AI Reality in Firms: Andrew Argue | CEO: Instead

To asking everyone in this series the same five questions. Where is AI reshaping strategic direction for firms? Andrew I think it depends on the size of the firm. A lot of the larger firms have already a discussion that we need to make AI a priority in each of our divisions. They're already building their own custom GPTs. But as you go down into the smaller and the medium sized firms, I think maybe 50% of people have been kind of AI aware, AI kind of forward in the sense that they've even used some of these tools. I'm thrilled to have me today Guest Andrew Argy From Instead by 2027, what will separate lead firms from the rest? When I talk to some firms they see these tools and they're immediately worried about what they're doing today and how that's going to be automated away. But I think it's being able to say hey, a lot of this stuff is now automated so. But these tools are really powerful. So kind of exploring how can I provide a lot more value to my client than I have in the past. But I think firms that are worried about it automating a way aren't excited and ready to reinvent themselves. Foreign. This is AI Reality Inside Accounting Firms, a series on accounting voices describing how AI is actually landing inside these firms. I'm interviewing a select group of leaders, senior leaders in firms, asking them the same five questions based on what they're seeing, deciding and being held accountable for. And for this senior conversation, I've aligned with five technology companies that are definitely shaping how AI is applied optimally inside accounting firms. I'm thrilled to have me today Guest Andrew Argie from instead. Andrew, thanks for joining us. Yeah, thanks for having me. We'll talk about instead in just a moment but let's give a shout out to Field Guide who are joining us on this. The AI native platform for audit and advisory firms. Carbon, the global leader in AI powered practice management software Digits who involve the AI powered financial intelligence platform for accounting firms and file that are also partnering with us. The Intelligent Tax Workspace for preparation and review automation. But instead he's right up there. You're driving the AI agenda. I read that Instead INSTEAD is the first AI tax agent for end to end research, planning, filing, defense. You're taking on the legacy players. Exciting times for instead. Yeah, no, we're very fortunate. I think for many years we have tried to create a tax preparation and filing software for professionals that would be an alternative to the cchs, the Ghost systems, the Ultra Tax, the laserts of the world that People have had for longer than they've been married to their spouse. In a lot of cases it's like a marriage situation. And finally we've done it. So this last year we actually have been approved by federal government, 48 states and all the cities, Michigan City, Ohio City, New York City for individual C Corp. S Corp Partnership and trust in a state print and electronic filing. And so been a huge journey. We have 250 team members that have been going through and getting all that done. So now we're, we've been very fortunate, really exciting time. So we're going to go into these five questions. But AI is at the very forefront of what you're delivering, isn't it? Yes, I think like this particular, you know, probably two years ago now I said there were only two normal tax seasons left and I would say this tax season was not normal for a lot of reasons. But probably the craziest thing I saw this tax season was I saw one tax staff producing 100 to 110 tax returns a day. So that is kind of a crazy now like people won't even think like that's insane. Or a lot of people might think like I don't even need that inside my firm because I don't have that many returns. Right. But that when we started to see that happening, that is. So it kind of changes the whole staffing mechanism. Like how do we do our work? Like what are the roles of everybody on the team? I especially people that are more junior on the team get very nervous about these kinds of things. But no, it's been a big change and even just in the last two quarters, I would say things have gone to a different inflection point. Well, let's get into these five questions because we're asking everyone in this series the same five questions to get all these different perspectives. So question one, you talk to accounting firms and leaders a lot. Where is AI reshaping strategic direction for firms? Andrew? I think it depends on the size of the firm. So if you're like a large top 100, top 500 firm versus if you're a small and a medium sized firm, I think it's a very different picture. A lot of the larger firms have already a discussion discussion and a mandate, whether it's from the CEO or it's like a private equity owned firm that we need to make AI a priority in each of our divisions or for the firm as a whole. And so you'll see some of these larger firms where they already everybody has like a chat GPT license or you know, and then they're already building their own custom GPTs, maybe they have a couple products, so. And all the way down to firms that really know they need to do something but don't have a strategy. And then, but in the top 100 firms, I think basically everybody knows they need to do something. But as you go down into the smaller and the medium sized firms, I think, you know, maybe 50% of people have been kind of AI aware, AI kind of forward in the sense of they've even used some of these tools. But you still have a lot of people. You know, I'm from Tulsa, Oklahoma originally. And so you have a lot of people from different parts of the country maybe that are still not really aware that like something could do 50, 60, 70, 80, 90% of the work that they're currently doing. And so I think the awareness changes on really the size of the firm first and foremost. I think the larger the firm, the more awareness there is. And then how they're approaching it, I think is a lot of them are trying to figure it out. In particular, we focus on tax. I wouldn't say these tools from a tax perspective. The process of doing an entire tax return really wasn't even possible until, let's say, the last two quarters. From an AI perspective, you could do little parts and pieces. But now I think people are trying to get up to speed and understand like what are the real capabilities of these. That's what I'm seeing on the ground talking with these firms today. It depends on their size and just how AI inclined they've been thus far. Very good. As firms have fallen over themselves to adopt AI, try and get it right. What do you think firms are getting wrong? I think I would say the tools are more powerful than you think. They're just not going to always work exactly the way that you work right out of the box. So like what you can do with these tools, if you're willing to train them, you know, like a good way to think of it is if you use instead and you use one of our AI agents, we have a process that we go through where you can write a long workflow. Like we'll have a long workflow for an individual tax return. Every step that needs to prepare that return. So taking all the client documents, extracting the data, populating a work paper, populating a tax return, reviewing the return, resolving the diagnostics, completing the work paper again and getting that return ready for efile. So that's basically a workflow of everything that a Tax person would do that. An AI agent can do every single step up and get it ready for agreement to review. But it might not be the exact way that you do your preparation process. You might have your own work paper template, you might have your own way that you like for things to go that may be a little bit different than what we have out of the box. So you can make edits to our workflows, you can make edits to the process. But I think just because, so you really, when you're looking at different products, whether you're looking at some of these, like off the shelf large language model companies like ChatGPT from OpenAI or the Cloud products from Anthropic or the Gemini products, you gotta look like, okay, what does this product do out of the box? And is it flexible enough to get to the point where I can build something that fits my firm like a glove, that fits my firm like a glove, where the AI product really adapts to my process even more so than I have to adapt to its process. And I think that, you know, just because it makes a mistake, a lot of times what I see is people will use AI and it'll make a mistake and they'll think that it's stupid. But if you're really honest and you look back at what you put into it, you gotta really be honest with yourself and say, what question did I ask? Was I articulate? Articulate enough? Did I provide it enough context? You know, one of the big things we've changed inside of our organization is move to like a narration culture. Everybody has the ability to speak to the computer because it provides a lot more context than if you type, if you type humans, we type these stubby little text messages, but if you can narrate and just riff and rant, especially in a group setting, you'll be able to get a lot more in. So I think the biggest mistake is just not realizing how powerful the tools are just because you see them do stupid things and not necessarily being honest with yourself about which side of the computer the stupidness is coming from. I know I fall into that trap sometimes as well. Talked to an accounting firm owner recently who recorded 150 loom videos of him doing a complete audit from start to finish to educate his team. And then he said, right, go and watch all of these and then record your own and do it your way. So it is definitely changing again. Question three, Andrew. What leadership decisions around AI will matter most over the next few years? I think probably the biggest one is like, what is your perspective on employees and their role in the firm? Because you know, if you look at it today, firms don't think about this historically, but what you're going to look at is how much are you spending on AI and how much are you spending on employees? And that wasn't really the case in the last few years because the AI tools have been really cheap. You know, they've been pretty cheap and even the ones you're getting are pretty cheap. But you're going to see some pretty heavy spend coming into these tools. Like I know in our organization, I mean we're literally spending some cases much more than you would think about paying an employee for things that these tools are doing, incredible things. And so I think then what is the role and like responsibility of the humans and like, where can they still provide value? So like, for example, if you look at the tax process, one of the things that we always talk a little bit about is if all of that process I outlined just a few minutes ago is automated, like what happens? And a lot of people immediately think they get a little bit scared. Especially like the first time you see an AI prepare the entire return all the way to the PDF and like then you see it do 100 in a day, you start really having a bit of an anxiety attack because you're like, what, what is my purpose? What is my role? How can I provide value? But there's really like three areas that I think we've seen people that are adapting to these tools still provide value. One is on orchestration. And this is like age can orchestrate with orchestrate AIs, but a lot of the younger people, it's a great place for them to fall because like they're good at talking to computers. This like this TikTok generation where they like fast, fast, fast, fast, fast. And like AI agents are like TikTok for knowledge work, almost like they move really quickly. So becoming an orchestrator, where you know how to talk to AI and ask for a big vision and not be worried about, you know, how much work it is because there's so much that it can do. So being able to orchestrate the AIs to do long range tasks, multitasks in parallel, you have like orchestrators and then you still have technical reviewers, like if I were to use an AI today and ask it a medical question, like, hey, I've got this rash on my, you know, whatever, you know, you tell me what's wrong, I would not be able to like accurately review that I'm not like a medical Doctor Like, I could misdiagnose myself. So review is like a very critical part of the process that is still super valuable. So, like, orchestrators are valuable, reviewers are valuable. And then also the third category is still, like, client service and relationships with other humans is still really critical. And so I think inside of the firms, like, that's one of the key things is like, how do we shuffle our org charts? How do we change the definition of some of these roles? Because we don't need to do a lot of this working anymore. And so I think that's probably one of the most critical things is like, and then in that context, are we hiring more employees? Are we hiring less employees? What are the titles? What are the backgrounds? What is the experience? How do we test them in the interview process to see if they fit into these new categories? I think that is going to be one of the most interesting things to watch. Well, it leads us beautifully into question four. I'm hearing the phrase a lot, leadership under pressure in accounting firm. So question four is, where is AI creating the greatest internal tension inside firms? What are you seeing? I think that the interesting thing that I'm seeing is, like, inside of some firms, right, you will have an AI agent go through and prepare a workflow or a process, and it will surface key problems. So, for example, in a tax return context, if you're preparing a tax return and you're just simply missing some documents from a client, like, this client had three K1s last year. They don't have it this year. But what I'm seeing is that humans are interjecting themselves into the process, thinking that they're maybe smarter than the AI and maybe either not listening or deleting some of that feedback. And then when you go and you look at the final output, you realize that the human intervening in the process made it worse at some points. And that's not always the case. I mean, obviously most of the time the humans are making it better. But I do think that getting these tools installed is very like, psychologically, it's a little bit of a disturbing experience for some people, especially people that ascribe, you know, employees at the firm, team members of the firm that ascribe their value to doing things right. If you ascribe your value to inputting data into a tax return from a work paper, and that's like, what you're really good at, or if you describe your value as like, making spreadsheets, and that's what you're really good at, I think people that have that kind of mindset they can become. It's almost like an AI victim mentality, right? Like they almost kind of chart the path to their own demise because they're just so triggered and overwhelmed that they end up kind of intervening in the process in a negative way. And it's actually interesting. I've seen people that have a. Have a good performance in their role, then AI comes in and it's not like they stay the same performance in their role or their performance in the role gets better. Their performance actually deteriorates. And the reason that it deteriorates is because they're just so overwhelmed with this sort of AI victim mentality. So I've seen that in a couple of cases and I think that, that when you, if you look at a firm, especially if you have, you know, 50 or hundreds of people, you're going to have these people that fall into these different buckets, people that react well and are doing more, people that kind of ignore it and do the same, and then people that kind of slip down. And so I think it's like getting your team excited, training and then. But being honest with yourself and assessing, like, is this person on board with these changes? Because there really is no stopping it. These tools are incredibly powerful. They're going out there. And so I. Making the hard decisions for new hiring, making the hard decisions to move people's role around even, and making the hard decisions to say, hey, you're going to have to do four times more work. But like, the compensation change isn't really a part of. You're not going to make four times more compensation. That's a weird conversation to have. And then also I'm going to demand that of you. So you've got to provide four times more work. You've got to work the same hours. You're going to have the same kind of compensation. You know, like, it's just like there's a lot of crucial conversations, difficult conversations. To constantly reiterate that because we're just living in this environment, we're all just reacting to it. We're all just reacting to it. So I think those are some of the difficult things for a leader is to just have all those difficult conversations and not be afraid to just shuffle, reshuffle the deck. Yeah, we're talking to Andrew agu, CEO and founder of. Instead, we've got question five coming up in a moment. We are having a series on accounting reality, AI inside accounting firms. You can find these on our Accounting voices podcast across YouTube, LinkedIn, CPA, trendlines, all the major podcast Platforms. Andrew, let's finish with question five, which is, by 2027, what will separate leading firms from the rest in the AI realm? When I talk to some firms, they see these tools and they're immediately worried about what they're doing today and how that's going to be automated away? And they'll say things like, why can't my client just do these journal entries on their own? Or close the books on their own, or why? Or is my client going to be able to prepare their return? And I think that I understand that inclination. If you are a firm where you're doing a certain scope, level of work, the AI is now doing a lot of it, and AI is doing a lot of it through a conversation where another person can try to do it, then, yeah, that is going to be the case. But I think it's being able to say, hey, a lot of this stuff is now automated. So. But these tools are really powerful. So kind of exploring how can I provide a lot more value to my client than I have in the past? And maybe how do I provide a lot more value to my client for the same price? How do I provide a lot more client value to my client for, like, a slightly higher price or maybe a moderately higher price, but like 2 times higher price, 10 times higher value? Like. And so I think a firm that is kind of just staying status quo and using this to automate their work, there's going to be some problems with that because there's already in the U.S. for example, tens of millions of people, 60, maybe 70 or 80 million people that are preparing their tax return on their own, DIY Tax return prepares. Okay, that number is clearly going to go up. But for tax planning, for tax advisory, for more complex decisions, for looking at savings, like, how are we going to shift people to doing those things that kind of everybody wanted to do but didn't have the time? And I think if people can be excited about using these tools to provide even more value than before, I think then they're going to be in a good place. But I think firms that are worried about it automating away aren't excited and ready to reinvent themselves in these new ways of providing value now that you have tools and you're not really constricted, like, oh, well, we couldn't do that before because it would have cost us, you know, $15,000 worth of time, but the client would only pay 10,000. But now it costs us, like, $200 worth of time. And, like, the client's willing to pay, like, 6,000. Like everything is reshuffling in that regard. I think being curious about how we can provide a lot more value and how these tools can help us do things that previously just weren't economically possible, I think is what's going to separate, you know, the firms that struggle versus the firms that, you know, really kind of make an opportunity out of it. Yeah, beautifully put. Five questions. One thought Leader 12 it's no script, no spin, just perspective on how it's landing inside firms. A big thank you to instead carbon field guide filed and digits for their alignment with this very important inquiry and the perspective on how I is unfolding inside accounting firms. Andrew, a big thank you for you for taking part. What excites you most about the instead journey over the next few years? I think that these products that people use for tax in the United States are so old, like they're like from the VHS tape era. One of the ideas we had at like some of the conferences, I'm old enough to remember that, yeah, VHS tapes, right? We gave everybody a VHS, VHS tape and wrote like, you know, the name of these products on there. Because that's kind of like what you're doing is like you're logging in, you're using a computer and it's so old and it's so kind of from a previous generation. Actually now after using our products versus using like these old products from the 70s, 80s and 90s, it feels actually when you use them like a kind of cognitive abuse. Like I think people are going to realize that like when you go to these new tools, you're like, I had been like psychologically abused by this experience. Like, this is really work, this is really hard labor. And so I, I'm excited to kind of see people's emotional experience just feeling like the possibilities come to them that they couldn't do before. I think that's going to be really fun because when you see something like one tax staff prepare now not review all. Reviewing 100 returns in a day is way harder than preparing them. But that's a different problem to face than before. You know, reviewing a tax return and thinking about what's really going on is kind of the more fun side of things than just like grinding out like PDF to work paper to tax return input process. And so I think it's giving and thinking about the strategy of like, how was this return prepared? And like, okay, so like it's already April right now. We're about to file this return for last year, but based on all the data that we have what should this client really be doing this year? How can we provide them with some really great professional advice about all the strategies they can do? So I think it's exciting to help firms move to a higher level of abstraction, get out of that cognitive abuse layer that we've been in for a few decades and kind of reinvent themselves. Exciting times for Andrew Argue. And instead, thank you for joining us today. We appreciate it. Thank you.