just about competition. You can all but eliminate human error which is often the cause of costly lawsuits. If you’re a retail investor looking to play this theme, unfortunately, all of the Big-4 accounting firms are privately held:
This is probably because they don’t want anyone to see just how much money they’re actually making providing services that are all but mandated. You could buy shares of Xero, or you could just wait and hope that one of the other two startups we’ve covered has an IPO.